Estate Tax Exposure
January 5, 2012 By Parman and Easterday
A lot of people call the federal estate tax the "death tax, “and many consider it a sarcastic term. Some probably do use it in this spirit, but the reality is that there is literal truth in this description.The assets that you accumulated throughout your life after paying taxes are sitting safely in the bank or otherwise invested.
While you are alive, other than tax on the earnings, there is no reason to tax these assets again. But at the time of your death, they suddenly become taxable, and taxable at an extraordinarily high rate.
This is one of the many reasons the estate tax seems unfair to some individuals. Another reason is that, in a very real sense, the estate tax is more of a high-stakes gamble than a fair and just, logically supportable and truly necessary federal levy.
To explain, consider the fact that the estate tax rate was 45% and the exclusion was $3.5 million back in 2009. So if you were to die during that year with an estate valued at $5 million, your heirs would owe the federal government $675,000.
During the previous year, 2008, the rate of the tax was the same 45% but the exclusion was just $2 million. So if you died on the final day of that year, your family members would have to part with 45% of the taxable portion of your estate, which would be $3 million. As a result they would be presented with a $1.35 million tax bill, more than twice the cost of dying in 2009.
Right now, the estate tax exclusion stands at $5 million, so a family who inherits this much money during 2011 would owe no estate tax all.
This type of random imposition of such draconian, life-changing levies is difficult to wrap your head around, and this is one of the reasons why so many people feel as though the estate tax should be permanently repealed.
ABOUT THE AUTHOR: Larry Parman
Experienced estate planning attorneys Oklahoma City OK of the Parman and Easterday offers estate planning and business planning resources to residents of Oklahoma City OK.
Copyright Parman and Easterday
More information about Parman and Easterday
Disclaimer: While every effort has been made to ensure the accuracy of this publication, it is not intended to provide legal advice as individual situations will differ and should be discussed with an expert and/or lawyer. For specific technical or legal advice on the information provided and related topics, please contact the author.
This is one of the many reasons the estate tax seems unfair to some individuals. Another reason is that, in a very real sense, the estate tax is more of a high-stakes gamble than a fair and just, logically supportable and truly necessary federal levy.
To explain, consider the fact that the estate tax rate was 45% and the exclusion was $3.5 million back in 2009. So if you were to die during that year with an estate valued at $5 million, your heirs would owe the federal government $675,000.
During the previous year, 2008, the rate of the tax was the same 45% but the exclusion was just $2 million. So if you died on the final day of that year, your family members would have to part with 45% of the taxable portion of your estate, which would be $3 million. As a result they would be presented with a $1.35 million tax bill, more than twice the cost of dying in 2009.
Right now, the estate tax exclusion stands at $5 million, so a family who inherits this much money during 2011 would owe no estate tax all.
This type of random imposition of such draconian, life-changing levies is difficult to wrap your head around, and this is one of the reasons why so many people feel as though the estate tax should be permanently repealed.
ABOUT THE AUTHOR: Larry Parman
Experienced estate planning attorneys Oklahoma City OK of the Parman and Easterday offers estate planning and business planning resources to residents of Oklahoma City OK.
Copyright Parman and Easterday
More information about Parman and Easterday
View all articles published by Parman and Easterday
Disclaimer: While every effort has been made to ensure the accuracy of this publication, it is not intended to provide legal advice as individual situations will differ and should be discussed with an expert and/or lawyer. For specific technical or legal advice on the information provided and related topics, please contact the author.
