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Estate tax is also known as the "death tax".
It is a regressive tax on the estate of a deceased
person above a certain exempted amount.
Currently the exemption for the federal estate tax
is two million dollars but in 2010 it will be
suspended all together for one year. It is
scheduled to resurface in 2011 with an exemption of
one million dollars. Many States also impose
an estate tax.
Financial assets payable or transferable upon death
along with life insurance benefits, if the deceased
owned the life insurance policy or if it was payable
to the estate, are included in the total assets of the
estate for tax purposes. However, charitable
contributions by the estate can be used to reduce the
taxable amount of the estate.
The estate tax rate adjusts slightly year to year
but hovers right around 50% on the taxable amount of
an estate. It is believed by sane people that
this tax should be abolished. It destroys small
family businesses when the primary owner of the
business dies. For instance, a family owned
business started and owned by ones father worth $5
million and earning a reasonable $400,000 yearly would
create an estate tax burden of at least $1.5 million.
If the father owned other assets such as a $500,000
home, another $250,000 in estate taxes would be owed.
Few families in business for themselves are able to
make a $1.5 million to $2 million dollar sudden
payment without selling their father's business and,
thus, putting themselves out of business.
Unfortunately, many in Congress cannot control
their penchant for large spending bills and prefer to
tax the heck out of Americans rather than reign in
their spending appetite.
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