Background

According to the IRS, the estate tax is a tax on your right to transfer property at death. The federal estate tax, in its modern form, was enacted in 1916 and has gone through significant changes, including a temporary repeal in 2001. However, in 2011, the federal estate tax was re-implemented, although with a high threshold that currently stands at over $5 million (meaning that only those property transfers that exceed that amount trigger the federal estate tax).

Arguments For and Against Estate Taxes

Philosophically, some estate tax opponents question why property that belonged to you during life, and which presumably has already been taxed at the time of purchase, should again be taxed when you pass away. Estate tax opponents also ask why property that is obtained through a person's efforts and hard work during life should be taxed simply because he or she passes away. On the other hand, supporters of estate taxes argue that these taxes help to reduce economic inequality, and that the revenue they generate help governments at various levels to pay for necessary public services.

The Basics of Estate Taxes

Note that some forms of estate tax are imposed directly on the decedent's estate, while others focus on the recipients of the property. For example, in some states, estate taxes are imposed upon a person who receives property from the decedent, and the amount imposed can depend on both the value of the property being transferred and on the recipient's relationship to the decedent. As you begin to plan your estate, it's important for you to know the basics about the federal and your state's estate taxes, so that you make decisions that minimize the amount of tax that's paid either by your estate or by your inheritors. Depending on the purpose or type of estate plan you create, you may be able to transfer money and other property while avoiding taxes such as the gift tax. For example, one type of estate plan allows a person to create an account dedicated to providing school tuition to another person. This type of account generally avoids gift taxes.

Get Legal Help with Estate Tax Law

It's common to have questions about estate taxes, such as how to minimize your liability. It's best to contact a qualified tax attorney who can answer your questions about estate taxes and help you create an estate plan that best suits your needs.