Estate Tax: Fair & Balanced?

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When you are doing some estate planning research and you hear about attorneys implementing strategies that are intended to help people avoid paying the estate tax, you may feel pangs of conscience. Is it really right to try to sidestep your responsibility to pay your fair share? Let's take a look at the facts, and when you see them in the clear light of day it is very likely that your patriotic and moral concerns will be assuaged.

Selective Taxation

Only some people have to pay the estate tax, and who they are can vary wildly year to year. From 2006 through 2008 the exclusion amount was $2 million, so if your estate was worth less than that you owed no tax. In 2009 the exclusion amount was raised to $3.5 million. In both 2008 and 2009 the top rate of the tax was 45%.

So if John died on December 31st of 2008 with an estate valued at $3.5 million, his heirs had to pay the IRS 45% of the $1.5 million that exceeded the exclusion, or $675,000. If his neighbor Brenda passed away the next day, January 1st, 2009, with an estate valued at that same $3.5 million, her family paid no estate tax at all. In 2010 the tax was repealed altogether, so the heirs of a person like George Steinbrenner, a billionaire, paid zero estate tax, but John's family had to pay $675,000 on just $1.5 million.

Excessive Rate

This one is short, sweet, succinct, and, well, kind of sickening. As stated above the rate of the estate tax the last time we saw it in '09 was 45%. In 2011 it goes up to 55%, more than half of the value of your estate.

Taxing After-Tax Earnings

The assets that comprise your estate did not fall out of the sky untaxed. To use a simple example, if you put 10% of your paycheck into a savings account all of your life, and these funds wound up being part of your estate, that account is made up of after-tax earnings. So let's say you were in a 30-35% income tax bracket most of your life. You were only allowed to retain 7 bucks out of every ten you earned, and then when you die the IRS wants more than half of what you were able to save.

About the Author:
Saul Kobrick is an attorney licensed to practice law in the State of New York and the owner and founder of The Law Offices of Saul Kobrick, P.C. For more information on estate tax and other estate planning services, visit our website.



Article Originally Published On: http://www.articlesnatch.com


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