The House of Representatives recently passed a bill that would eliminate the federal estate tax. The bill is expected to pass in the Senate but be vetoed by the President, thus most likely preventing it from becoming law. However, the bill does bring up an interesting aspect of the federal estate tax, namely, how small businesses and family farms need to estate plan in order to protect their assets.
Federal and State Estate Taxes
Currently, the federal estate tax applies to any estate that is over $5.43 million, and any assets over that amount in the estate can be taxed up to forty percent. State estate and inheritance taxes vary and must be checked on a state by state basis; however, some states can take a significant portion of the estate’s worth if the assets are not properly shielded by an estate plan. For example, Ohio repealed its estate tax in 2013, but Maryland has both estate and inheritance taxes up to sixteen percent on estates worth more than $1 million.