Inheritance Tax as a Political Issue
Our blog has previously covered the issue of inheritance tax.
As a reminder, inheritance tax is charged on estates of a certain value or greater on a percentage basis. Smaller estates (different amounts depending on the jurisdiction) may be exempt, with the applicable tax charged on the portion of the estate exceeding the exemption limit. Inheritance tax does not apply to Canadian estates or their beneficiaries. While we see individuals go to great lengths to avoid the payment of Estate Administration Taxes payable on assets administered under a probated will in Ontario and other provinces, the rate (at approximately 1.5% in Ontario) is significantly lower than what we see in jurisdictions where estates are subject to inheritance tax (up to 55% in Japan).
In particular, we have covered a number of developments in U.S. inheritance tax, which saw some fluctuations during Donald Trump’s presidency. Trump had proposed the elimination of inheritance taxes all together. More recently, President Joe Biden’s government has been considering a number of measures to increase the taxation of large estates: the reduction of the estate tax exemption to $3.5 million (from $11.7 million), increasing inheritance tax rates from 40% to 65%, and/or increasing taxes on capital gains in respect of inherited assets. News reports suggest that there has been resistance to the proposed increased tax burden to estates as the proposed increased capital gains tax makes its way through congress. However, the measures proposed by President Biden could generate an additional $213 billion to $400 billion over the next ten years.
Having just seen another federal election in Canada, it is interesting to follow along with how inheritance tax has been used as an important part of political agendas in other jurisdictions. It will be interesting to see if inheritance tax or other taxes applied to estates become part of political platforms locally in coming years, as we continue to approach the greatest ever transition of wealth from one generation to the next.
Thanks for reading,
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