With a new administration in the government, there are always changes. When it comes to estate taxes, changes in the law can impact your plans for the future and your beneficiaries. It's known that President Trump has suggested eliminating the federal estate tax, but does that really affect you?
An estate tax, also nicknamed a death tax, is a tax on the value of your assets at death. For the federal government to tax your estate, it has to be worth a certain amount. If it falls below that amount, there is no tax.
Some states have their own state estate taxes that could be used on high-valued estates, even if the federal estate taxes are eliminated. Californian legislators, for example, already have suggested implementing an estate tax similar to the one used by the federal government if the federal government's estate taxes are eliminated.
Does it matter to you? Depending on the size of your estate, not having federal estate taxes could boost how much you leave behind for your loved ones. Presently, only a small number of people end up paying estate taxes. In 2017, it's estimated that only 5,500 people will pay taxes on their estates.
Would eliminating this tax end up causing more taxes on the state level? Possibly, but with over half of Americans polled stating that they were not in favor of estate taxes, it's more likely that the tax itself would be eliminated with no other consequences.
If this could affect you, your attorney can help you understand how changes in the law will alter your plans and the way your estate is distributed.
Source: Bloomberg BNA, "Death & Taxes: What effect could President Trump's proposed elimination of the federal estate tax have on state-level estate taxes?," Jerry Gianakis, May 16, 2017