What is the Death Tax?

The death tax (a.k.a., the federal estate tax) is a tax applied to the transfer of a person’s assets at death. It is defined by the Internal Revenue Service as “a tax on your right to transfer property at your death.”[1]

Under current law, the tax is temporarily set at the rate of 35 percent with an exemption of $5 million. On January 1, 2013 the estate tax is set to return at a top marginal rate of 55 percent (with an additional 5% surtax for certain estates) on all assets above a $1 million exemption amount.[2] See “The Current Fight” for more information.

The estate tax is imposed on any and all life-savings.

This includes:

• personal property (such as a home, cars, furniture, artwork)
• business assets (property, machinery and inventory)
• investments (stocks, bonds and real estate)

The estate tax is paid by the recipients of an inheritance – most often family heirs – and is due within 9 months of the decedent’s death. If the heirs do not have sufficient cash, personal property and business assets must be sold to pay the tax.

In the case of family business owners and farmers, the tax often exceeds the ability of the family to pay. These heirs are consequently forced to sell off part, if not all, of their enterprise in order to pay the tax.

See “Repeal the Death Tax” for further explanation of how the death tax destroys family businesses, farms and jobs.

1. Internal Revenue Service, Estate Tax Overview, http://www.irs.gov/businesses/small/article/0,,id=164871,00.html.

2. Internal Revenue Service, Publication 950, Introduction to Estate and Gift Taxes, http://www.irs.gov/publications/p950/ar01.html#d0e23.