Estate taxes back in spotlight

When President Donald Trump released his list of proposals for changes in the tax code, one of the 19 bullet points was “Repeal the death tax,” thrusting estate and gift taxes back into the national debate.

As a reminder, the federal government taxes estates at up to 40 percent but provides an exemption for individuals up to $5,490,000 in 2017 and twice that amount for married couples.

The high threshold makes the estate tax applicable to very few Americans. In 2015, only 11,917 estates filed estate and generation-skipping transfer tax forms with the IRS. As the exemption amount increases, the number of those filing should decrease.

The Tax Policy Center estimates that about 11,000 individuals dying in 2017 will leave estates large enough to require filing an estate tax return, which will total nearly $20 billion. “Nearly 70 percent of these taxable estates will come from the top 10 percent of income earners and over 25 percent will come from the top 1 percent alone.”

As for the impact on small farms and closely held businesses, which the Trump administration claims are burdened by the estate tax, the Tax Policy Center estimates that they will pay $20 million in estate tax in 2017, 0.1 percentage of the total estate tax revenue.

If you are fortunate enough to inherit money, with or without taxes, keep in mind that a windfall has complications. That’s why it’s important to be aware of mistakes and avoid them.