Tag: death tax
With his election victory in the not too distant past, President-elect Donald Trump is receiving extensive coverage in the media. Although the issues following him vary widely, as we at Hull & Hull LLP are estates lawyers, our focus is on the effect the President-elect is having in the estates community.
US Estate Tax
As previously blogged by Hull & Hull LLP, the President-elect is considering abolishing estate tax in the United States altogether. This is a departure from the current US model which sees married couples exempt for the first $10.9 million in their estate, with any surplus amount being taxed at 40%. In relation to this current model, recent polls suggest that in 2015 only 10,800 estate returns were filed with about half of those being taxable.
No date has been set for the anticipated repeal.
As well, the President-elect seeks to change capital gains owing at death such that if capital gains are held until death and valued under $10 million, they will not be taxed. Apparently, the rationale is to support small businesses and family farms.
As a result of this change, it is predicted that beneficiaries of large estates will be able to avoid paying capital gains on the inherited asset if they do not sell what they inherit. They can wait to pay the tax when there is an opportune time to do so. Otherwise, those beneficiaries who are in ready need of money, will have to sell the asset, thereby triggering the tax owing.
As a result of the changes to estates and capital gains tax, pundits predict the dawn of dynastic wealth (i.e. monetary inheritance that is passed on to generations that didn’t earn it) in the United States of America.
Now, given what we have learned about the President-elect’s platform regarding estate tax and capital gains tax, consider meeting with a professional advisor to ensure your estate plan is up to date.
Find this topic interesting? Please also consider these related Hull & Hull LLP Blogs:
- Blind Trusts – Who Controls Donald Trump’s Assets While President?
- Estate Issues for Americans to Consider Before Moving North
- S. Inheritance Tax Deductions for Surviving Spouses
Given the intrigue and extensive coverage that the current US election has had north of the border, it is only fitting that we dedicate today’s Hull & Hull Blog to reviewing the position taken by Clinton and Trump with respect to changes to estate tax.
A recent article in Forbes explains that current US laws exempt estates worth $5.45 million or less from paying estate tax. Estates valued higher pay 40% tax.
Hillary Clinton seeks to increase the taxes owing by the wealthiest from 45% to 65% based on the value of the estate, apparently the highest it’s been since 1981. Specifically, estates over $10 million would be taxed at 50%, those over $50 million at 55%, and those exceeding $500 million (for a single person) at 65% As well, Clinton also seeks to lower the exemption for estates valued at $5.45 million to $3.5 million.
Trump, on the other hand, seeks to eliminate the estate tax altogether.
According to the Wall Street Journal, the Republicans see the tax as “a patently unfair confiscation of wealth that punishes family-owned business”, while the Democrats view it as “a levelling tool necessary to combat concentration of wealth”.
In Ontario, while there is no inheritance tax, estate administration tax is charged on the total value of a deceased’s estate. Subject to certain exceptions, this includes the following assets: real estate; bank accounts; investments; vehicles and vessels; all property held in another person’s name; and, all other property, wherever situated, including goods, intangible property, business interests, and insurance proceeds.
As discussed in prior Hull & Hull LLP blogs, new provisions came into force on January 1, 2015, which requires payment of $5.00 for each $1,000, or part thereof, for the first $50,000 and $15 for each $1,000, or part thereof, of the value of the estate exceeding $50,000. There is no estate administration tax payable if the value of the estate is $1,000 or less.