The federal estate tax is assessed on an individual's property and assets after they die. According to the Office of Management and Budget, in 2014, the estate tax generated over $19 billion at the federal level. However, in reality, most taxpayers never come close to paying estate taxes because of the significant exemption amount available to individuals. For example, for the tax year 2017, the personal estate tax exemption amount is $5.49 million. The exemption is indexed for inflation and increased from $5.45 million in 2016. Therefore, if your estate is worth less than $5.49 million, your estate will not owe federal estate tax if you pass away in 2017.
As one of his many promises, President Trump campaigned on ending the federal estate tax. In a campaign speech in Detroit, then candidate Trump spoke out against the so-called “death tax.” “American workers have paid taxes their whole life, they shouldn't be taxed again when they die,” Trump said. In accordance with President Trump's campaign promise, there are currently two bills pending on Capitol Hill to repeal the federal estate tax. However, one California state senator has proposed establishing a state-level estate tax to recapture those taxes.
Scott Wiener, a Democratic senator from San Francisco, introduced SB 726 in February of this year. According to Senator Wiener, the federal estate tax generated $4.5 billion attributed to high-net-worth California residents in 2015. SB 726 would replace the repealed federal estate tax with an identical California estate tax to recapture the billions in tax revenue that would be used solely in California. If Congress does not repeal the federal estate tax, Senator Wiener has said he will withdraw the measure.
"If Donald Trump and congressional Republicans are hell-bent on cutting taxes for our wealthiest residents, we should counter-balance those tax cuts by recapturing the lost funds and investing them here at home in our schools, our healthcare system, and our roads and public transportation systems," said Wiener.
Prior ballot measures adopted in 1982 prohibited a state-level estate tax for California. Thus, before California can enact an estate tax, the measure would have to be approved by voters. A number of other states already have a state-level estate tax, including the District of Columbia.
Proper estate planning can help reduce or eliminate estate tax liability for families with assets over the exemption limit. If you have any questions about estate taxes and estate planning, the law firm of Butterfield Schechter LLP is here to help. We will answer all your questions and make sure your estate plan is set up to care for your loved ones and reduce tax liability.Contact our office today with any questions on how we can help you and your family succeed.