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Editorial Calls for Repeal of the Estate Tax

Local residents with a taxable estate over $5 million need to conduct New York estate planning to ensure that they are best positioned to save on estate taxes. The estate tax is essentially a tax on one’s right to transfer property at death, and it can result in substantial liability for those with large estates. However, there are seemingly endless political debates about who should be taxed and at what level. The law in this area changes with surprising regularity. For example, in 2004 the tax applied to all those with taxable estates over $1.5 million. A few years later that threshold amount was increased to $2 million. In 2010 the tax was eliminated altogether. While it currently stands at $5 million, it is unclear whether policymakers will change that figure in the coming years. Of course, our New York estate planning attorneys closely monitor all estate tax developments, as these laws are important factors in our work helping residents conduct inheritance planning.

Criticism of the estate tax and the political wrangling around it is common. For example, a Forbes editorial last week called for repeal of the tax entirely. Pointing to the seeming randomness of the rates, the article author noted that “over the past ten years the federal estate tax rules have bordered on the ridiculous.” The author explained that planning plays a crucial role in helping residents legally avoid much estate tax liability. Proper planning can actually pay dividends for entire families. He wrote that “with a little bit of planning, not only would the estate of a person who died in 2010 be excludable from estate tax, but the future estate of the surviving spouse would be free of estate tax as well.” At the end of the day, the amount of tax paid often hinges on whether or not an individual has prepared a proper estate plan ahead of time or not.

Currently the estate tax generates about 2% of the annual federal revenue. The editorial author suggests that it would be logical to shift the tax system so that the 2% is paid as part of a more progressive income tax system. He specifically suggests increasing tax rates for capital gains and qualified dividend income. It is argued that even slight alterations to these taxes could generate $200 to $250 billion in additional revenue from those making more than $300,000 annually. The goal of this tax shift, claims the proponent, would be to provide a more logical taxation system that is easier to administer without sacrificing much needed public revenue at a time of tight budgets.

See Our Related Blog Posts:

High-Profile Example Highlights Need for Clarity in the Estate Planning Process

New York Estate Planning is Much More than Wills & Trusts

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