Estates, Wills & Trusts

New Estate Tax Regime

After bumbling about, trading political favors, Congress has arrived at a $5 million inflation adjusted amount exempt from Federal Estate Tax. This is a “combined” estate and gift tax, with the CPI adjustment, it is now $5.34 per person – but only applicable to US Citizens. 

Now, if you are single and have a net worth including death benefits from personally owned life insurance, group life and retirement plans of ALL types of over $5.34 million, then you are subject to estate tax. The rate is 35% of the excess. NOTE: your proper administrative costs are also deductible, so if you are just over, your estate is not likely to suffer the tax.

If you are married, your tax situation improves if you are leaving assets to your spouse. There is no tax on assets left to a spouse – or those provided as gifts to a spouse during lifetime. If a well considered trust is created, a married person can create benefits for a surviving spouse and children, and exempt a total of $10.68 million - $5.34 million for each spouse.

Estimates are that less than 1% of residents to whom this law applies will actually be taxable. The gift and estate tax combined has never generated over 6% of the Federal Budget. It is and has remained from inception one of the most irritating taxes ever imposed, even for those whom it does not affect. At the core it was intended to break up concentrations or wealth. Translation - money is power, power that can buy political favor. The tussle over this is just that basic and base.