Estate tax is a hot political topic. In April, The House of Representatives voted to repeal estate tax 240 – 179. While the matter doesn’t have enough votes to pass in the Senate or hit the desk of the president, the truth is that the estate tax bill does not affect most people.
Often called death tax, estate tax will only affect a person’s heirs when they die.
Estate tax is approximately 40% of the total worth of the estate, but exemptions allow the number of people affected by the tax to be very limited. The exemption amount varies yearly, with the current exemption of $5.43 million and $10.9 for married couples. Less than 1% of all estates will have to pay the dreaded estate tax.
Proper estate planning can lower the burden of estate tax if done early on.
Experts recommend working on estate planning well before death becomes a concern. Assets may be gifted to family members, or sales can occur that would effectively reduce the value of an estate and help families affected by estate tax keep their property.
As political campaigns ramp up, many candidates will be using estate tax as a hot button issue, but very few people will benefit from a repeal.