The majority of Americans would tell you that they’re not chomping at the bit to pay taxes, but they are cognizant of the needs that exist so they don’t mind carrying their share of the load. The problem people have is when they feel as though they are being taxed unfairly, and this sentiment is often felt when the topic of the estate tax is discussed.
There are a number of reasons why people have a hard time embracing the estate tax, and one of them is the fact that it is an instance of taxing resources that have already been taxed. The assets that you have left over after you pass away are the remainder that you were able to retain after paying income and payroll or self-employment taxes on your earnings. There doesn’t seem to be any logical reason why your death should trigger an additional levy on these funds.
But in addition to this, even if you were to somehow accept that the estate tax was justified in principle, the way that it is imposed is inequitable. To illustrate, the heirs of someone who passed away in 2009 with an estate valued at $5 million would owe $675,000 in estate tax because the exclusion was $3.5 million and the rate of the tax was 45%.
This year, the estate tax exclusion is $5 million and the rate of the tax is 35%, and these parameters will remain in place through the end of next year. So if someone died with that same $5 million amount in 2011 or 2012 his or her family would not be exposed to any estate tax all.
But in 2013 the estate tax exclusion is going down to $1 million and the top rate is going up to 55%. So that same $5 million estate would be shaved down by almost $2 million in estate tax liability.
So you die one day, your heirs get all $5 million; but if you die the next day, they get $3 million and the government gets almost$2 million. Something about this seems a bit odd.
There’s not much we can do about this as individuals. But what you can do is remain in contact with your estate planning attorney on an ongoing basis so that you can make the necessary estate plan adjustments as the goalposts are moved around.
Mr. Horowitz was awarded his Juris Doctor degree with honors from the University of Connecticut School of Law. While attending law school, Mr. Horowitz received the American Jurisprudence Award in Legal Ethics and the Nathan Burkan Award.
After graduation from law school, Mr. Horowitz continued his legal education at New York University School of Law where he received a Post Doctorate Law Degree in Taxation. He has also recently received a national achievement award.
Mr. Horowitz is admitted to practice before all the state courts in the State of Connecticut and the United States District Court.
Mr. Horowitz was selected for Super Lawyers in 2021.
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