The Ethics of Abolishing Estate, Gift and Inheritance Taxes (2024)

FAQs

Why should the estate tax be abolished? ›

The tax is a burden on family-owned businesses, slows economic growth, and contributes to large compliance burdens. It's a costly burden that families often plan around. Politically, repeal of the death tax is even more of a no-brainer.

(1) One of the main arguments against an inheritance tax is that it, and the estate tax, essentially serves as double taxation on a deceased person's wealth. (2) An inheritance tax disproportionately burdens small businesses.

It would be difficult to argue that these taxes are justified on a benefit received basis, since dead people derive no benefit from government. The author discusses some ethical issues involved in these forms of taxation and suggests that the ethical solution is to abolish them.

Inheritance tax is a tax on money going, usually, from parents to children. Without it, the argument goes, children of wealthy parents get windfalls that give them access to opportunities children of less wealthy parents could only dream of.

Private-placement life insurance, or PPLI, can be used to pass on assets from stocks to yachts to heirs without incurring any estate tax. In short, an attorney sets up a trust for a wealthy client. The trust owns the life-insurance policy that's created offshore.

The federal estate tax is imposed "on the transfer of the taxable estate of every decedent who is a citizen or resident of the United States." Federal estate taxes give very wealthy families incentives to transfer resources directly to distant generations in order to avoid taxes on successive rounds of transfers.

Washington has the highest estate tax at 20%, which is applied to the portion of an estate's value greater than $11,193,000. Inheritance tax rates depend on the beneficiary's relation to the deceased, and, in each state, certain types of relationships are exempt from inheritance tax.

There is a federal estate tax, however, which is paid by the estate of the deceased. In 2024, the first $13,610,000 of an estate is exempt from the estate tax. A beneficiary may also have to pay capital gains taxes if they sell assets they've inherited, including stocks, real estate or valuables.

The executor or the trustee of a qualified grantor trust is responsible for filing the applicable federal and state estate tax returns and ensuring that all taxes are paid from estate.

In the context of the estate tax debate, system justification theory suggests that many people oppose the levy as “a system threat to the social status quo of the family.” It matters not that the families in question are disproportionately wealthy; a rich family is still a family, and any tax that threatens a family is ...

Is estate tax biblical? ›

The moral principles of Judeo-Christian ethics definitely require some level of estate tax exemptions permitting a reasonable transfer of wealth to heirs without having to pay estate taxes or donate the excess to charity.

One type of trust that helps protect assets is an intentionally defective grantor trust (IDGT). Any assets or funds put into an IDGT aren't taxable to the grantor (owner) for gift, estate, generation-skipping transfer tax, or trust purposes.

Think twice about property as a gift

From a financial standpoint, it is usually better for your heirs to inherit real estate than to receive it as a gift from a living benefactor.

Inheritance tax is a complex issue with both advantages and disadvantages. While it can generate revenue for the government and promote fairness, it can also lead to double taxation and have a negative impact on family-owned businesses.

Inheritance checks are generally not reported to the IRS unless they involve cash or cash equivalents exceeding $10,000. Banks and financial institutions are required to report such transactions using Form 8300. Most inheritances are paid by regular check, wire transfer, or other means that don't qualify for reporting.

The main difference between inheritance and estate taxes is the person who pays the tax. Unlike an inheritance tax, estate taxes are charged against the estate regardless of who inherits the deceased's assets.