It seems like every time there’s a presidential election, voters hear about the estate tax. Whenever this happens, there is a debate about whether to raise the estate tax, cut it or keep it as it is.
But while it makes headlines, the fact is, very few people in the Philadelphia area have to worry about the estate tax. The current tax only applies to estates valued at more than $11.7 million for unmarried individuals and more than $23.4 million for married couples. From 2011 to 2016, the estate tax applied to just 0.2 percent of estates. In 2019, the executors of just 6,409 estates filed estate tax returns, and the IRS found that 2,570 of them owed tax on the transfer of their wealth to the deceased’s heirs.
Could the estate tax change?
That might change soon. A budget plan being considered in Congress would lower the qualifying threshold for the estate tax to $5 million per individual, which is how the tax worked in 2010. While trimming the cutoff by more than half would seem to increase significantly the pool of estates subject to the tax, one observer told CNBC that just 0.3 to 0.4 percent of estates would have to pay.
Options for protection against the estate tax
Still, if you have built up substantial wealth, your estate might potentially trigger the estate tax after you pass away. But as the tiny number of estates that actually get taxes suggests, there are things wealthy Americans can do as part of their estate planning to avoid or minimize an estate tax bill. For example, you can establish trusts that allow your property to avoid probate. Or you can give gifts to loved ones or favorite charities.