Many individuals look at the estate tax and have a hard time understanding why it is imposed. They have a number of reasons for feeling this way.
One of them is the fact that it is an instance of double taxation. We are all taxed every step of the way throughout our lives. Your estate is comprised of anything that you may have left over after paying all these taxes. Why should these resources be subject to another tax?
Another thing to consider is the trigger that causes the tax to be imposed. Taxes are usually created if you have economic realization or gain. In other words, wages or capital gains from an investment. If you take your after-tax earnings and put the principal in the bank it is not taxed again simply because of the deposit.
However, things change after you pass away. These after-tax savings are subject to the estate tax as your resources are being transferred to your loved ones.
The only thing that took place to make these resources taxable was your death. This is why some people refer to the estate tax as the “death tax.”
There are those who say that this is a sarcastic characterization that is meant to paint this federal levy in an unfair light. But the literal truth is that it is a tax that is imposed because someone died and for no other reason. Pure and simple, it is another example of our tax code being used for social engineering and wealth redistribution. We have to assume it is acceptable because we fail to elect enough U.S. Senators and Representatives to change the law. We seem to get close but never quite get there. At this point, there is no way the U.S. Senate pass a bill or the president sign one that would eliminate the estate tax.
Those who question the fairness of the death tax make a good point. However, the tax exists and you must take steps to reduce the asset erosion that it carries if your estate is in taxable territory. The best way of doing this is with the assistance of a licensed and experienced Oklahoma City estate planning lawyer.
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Parman & Easterday