The Future of the Estate Tax

The Federal Estate Tax (affectionately called the "Death Tax" by opponents) is a tax on property owned by an individual at death. If any individual dies with assets (including proceeds of life insurance) that exceed the current "tax-free" amount, then there may be estate taxes due. The tax rate is roughly 45% of any assets exceeding the current tax free amount.

The current tax-free amount is $2,000,000. It is scheduled to increase to $3,500,000 in 2009. In 2010 there is no estate tax and then the tax returns in 2011 with a tax-free amount of $1,000,000. The tax returns due to a sunset provision. The current system makes planning difficult and may put the lives of many wealthy individuals in jeopardy in 2010!

We will probably not have a resolution until after the elections this fall. The Presidential candidates do have their own plans regarding the estate tax. Barack Obama is recommending a permanent tax-free amount of $3,500,000 with a maximum tax rate of 45%. John McCain is proposing a tax-free amount of $5,000,000 with a 15% tax rate. Both proposals demonstrate that the tax is probably here to stay and George Bush's dream of permanent repeal is unlikely.