Estate Planning

The U.S. Death Tax is Dead! Will it be Resurrected?

By Hull & Hull LLP

The United State's federal estate tax, more commonly known as the 'Death Tax' is a tax applied to the transfer of a person's assets at death. It is defined by the U.S. Internal Revenue Service as 'a tax on your right to transfer property at your death.'

The Death Tax is paid by the recipients of an inheritance and is due within 9 months of the decedent's death.   If there is not sufficient cash in the estate, personal property and business assets must be sold to pay the tax. 

As noted in one of our prior blogs, due to changes made by Congress during the George Bush administration back in 2001, the Death Tax was due to fall from 45% to 0% on January 1, 2010.  Many thought this loophole would be addressed before the start of the year. However, due to a Congressional tax standoff, no action was taken in time and the Death Tax has been repealed. However, the repeal is not permanent and the Death Tax is scheduled to be resurrected on January 1, 2010, at a rate of 55% on all assets above $1 million (the current exemption amount). 

It remains to be seen which way the political winds will blow, as Congress will likely address the issue this year. In the interim, estate planners in the U.S. are in uncharted territory, as no one can predict whether/when the Death Tax will be resurrected and if so, whether Congress will make it retroactive to the beginning of the year. This may ultimately be a matter for the courts to decide. Stay tuned!

Bianca La Neve

Full post as published by Toronto Estate Law Blog on February 11, 2010 (boomark / email).