For many, what they leave to their loved ones when they pass on is always a lingering concern. Getting documents in order to determine who receives property or monetary inheritance as well as sorting through all the legal complications that come with it can be a daunting task to face in the later stages of one’s life. And considering how many people fear the invisible hand of death to reach out to them at any time, why would you want to postpone finalizing any sorts of plans that might allow your loved ones to be left taken care of when you are gone?
The Federal government is in the process of considering to repeal estate tax policy, which has very likely put the plans of many people on hold in the interest of passing down as much of their estate directly into the hands of those closest to them. However, some state representatives see this as a loss of potential funds that could be used toward improving public resources.
“If Donald Trump and congressional Republicans are hell-bent on cutting taxes for our wealthiest residents, we should counter-balance those tax cuts by recapturing the lost funds and investing them here at home…” said Senator Scott Wiener of California.
Even though the Federal law does not prohibit states from enforcing their own laws regarding policy so long as no conflict of interest occurs, it seems that Californians are already in a lose-lose situation. Even beyond all of the math that goes into figuring exact amounts for various scenarios of estate distribution, the fact that such a nationwide repeal would still only affect a portion of the national population due to individual state interests regarding estate tax policy.
So, in essence, the Federal government might be saying to you, “We will not take money or the value of property from a decedent.” California’s individual response may just be, “We will take it instead.”
Granted estate taxes are generally imposed on those with larger estates to pass down from decedents to surviving members of friends and family. Most states that do enforce estate tax separate from the Federal government currently adhere to a minimum that matches the Federal exemption, $5.49 million in value as of this year. So, the main question after that becomes what sort of policy will open up to residents of various states should Federal estate tax be repealed as a whole? Without any minimum to stand by, will states maintain a similar policy or will they take matters into their own hands similar to the path of California lawmakers?
The general argument seems to be with regard to keeping taxation on the wealthy where some argue Trump’s consideration for repeal comes from a position of business and favoring policy reform for wealthy citizens and families. However, if Trump and Federal lawmakers eliminate all precedent by which states can follow, the big mystery remains how many states will reciprocate to make up the loss in Federal funding. Will states without an estate tax follow the California route? Will states who already impose an estate tax lower their threshold and tax those with lesser estates to be passed down? In either case, is it really worth you waiting to make arrangements for estate planning with regard to your estate and how it could impact those you love?