Elimination of Federal Estate Taxes ("Death Taxes")

President-elect Donald Trump has proposed the elimination of a Federal Estate Tax, commonly referred to as a “Death Tax”. But who will this impact?

Some form of death taxes go back to ancient Egyptian and Roman times. Our own country enacted certain death taxes during times of crisis for example in 1797 as a means to fund a navy, in 1862 to help fund the Civil War, and again in 1898 to fund the Spanish-American war. The current Estate Tax system was enacted in 1916. The Federal Estate Tax system only taxes the property left by the decedent. It does not tax the beneficiaries, i.e. there is no federal inheritance tax.

Today, the Federal Estate Tax impacts very few Americans. Currently, the exemption for each individual is $5.45 million (going up to $5.49 in 2017) with the highest tax rate for estates being at 40%. That means each individual can freely transfer assets valued at $5.45 million to the next generation tax free. Each state may also implement a separate estate tax but California currently does not have an estate tax.

In 2015, only 4,918 taxable estate tax returns were filed, producing less than one percent of total federal revenue. As a result, Trump’s plan to repeal the “death tax” will impact only the very rich.