The Estate Of The Union
As of the day I write this (in October), we are getting closer and closer to the upcoming election. I will not address the politics, hysteria, and the all-out slugfest that we have come to associate with election years (mainly because I do not have a glass of bourbon that I can easily reach). However, there are a number of concerns that we are keeping an eye on. The “left” and the “right” have very different platforms and thoughts on the world of estate planning. Without getting into all of the technicalities, the main difference is each political party’s philosophies on how assets should (or should not) be taxed at the death of the owner. NOTE: THE ROSENBAUER LAW OFFICE IS NOT TAKING SIDES OR ENDORSING ANY POLITICAL PARTY OR CANDIDATE WITH THIS ARTICLE! That only happens if you bring me a bottle of Knob Creek 12 Year and 2 glasses. Even then, I might not take sides. 1. Estate Tax/Lifetime Gift Exemption Amount After the 2017 Tax Cuts & Jobs Act was passed, the federal estate tax exemption (which is how much an individual can pass to his/her heirs between lifetime gifts and inheritance after death) was increased to over $11.5 million per person. For a married couple, this allowed them to pass over $23 million combined. This means that any individual could pass $11.5 million to his/her heirs through a combination of lifetime gifts and whatever was left in his estate after he passed away without paying any estate tax. The estate tax would only be applied on anything over $11.5 million.
As of right now, republicans generally want to keep this amount the same or do away with the estate tax altogether. A republican win will most likely extend this exemption or even do away with the federal estate tax once and for all. The democrats generally want to lower the amount of the exemption (which is the amount you can pass on without paying any tax). Depending on who you talk to, the general consensus is that the democrats would prefer to tax anyone who passes more than $3 million–$5 million per person (double for a married couple) to their heirs. 2. Estate Tax Rate As of today, any assets that are subject to estate tax at someone’s death (exceeding the $11.5 million per person) are taxed at the federal level at 40%. Therefore, if someone passed away and had $1 million that was above the exemption amount (and was therefore subject to estate tax), the estate would have to pay the federal government 40% of that excess amount (total of $400,000), before the remaining amount was passed on to the heirs. Republicans seem to be content with the 40% estate tax rate as it stands today. There has not been any real movement by this side of the aisle to make any significant changes to the tax rate in a number of years. On the other side of the aisle, democrats support raising the tax rate. Although there has been limited specifics, the general consensus is that the democratic party favors a tax rate that is closer to “historical norms.” In years
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