According to reports, federal lawmakers are gridlocked over whether to dismantle the country's tax on inheritance completely. Currently, federal taxes kick in on estates over $5.34 million, taking as much as 40 percent of the value before heirs receive their cut. In addition to hefty federal taxes on high value estates, 21 states assess taxes on inheritance.
Experts say that estate taxes are a negative for local and national economies, because they reduce the chance individuals will invest and grow their wealth. According to numbers published by the Joint Economic Committee, the death tax may be reducing capital stock in the economy by as much as $1.1 trillion. One former Congressional Budget Office director said that repealing the national estate tax would result in the creation of a million jobs.
The national economy isn't the only thing at stake, say experts. Some point out that states with high estate or other tax structures lose wealth when individuals or businesses leave the area. They say individuals will choose to live in states where tax structures are friendlier to their wealth or to heirs.
With so much at stake, it's not surprising some states are doing away with death taxes. According to reports, Oklahoma is one of a few states to abolish death taxes recently. Even states that aren't doing away with the tax completely are reducing tax percentages so that death taxes come with less sting.
In addition to understanding estate tax structures in your location, you can protect your personal assets and wealth in a number of ways. Revocable or irrevocable trusts are two ways individuals can protect wealth from certain taxes, creditors and unethical relatives in late life. Solid estate planning makes use of trusts to protect assets for future generations.
Source: Roll Call, "Efforts to Kill Death Tax Find New Life in Blue States | Commentary" Thomas Fletcher, Apr. 24, 2014