There are a number of reasons why many individuals feel as though the estate tax is patently unfair. One of them is the fact that the estate tax is an instance of double taxation. The assets that comprise your estate were accumulated with funds that you were able to hang onto after paying all sorts of taxes including income tax, payroll or self-employment tax, sales tax, property tax, etc. These resources are not taxable while you are alive, but your death is somehow viewed as a taxable event by the powers that be.
In addition to the fact that the tax is being imposed on money that has already been taxed, it is also levied at a rate that many people find to be excessive. This rate moves around a lot, but right now it is 35%. In the beginning of 2013, it is scheduled to be raised to 55%. It is difficult for some individuals to wrap their heads around a tax that will take more of the taxable portion of an individual’s legacy than it leaves behind to his or her family.
The final reason that we would like to highlight here is the assertion that the estate tax is selectively imposed and as a result is a punishment for success. There is an estate tax exclusion in place and if the value of your estate is within this amount your heirs are not asked to pay the estate tax. Right now it is $5 million; in 2013 it is going down to $1 million.
Some would ask why the family of a person who was able to accumulate assets that exceed this rather arbitrarily selected figure would have to part with a large portion of these resources while others are not required to pay the tax. To them it seems punitive rather than being a fair and balanced levy imposed on all Americans for the common good. Many objective observers would say that those who feel this way are raising a valid point.
Mr. Kraft assists clients primarily in the areas of estate planning and administration, Medicaid planning, federal and state taxation, real estate and corporate law, bringing the added perspective of an accounting background to his work.