Horror Stories

estate tax horror storiesThe Personal Case against the Estate Tax

Below are op-eds, letters, and testimonials from taxpayers on the real-life impact of the estate tax.  If you have a personal story you would like to share, please contact PATG using this form.

Open Letter from a Tax Payer

To Whom It May Concern:

My name is Clayton and I have a story to tell. In the 1860’s my great-great grandfather was a cattleman. He had moved from England to Virginia and from Virginia to Texas. He began leasing land from landowners to graze cattle, all the while saving his money. Gradually, as he saved more and more, he began purchasing small tracts from the people he was leasing from and over his lifetime he had purchased several thousand acres through hard work and frugal living, the typical American dream.

When he passed away the land then went to his children. His children continued the ranching tradition and passed it on to his five children (one of which was my grandmother). My grandmother passed away in 1997 and unbeknownst to my father (or my grandmother at the time of writing her will), he suddenly had to pay a tax, 38.5% of the estate minus a $1mil deduction, on the appraised value of the land that her grandfather had worked so hard to purchase, protect, and work. At the time, no one even knew the value of her estate because its value was in what it could produce, not what it could sell for. Her estate didn’t have many liquid assets or a large amount of cash that could pay this new debt to the IRS. So, my father set up a payment plan and began working to pay it off.

We fast forward to the Summer of 2006. My father began to get ill and since the estate tax of my grandmother had become such a burden and such a large part of our family life we got together with a team of attorneys, CPA’s, and tax planners to try and avoid the dreaded estate tax should something happen to my father. In November 2006, my father passed away. We had a written plan on how to structure the family ranch, but the majority of it we didn’t get to put into practice in enough time to steer clear of the estate tax.

So, once again, my father’s will stipulated that the family ranch would go to my brother and me. We would be the 5th generation to own and work this land. But, we had to pay for inheriting what he fought to hold on to…again! And once again, my father didn’t have much saved cash or liquidable assets. What few liquid assets he had were quickly spent on CPA’s, tax attorneys, surveyors, and appraisers to determine what we owed the IRS. So, we were forced to set up another payment plan with the IRS.

We are now burdened with two estate tax payments every year. One for my grandmother’s estate (from 1997!), and one for my father’s estate. We will be making these payments for the next 15 years. So, not only are we trying to make a small family business in ranching profitable for ourselves, we are now trying to make it profitable for the IRS so that it doesn’t end up as federal land.

For five generations my family has worked this land. Five generations have poured their blood, sweat, and tears into this land, this family business. We have diligently paid our local, state, and federal income taxes. We have sowed into our local, state, and national economy. But because we’re now defined as wealthy according to someone else’s definition of the word, it will be next to impossible to preserve our family heritage for another generation.

Thomas Jefferson once said: “A wise and frugal government, which shall restrain men from injuring one another, which shall leave them otherwise free to regulate their own pursuits of industry and improvement, and shall not take from the mouth of labor and bread it has earned. This is the sum of good government.” Ask yourself if our story is one that represents the sum of good government.

Thank you for your time.

Sincerely,
Clayton T. Leverett

Op-Ed

“Families need a permanent, certain fix of Estate Tax”
Wednesday, April 26, 2006 Harry Alford

Why does the National Black Chamber of Commerce support the permanent elimination or the reduction of the estate tax? Because many of our family businesses are first generation businesses, where children work along side their parents, in these businesses. They would like to see their children continue the business for the benefit of their community and the family. They do not want to sell the business to pay the estate tax and eliminate the livelihoods for the next generation in addition to the jobs for those who they employ.

It is a deceptive rationale to represent that “only 1 percent of Americans are affected by the estate tax.” That is the percent of decedents whose estates will actually write a check each year to the IRS. The Polling Company has found that “twice as many family businesses sell out early, rather than pay the tax.” This often means a loss of jobs and a business in the community. All too often the family business is sold to a larger company who then moves the business and takes the jobs out of the community. Why is it fair to penalize those who worked hard, created jobs, took risks, achieved success and paid substantial taxes during their lifetime with a 47 percent tax at death? Isn’t this discrimination? Targeting those who have more, just because they have more is not fair.

Families need certainty in planning for the future of their businesses. Congress has spent the last decade discussing and attempting to alter the estate tax. With the tax bill passed in 2001, it has only made it more difficult and uncertain to plan. One year of repeal in 2010 makes no sense and is not helpful to families. Both parties should sit down in good faith and work out a solution that will help all families, their businesses, and the workers they employ. Congress should stop using the future of family businesses as an election issue or political tool and pass permanent repeal or permanent reduction of the estate tax!

Members of the National Black Chamber of Commerce are anxious to continue to build successful businesses that future generations can enjoy. They have taken risks and employed many people and they deserve to know with certainty that all of their years of hard work will not be lost. It is time for the Senate to act and vote on HR8 and give families certainty.

Harry Alford is president of the National Black Chamber of Commerce.

“Businesswomen are Discovering Estate Tax’s Dire Consequences”
Wednesday May 17, 2006
By: Barbara Kasoff

Many people like to think of the estate tax as a victimless crime.

