Just before the U.S. House of Representatives adjourned for its summer vacation, the primary sponsors of a bill to repeal the estate tax crossed an important threshold. With 221 sponsors signing on, the bill is sure to pass a full House vote in September. In fact, the bill could lose three sponsors and still pass. In the Senate and at the White House, though, the bill will likely not fare as well.
Still, proponents are counting this as a victory, as many in Missouri may be. The state hasn’t its own estate or inheritance tax, so the only tax bill right now is from the IRS. No federal estate tax would make estate planning and administration a little less complicated.
The bill would repeal the estate tax as well as the generation-skipping transfer tax. It would also freeze the gift tax at 35 percent with a $5 million lifetime exclusion. The bill would take effect immediately.
Right now, the estate tax is set at 40 percent, but there is a $5.3 million exemption. So, after administrative costs and other estate expenses are deducted from the estate, the first $5.3 million is not taxed. For Democrats and the IRS, smaller, “relatively simple” estates, then, need not deal with the tax.
The Democrats add that repealing the tax would only benefit the rich. They would rather see a plan that would help out those smaller, relatively simple estates.
As we said, estate planning in Missouri would be less complicated without the estate tax. Its repeal, however, does not mean that a planner can ignore the federal government altogether. There is still the generation-skipping transfer tax, which we will discuss in our next post.
Source: Crain’s Wealth, “Plan to ax estate tax gains momentum in House,” Mark Schoeff Jr., July 24, 2014