No one can deny the struggling state in which our economy has found itself; nor can anyone deny that drastic measures need to be taken in order to rectify the troubled times in which we are living. This, however, does not have to translate into tax hikes for the individuals involved in matters of estate planning. Given the recently introduced bill to have the estate tax permanently repealed, it would seem as though United States Representative Bob Latta (R-Bowling Green) agrees.
In effect, repealing the estate tax would protect the beneficiaries of an estate from having to pay higher taxes on a property that could otherwise be slammed with an increased tax value based upon the "stepped-up" basis used at the time of a person's death. Instead, these individuals would be ensured that their taxes would not reflect the increased value of an estate that was "stepped up" to the fair market value of the property under current circumstances.
As proclaimed under the guidelines of the Internal Revenue Code § 1014(a), the stepped-up basis refers to the basis of property that a taxpayer will be set to receive from a decedent. In other words, the basis of the property that a beneficiary receives from his or her benefactor must equal the fair market value of the property at the time the decedent passes away. If the proposed repeal goes into effect, however, the increased taxation that has been unfairly felt by too many beneficiaries throughout the country would no longer be a burden of financial worry.
The Congressman's efforts to have the bill repealed directly reflects his belief that the estate tax – which has also been referred to as the death tax – "punishes the efforts and investments that hardworking taxpayers have made during their lifetime." Rather than forcing families to sell their personal belongings in order to afford the taxes imposed on the estate that was inherited, the Congressman has instead proposed that the tax be eliminated altogether, thus ensuring that property owners can continue to grow and prosper.
The estate tax is a federal tax that is currently levied against the assets of a person's estate at the time that they pass away. With the implementation of the repeal that has been proposed by Congressman Latta, this could change. As of now, the top estate tax rate stands at 40% and the exemption amount is set at $5 million, which is then indexed to inflation. Only time will tell whether or not the efforts to secure the passage of this repeal bill will be successful. Until then, our legal team will be here to answer your questions and field any concerns that you have about the estate planning process as a whole.
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