Death and [Estate] Taxes: 2011 and The Rebirth of The Death Tax
"The Estate Tax is a tax on your right to transfer property at your death," so sayeth the damed Internal Revenue Service. To be sure, it is a double tax. Keep in mind that all property transfered at death has been taxed previously. Whether the property has been accumulated by way of income, gift, inheritance, etc., this property has already been taxed by the IRS before. Not that it makes it any better, but it does provide evidence of some consistency. That is, nearly - if not all - transfer rights (such as transfers by way of gift, etc.) are taxed. So, it's nothing new, nor unique when it comes to the M.O. of the IRS. However, despite this apparent consistency, it still makes all red-blooded capitalists cringe.
Pictured above is the United States Treasury Building (depicted in its true nature). Things in the tax collections department, particularly with regard to American's estates, are predicted to see a substantial increase in activity in the coming year. 2010 has been joked to have been the year in which - if one could so choose the occurrence of death - one should die. This cynical insight is predicated on the fact that this year there is no estate tax, or to use the pejorative: "death tax." There are very few fiscal transactions that take place in the United States that doesn't in some wise implicate a taxable event. The present reality of this uniquely nontaxable event, coupled with the fact that the most "expensive" (in terms of sheer amount) taxable event in one's life might, indeed, be an estate tax is truth that makes the jest (about the benefits of death in 2010) resonate. The lack of an estate tax in the current year is the single greatest "tax shelter" in the relatively short history of our great nation.
Each year, there is a minimum amount which triggers the estate tax. Each year, since the implication of the estate tax that amount has increased. In 2009 the estate tax exemption amount hit its peak at $3.5 Million (not including the non-existence of an estate tax in 2010). That means that in 2009 if you did not have a federal gross estate amount equal to $3.5 Million, then you did not need to worry about an estate tax. Likewise, most people (and attorneys) lost interest in the concept altogether, as most average citizens do not accumulate that amount of wealth. This ever increasing exemption amount is a trend that is thought - amongst tax lawyers and academics - to be coming to a abrupt halt. For the first time since its implication, the federal gross estate tax exemption rate will very likely decrease from its previous amount. Decrease downwards near the $1 Million mark. That amount, unlike that of the 2009 $3.5 Million mark, will catch a lot of us.
This is no way good news for those that will, inter alia, "meet their great reward," (or die) in 2011 and thereafter (save, of course, another repeal of the death tax). However, for those of us in the legal field, there might be some silver lining. In 2011 and beyond, it will be vitally important for all of those out there to seek the advice of a learned estate planner/estate tax specialist. Death and taxes are the only things certain in this life; and, next year they reemerge as a collective unit. Do yourself a favor: seek expert counsel.