Frequently Asked Questions
What is the estate tax?
The federal estate tax, often referred to as the “death tax”, applies to property transferred at death when the value of the property exceeds the estate tax exemption.
When is the tax due?
The tax is due 9 months after the date of death and is payable in cash.
What is the GST tax?
The generation-skipping transfer tax is a tax on assets that you pass on to your grandchildren (technically known as “skip persons”) at a 40% rate, once you have utilized your GST exemption. Note this is in addition to the 40% gift tax you also pay on the same assets.
What is the history of the estate tax?
The estate tax was initiated in 1916 to fund World War I. It was maintained in the tax code through the 20s and 30s to help prevent the concentration of wealth. Since that time, anti-trust laws have eliminated many of those concerns, but to date, the estate tax remains intact.
When was current estate tax law established?
Current estate tax law was established in 2017 with the Tax Cuts and Jobs Act of 2017; HR1 included:A maximum estate tax rate of 40 percent, with an increase in the lifetime exemption to $11.2 million per person and $22.4 million per couple, that is also indexed to inflation.Unification: The estate, gift and generation skipping taxes continue to be permanently unified. This establishes a single graduated rate schedule for all three taxes.Spousal portability: Permanently allows couples to transfer any unused exemption to the surviving spouse under simplified rules.Preserved were widely-accepted accounting principles including valuation discounts, grantor-retained annuity trusts (GRATs) and state estate tax deductibility.
How much revenue is raised by the estate tax?
Generally less than 1% of tax revenues are from the estate tax; based on 2021 IRS Estate tax tables, estate tax revenue was $27 billion, which is .65% of total federal revenues.
What is the cost to collect the estate tax?
According to a December 1998 Joint Economic Committee report, the cost to comply and collect the tax is equal to the revenue raised.
How does the estate tax hurt family businesses?
Much of the value of family-owned businesses, such as farms, manufacturers and construction firms is illiquid, as these businesses reinvest profits in assets such as land, buildings and equipment. When an owner passes away, these assets are often sold to pay the estate tax. In this way, the tax endangers a family business’s ability to survive between generations.The cost of the estate tax comes not only from paying the tax itself, but also from paying for attorneys and accountants and large life insurance premiums as they engage in estate planning. For many family-owned businesses to keep operating after the death of the owner, they must plan for the estate tax. Planning costs associated with the estate tax are a drain on business resources, diverting precious resources away from expanding their businesses and creating jobs.
How many family businesses are there in America?
Based on research done by Joe Astrachan and Melissa Carey Shanker in 2003, entitled : “Family Businesses’ Contribution to the US Economy; A Closer Look”, there are 24.2 million family businesses in the US which generate 64% of GDP and employ 62% of the work force.
What is the economic effect of repealing the estate tax?
A study by Douglas Holtz-Eakin and Cameron T. Smith in 2009 found that if estate, gift and GST taxes were repealed it would raise the probability of hiring by 8.6 percent, increase payrolls by 2.6 percent, expand investment by 3 percent, create 1.5 million small business jobs, and cut the jobless rate by 0.9%.
How does the small business community view the estate tax?
Unfavorably. Ninety trade and industry organizations have formed the Family Business Estate Tax Coalition, whose sole purpose is to secure sustainable relief and ultimate repeal of the estate tax.
What is the general public’s attitude towards repeal of the estate tax?
In national polls, focus groups and instant response sessions – the majority of respondents believe that the estate tax should be repealed.
What can Congress do to address the estate tax?
Many lawmakers on the left and right understand the unfairness of the estate tax, but politics has gotten in the way of its elimination. The estate tax continues to impose a heavy burden on family businesses. Attorneys, accountants and life insurance companies benefit as hard-working entrepreneurs – the backbone of this country – carry the burden. Many Members of Congress recognize this burden and have gone on the record to indicate they support further relief and ultimate repeal of this onerous and confiscatory tax.
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