The Federal Estate Tax May Be Permanent
As you may be aware, there is a federal estate tax in place for high-value estates, placing significant burdens on those who are subject to the tax. Many critics refer to this as the “death tax” and argue that it places an unfair burden on individuals who are already dealing with the death of a loved one. Despite the fact that few people like the estate tax, it appears that it’s here to stay.
In 2001, Congress passed the Economic Growth and Tax Relief Reconciliation Act, which slowly reduced the burden of federal estate taxes over the past decade. The law allowed beneficiaries to pay less in taxes following the death of a loved one. Although some the burden was relieved during this time, it returned in 2011, and the tax rate was set at 55 percent for an estate worth more than $1 million. This represented a serious increase in estate taxes after a decade in which they were on the decline. The minimum taxable estate is now substantially higher than $1 million now. For decedent’s dying in 2015, the estate tax generally only applies if the decedent’s taxable estate is over $5.43 million. But, for applicable estates, it must be planned for.
Since that time, many policymakers have pushed to reduce federal estate taxes or even do away with them permanently. However, these bills have failed to pass, and elected officials in Congress are gridlocked over the best way to address the issue.
Estate taxes are a serious matter. When an estate is processed through ordinary means, meaning through a will and probate, the Internal Revenue Service requires the estate to pay federal tax. When an estate is especially large, these taxes can eat into a huge portion of the estate and can cost beneficiaries thousands of dollars.
If you have a high-value estate, there are numerous mechanisms available to help reduce the federal estate tax burden. To learn more about your options, consult a knowledgeable Florida estate planning attorney at BaumannKangas Estate Law.