I’m often asked about whether I accept guest posts. I do. Once per year. And it’s that time of year!
Earlier this year, I announced my annual call for guest posts where I offered readers the chance to answer one of six tax-related questions. I chose, out of all of the submissions, thoughtful posts that represented a mix of viewpoints on each of the issues. That mix means that there might be opinions that differ from yours – and that’s okay. Feel free to chime in with your own thoughts as a comment. Remember, however, that the normal terms and conditions for Forbes apply to comments: additionally, I have my own rules (they can be summed up in two words: play nice).
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Do You Support Repeal Of The Federal Estate Tax?
By Jean Gordon Carter
It already has been repealed—at least for most Americans. The current exemption from the federal estate tax is $5,340,000, which a married couple can double for $10,680,000 going, for example, to their children without a death tax. Few Americans have estates in excess of the exemption, particularly the doubled exemption for couples. And most of the states have also eliminated their estate taxes.
Now for true confession: I am an estate planner, a lawyer who for more than 30 years has helped clients plan their estates. While the federal estate tax is often discussed in estate planning, the increase in the exemption has made little difference in my practice. Parents still provide trusts for their children, and people want to make special gifts or donate to charity. The repeal of the estate tax does not significantly affect me professionally. But because of my profession, I have heard hundreds of people with estates in excess of the exemption discuss their concerns on passing their property at their deaths.
The recurring theme of clients with larger estates is not to leave too much property to their children too soon. They fear that the sudden influx of wealth to their children would take away the incentive of their children to work to succeed on their own. They consider their children’s personal success to be vital to their children’s happiness. The result is they place property in trusts until children are well beyond the milestone ages or they go further and direct significant wealth away from children, generally to charity.
I often know these children about whom my clients are worried—they are solid citizens—and yet the theme from the parents is there: My children don’t need that much money—it might hurt them and it won’t help them, but it can help others, through charitable gifts. Clearly the concern of parents is taking care of their children and the existing exemption from the estate tax does that—i.e. a couple leaving in excess of $10,000,000 to their children does protect them. Assets beyond the exemption seem to have a limited role in protecting children and are perceived as potentially causing harm.
The historic reason for the estate tax has been avoiding massive accumulation of wealth in families—the estate tax serves to break up that dynastic wealth accumulation. I will leave to economists and sociologists whether this goal of the estate tax is valid, but in a human sense it does seem to be part of the ethos in estate planning for many wealthier clients.
I have scratched my head often over the popular cry to “repeal the death tax”—the name, of course, intended to paint the tax as evil and unfair. The majority of the repeal supporters will never be subject to this tax. Perhaps their hope is someday to have an estate well in excess of $10,000,000 so that they can pay the death tax. Yet my experience shows me those wealthier people often decide that the estate tax is a minor consideration as they look at their family’s future.
The irony is that if the estate tax is repealed, the federal budget will not drop by that amount—the estate tax would likely be replaced by another tax—perhaps an increase in the income tax. Personally I would rather pay my taxes when I am dead, not while I am alive. So my answer is “No, I do not support repeal of the federal estate tax.”
Jean Gordon Carter is a partner with the law firm Hunton & Williams LLP in Raleigh, NC and advises clients on estate planning and tax issues.