The estate tax, also commonly referred to as the “death tax,” is a popular subject among many in New Jersey, even though very few Americans are at risk of being subjected to the tax. People tend to hold strong opinions on the matter, and it is a prime example of a topic that tends to reveal one’s political leanings. The estate tax has once again become a topic of conversation due to a recent House vote supporting the repeal of the tax.
The current estate tax can lead to the loss of as much as 40 percent of wealth that surpasses the level of exemption. The current exemption sits at $5.43 million per individual, and married couples enjoy a combined exemption of $10.86 million. Only wealth that exceeds those totals is subject to the estate tax, which is why only a tiny percentage of the American public will be faced with losing a significant portion of accumulated wealth. It is also important to note that families that have amassed high levels of wealth often take advantage of complex estate planning tools that can significantly reduce the impact of the estate tax.
The issue divides many along political lines. Republicans assert that the tax unfairly penalizes those who have attained success, and that many small business owners are unfairly hurt by the tax. Democrats argue that those who are most able to pay the steep tax are obligated to do so, and that repealing the estate tax is just one more way of providing assistance to the nation’s most wealthy. Regardless of what side of the issue one is on, the fact remains that the end of the estate tax would lead to a loss of approximately $269 billion over the course of a decade.
The recent House vote fell along predictable political lines, with only 10 voting in opposition to their party’s stance on the matter. As the proposed change continues to move through the legislative process, many in New Jersey will engage in debate on the topic. For those who are concerned about how the estate tax might affect their own financial circumstances, it is important to meet with an estate planning attorney to review the various tax reduction options.
Source: thehill.com, “House votes to repeal estate tax“, Bernie Becker and Cristina Marcos, April 16, 2015