Posted: August 13, 2010
As many of you know, the inheritance tax is zero percent through the rest of 2010. Unless Congress makes any changes to existing law, the rate will revert back to 55 percent beginning Jan. 1, 2011. In other words, there will be situations where loved ones could be on borrowed time this calendar year and relatives may be forced to make important decisions because of the financial implications of the federal tax law. That is the sad state that our country operates in unless changes are made.
After my mother, Arty, passed away in March, I have been confronted with the reality that I am responsible to serve as the executor of the estate. It is a bit unnerving, but part of life. As a result, I am updated on a regular basis about the inevitable process of administering family wealth. I also understand there will be more than just a few conversations with attorneys and financial planners upon my father's passing.
Proponents of a return to the 55 percent bracket of the inheritance tax claim that abolishing the tax would result in tens of billions of dollars lost annually from the federal budget. Another argument among this tax-happy group of people believe the inheritor of wealth doesn't deserve it because he or she did not earn it directly.
Those against having an estate tax, commonly referred to as a "death tax", believe that much of the income earned through inheritance has already been taxed. After all, our parents and grandparents paid taxes on their homes, their income and their vehicles well before they planned to pass it along to their heirs.
I know there are certain credits that are available to those whose income is above the specific level that may allow for some family farms and small businesses to change hands upon the death of a family member without having to be taxed so heavily. For this reason, I strongly encourage those who may need to update their wills or revisit their parents' desires to meet with a professional accountant or financial planner.
In the meantime, I would like to quote an editorial in Investor's Business Daily that sums up my thoughts on the inheritance tax:
"People should not be punished because they work hard, become successful and want to pass on the fruits of their labor, or even their ancestors' labor, to their children. Families shouldn't be required to visit the undertaker and the tax collector on the same day".
If only that could be the case after 2010.