Sure it is double taxation, they’ll say, but the government needs the money and, besides, few people actually pay. Unfortunately, the estate tax actually contributes very little to the federal budget, and its victims are real and tragic: family farms and small businesses.

It works like this: When small farmers and businesspeople die, their estates must pay a sum equal to 47 percent of the value of their total assets above $2 million, including their farms and businesses. If the heirs cannot pay the tax, they must liquidate.

In all likelihood, this is what will happen to Melanie Meyer’s business. The majority owner of the Versailles Arms apartment complexes, which together constitute one of the largest Section 8 public-assistance housing properties in New Orleans, Ms. Meyer has been an exceptional proprietor and community leader. Her buildings have always been clean and superbly maintained, and she has worked vigorously to promote economic development and empowerment in her predominantly low-income neighborhood.

In 1994, she helped establish in New Orleans the Safe Neighborhood Action Plan (SNAP), a joint effort between the Department of Housing and Urban Development and various community organizations to prevent crime, provide continuing education and promote economic development and homeownership. She has been a leading force in the initiative ever since, and SNAP has its local headquarters at the Versailles Arms Neighborhood Networks Learning Center.

Ms. Meyer is trying to rebuild the Versailles Arms in the wake of Hurricane Katrina. She wants it to be the same positive force for change in the coming decades that it has been in the previous few. This is why she would like to keep the property in the family: to ensure that those who run it are mindful of both the community and the bottom line, and not simply one or the other. But there’s a catch. If Ms. Meyer died today, none of her heirs would be able to afford the estate tax on the property.

The estate tax is patently unfair to Ms. Meyer. She has worked all of her life to build her enterprise, and she has paid taxes on everything she has earned in the process. The government has already taken a generous chunk of the wealth she has generated. When she dies, it will demand half of what is left.

Yet the estate tax is even more unfair to the members of the community who have benefited from the existence of the Versailles Arms. If the tax persists, Ms. Meyer’s properties will expire when she does. Its tenants, who relied on it for safe, sanitary and affordable housing, will have no place to live. Its employees, who relied on it for their jobs, will have no place to work. The local residents, who relied on the learning center for education and financial advice, will be on their own once again.

The estate tax is fundamentally against the interests of the American people because, in effect, it destroys the things individuals create in their lifetimes, things that we would just as soon have around. Think of the family farms that are sold and then parceled up to make way for subdivisions. Think of the small businesses sold and digested into larger corporations, leaving their former premises empty and their former workers unemployed. Think of Ms. Meyer’s housing complex.

The great irony in all of this is that the estate tax does not even generate much income for the federal government. It constitutes only 1-2 percent of federal revenue on paper, and many experts believe that collection and compliance costs approach the amount actually collected. So, in all likelihood, we are jeopardizing our farms and businesses without actually increasing the federal bottom line.

Female business owners are becoming particularly aware of the negative impacts of the estate tax. There are 9.1 million woman-owned businesses in the United States, employing 27 million people, and women are starting businesses at twice the rate of men. But the more they accomplish, the more women recognize that the estate tax hangs like a guillotine over all they have built.

For the sake of the family farms and small businesses across the country, Congress must act to repeal the estate tax permanently. It is not just unfair to business owners and damaging to the American economy, it is an affront to the American dream that so many women are striving to achieve.

Kasoff is president of Women Impacting Public Policy, a national organization of women in business.

Selling Family Farm To Prepare For Estate Tax

I have been very concerned about the outrageous estate tax.

Our family has owned a ranch in Texas since 1959 and when my dad passes we are faced with losing this precious land. There is no way we can come up with that kind of money to pay taxes and keep the ranch. I finally convinced my dad who is now 81 years old that we needed to try and sell this land, so now it is on the market.

It breaks my heart to part with this ranch since my sister and I and then our kids grew up going to this beautiful place in the Texas Hill Country.

What can we do to help abolish or make estate taxes fair, where families like ours don’t have to lose something that means so much to us?

WD
Houston, TX

“I have been so scared since my mother-in-law died last week that I am having daily anxiety attacks worrying about how I can save the farm.

My husband died in 2000 and I am now the only heir to my mother-in-law’s farm. After my husband died, I planted the majority of the farm in trees; saving some acreage for cows and other crops. So much of the land around me is being developed for house trailers and housing developments. I want so much to save the land for future farm use. There are about 60 acres of this land that remains as it was hundreds of years ago….as my husband used to say, “never touched by human hands.” This land was bought, paid for, loved, and improved on. I should not have this terrible fear of not being able to buy it again from the government, (in the form of the death tax), in order to save it. Not only that…..my future security will be wiped out. I have worked so hard all my life, and this just doesn’t seem fair.

My luck has always followed the “day late and dollar short” saying so I do not look for any miracles to save me. I just hope the death tax is abolished so it will help others enjoy the fruit of their labors.

Thank you so much for trying to help.”

