Death and Taxes: Don’t Die in 2013
2010 was the best year for a wealthy person to die. 2013 may be the worst.
In 2010, former New York Yankees owner George Steinbrenner was the most famous billionaire who passed during the most opportune year for his heirs. Per the terms of the Bush tax cuts, the estate tax was suspended, only to be reinstated in 2011 at a 35% rate for estates over $5 million. But heirs of non-billionaires who passed away in 2010 duly reaped many benefits as well.
According to an Americans for Tax Reform (ATR) report, the death tax will go up even more in 2013 if Congress does not act. The top marginal rate will increase by 20 points to 55 percent and will apply to estates over $1 million. Furthermore, a 5% surtax will be levied on estates between $10 and $17 million, which effectively, as ATR notes, the top effective death tax rate 60%.
According to a 1994 study by the Tax Foundation, an increase in the death tax does not just hurt the extremely wealthy. A 55% estate tax “has roughly the same effect on entrepreneurial incentives as a doubling of income tax rates.”
Americans are feeling even more economic uncertainty because Democrats have openly threatened to take the country to the fiscal cliff by letting the Bush tax cuts expire across the board. The expected death tax increase will give Americans, especially those in bad health and have heirs, even more to worry about in 2013.