There’s no way to know how far Republicans will get with tax reform, but one thing is clear: no one likes the federal estate tax.
CNN Money’s recent article simply asks, “Will Republicans kill the estate tax?” The article reports that House Ways and Means Committee Chairman Kevin Brady calls it "un-American."
"You work your whole life to build up a nest egg or a family-owned business or family farm. Then you pass away ... Uncle Sam can swoop in and take over 40% of everything you've earned over a certain amount. It's just wrong," said Brady at an event promoting tax reform.
However, there are a few important details about the estate tax that should not be overlooked, specifically that the Congressional Budget Office projects the tax will raise between $25 billion and $34 billion a year over the next decade.
The tax currently affects only 0.2% of all estates. Only those estates worth more than $5.49 million this year ($10.98 million for married couples) are required to file estate tax returns and only half of those will be taxable after deductions and credits. The Tax Policy Center estimates that just over 11,000 estates will have to file a return in 2017, and only half will owe any federal tax.
In addition, very few family farms and businesses are affected. The Tax Policy Center estimates about 80 family-owned businesses and farms will need to pay any estate tax in 2017. The Congressional Research Service projects a higher number for any given year (about 159) but notes they represent fewer than 3% of taxable estates. In addition, there are estate tax law options that allow owners to significantly lower the value of a family business or farm for estate tax purposes.
No one can argue that there’s unfairness to a tax that is levied on money that you have already paid income or investment tax on, and then your family get taxed again.
A skilled estate planning attorney can help you use the available strategies to structure your estate so that more of it goes to your family or charitable organizations.
Reference: CNN Money (August 23, 2017) “Will Republicans kill the estate tax?”