MJ
Live Oak, Florida

“My name is Abby Jensen. My father, Roger Jensen, died June 30th. He was only 54. I am only 19 years and starting college. My brother is only 24. My parents were divorced when I was 8 years old and I have lived with and depended on my father completely. I am concerned with the death tax, it sounds so unfair. On top of all the grief, this is added to our list of problems. My father was a very smart man and he would of put his life insurance in bonds to avoid adding it to the estate, but he just recently raised his insurance to $500,000 and didn’t have time to. He was very healthy and in two short weeks, a shocking dignosise of brain cancer killed him. He was just about to enjoy the fruits of his labor, he wanted to go to Great Britain, he was starting to finally buy things he enjoyed. As long as I have grown up he has been tight with the wallet, what good did that do. The government wants to take what sounds like a lot of his savings and hard work. My dad bought land that would pay out when I would go to college and now the government wants to tax it again. I am a dependent, my dad worked hard because he had a dream to send me and my brother to a good college of our choice. I was going to go to a private school but now I don’t know if I can afford it. It sounds like my dad had a lot of money, lot of investments, and the life insurance and retirement money on top of that will put it over a million. My dad was just about to take a loan out for 2.8 million dollars (with a partner) for what sounds like a very great opportunity investment. If the bank still borrows the money, we want to continue on all my dads work. There are tons of bills coming in the mail that me and my brother never had to deal with, its very overwelming. Then the death tax, court fee, lawyer fee on top of that. I want to learn more about the death tax, I don’t think it is fair. Thank you for your time.

AJ
Hugo, MN

“Boy do I have a horror story for you! My father passed away 10/90. His estate for tax purposes was assessed at 7.7 million dollars when it was re-evaluated. After six months it had not changed much so approximately 3.8 million was owed in death and estate taxes.  Most of my father’s estate was in real estate and shortly after the six month period after his death, real estate took a dive. And every piece of property we sold to pay taxes sold at about 40% of what it was appraised at time of death.

Well it has been ten years since my father’s passing and we have still not seen any money. If and I do mean if we are lucky, then maybe at the end of this year after we pay the last $350,000 to federal and pay the state, my mother, sister and I may have all of $200,000 to split between us. Great.”

Michael Stern

“I am 77 years old.  My history of work, thrifts and efforts to save money is unbelievable.  Here is my reward!  All of my social security (plus more) goes for income tax.  I live off my teacher’s pension as I do not want to cash my investments.  If I died today, I’d pay about $200,000 in death tax.  I am helping a great niece to go to college.  I have two great nephews coming up.  All are bright children.  I would like to help them – not the IRS.

I had a newspaper route in college.  I worked for 50¢ an hour doing office work under the program set up by President Roosevelt.  I have lost money in investments.  I went to work when I had a death sentence with lung cancer in 1967.  I didn’t miss a day when I was told I could only live three months at the most.  I am still working.  I have a tenant and I tutor ESL students.  I do almost all my own work and cooking.  I have never had a bill I didn’t pay on time.

The way things are now what the nursing home doesn’t get (if I’m that unfortunate) the IRS will!  What did I make all this effort for?  Our laws need to be changed but I have no clout!”

Ida Prichard
Seattle, WA

“A Matter of Fairness”
Tuesday May 16, 2006
By: Patrick Guerriero

Life’s only certainties are death and taxes. Unfortunately, the government won’t even let someone die without taxing them. The current death tax rate is almost 50 percent. That means within nine months of death, Uncle Sam gets 47 percent of the value of everything you own — including cars, furniture, personal belongings, homes, investments, pension plans, 401(k)s and even your business, if you own one.

The death tax hurts the economy by devastating family businesses such as farms and constructioncompanies. Since most people don’t have cash to pay a huge estate tax bill, families are often forced to sell or close successful businesses just to pay Uncle Sam. This hurts our economy and leads to job losses.

Losing a loved one is difficult enough. The financial worry caused by the death tax makes such a loss even more unbearable, especially for gay and lesbian couples. Under current law, married couplesare allowed a “marital deduction” that shields assets from taxation when one spouse dies. Gay couplesare prevented from getting the same benefit As a result, they are subject to the death tax twice. Apartner’s assets get taxed once and those same assets get taxed again at the death of the second partner. Does this make sense? No, because the estate tax makes no sense, and Congress has a chance to fix it this year. The public overwhelmingly supports a repeal of the estate tax. That’s why Republican and Democratic political leaders want to reform this tax. In fact, Congress hasspent the last decade debating the issue. The 2001 tax bill included some estate tax reform, but it actually created even more confusion. That’s because the estate tax will be phased out in 2010, but only for one year. Without congressional action, the death tax will come back to life in 2011. Uncertainty about this issue makes estate planning more difficult than ever. Families need certainty in planning for the future of their businesses.

Both parties should sit down in good faith and work out a solution that helps families, businesses andworkers. Congress should stop using the future of family businesses as an election issue or political tool. It’s time to pass permanent repeal or permanent reduction of the estate tax! It’s a matter of fairness.

Why penalize those who work hard, create jobs, take risks, achieve success and pay substantial taxes during their lifetime with a 47 percent tax at death? It’s time to bury the death tax once and for all.

Patrick Guerriero served as president of Log Cabin Republicans, a national organization representing gay and lesbian Americans.