There is such a thing as a “meme,” and it can take a number of forms but one of them involves an idea becoming inculcated into the culture as a fact when it may not actually be true. One of these exists with regard to the estate tax. People who are informed make the strong argument that the estate tax is indefensible from a logical perspective because it is an instance of double taxation. The assets that you have been able to accumulate and prepare for eventual passing to your loved ones after your death represent the remainder that you have been able to hold on to after paying numerous different taxes throughout your life. By what logic does the government have the right to swoop in and take anywhere from over a third to more than half of this remainder after you pass away?
This is where the meme comes in. If you were to ask certain people the above question they would simply sweep it aside saying it doesn’t matter because the estate tax is only imposed on “the rich.” There will be those who would suggest that everyone is entitled to be treated fairly, even those who have achieved some measure of financial success. But above and beyond this it is important to recognize the fallacious nature of this meme.
As the laws stand at the present time the estate tax exclusion is $5 million, so if your estate is valued at $5 million or less your estate is not subject to the estate tax. When you consider the fact that there are people who are billionaires, is someone who is able to accumulate more than $5 million over a lifetime truly wealthy? In addition, the estate tax exclusion is scheduled to be reduced to just $1 million in 2013 and the rate of the tax is scheduled to go up to 55%.
This means that the portion of your estate that exceeds $1 million in total value will be taxed at a rate of 55%. Remember, this include your home or homes and any inheritances that you may have received over the course of your lifetime. Many American families (over 8 million of them) who would not describe themselves as rich have assets that reach seven figures.
The suggestion here would be to separate perception from reality. Recognize that the estate tax can be imposed on people who do not consider themselves to be truly wealthy and keep yourself apprised of the facts.