According to data released by the U.S. government on October 15, 2010, those individuals who pay a tax on inheritances has declined over the last decade.
The Internal Revenue Service says that about 17,000 estates in 2008 paid taxes when passed on compared with less than about 15,000 in 2009.
About 52,000 estates were taxed when passed onto heirs in 2001, according to the IRS.
Fewer estates are subject to the tax largely because of a gradual increase in the threshold value of estates taxed since 2001. In 2009, estates were taxed on values above $3.5 million for individuals, and $7 million for couples. The threshold for taxation has gradually risen since 2001 from $675,000.
The estate tax disappeared this year after lawmakers deadlocked on a way to extend it, but will automatically spring back with a threshold of $1 million for individuals at a rate of 55% if Congress doesn’t take action by 2011.
President Barack Obama and most Democrats back extension of the $3.5 million exemption, with a 45% rate.
Many Republicans want to scrap the tax, but some have offered a plan to exempt $5 million at a rate of 35%.
Estate tax planning is still necessary. In California, whatever the federal tax may be, state law will continue to impact estates differently and thus the need to address those differences remains high. Call an estate planning attorney for help – call Mitchell A. Port at (310) 559-5259.