Personal and Social Issues

The issue of passing family assets to our heirs, poses complex problems of both a personal and social nature. More than that, it can be viewed as the process by which we take responsibility for our families and for our role in society.

Most of us may limit ourselves to concerns over the most effective way to transfer wealth, minimize taxes, and provide direction and assistance to our loved ones.

There may be a radically different way to view this process. If, as many religious doctrines point out, we are merely stewards of our wealth and property, that everything we have accumulated has been a gift, then it is certainly our obligation to give back.

And certainly, there is much that we take for granted. Imagine all of the technology and development, the years of sacrifice and hard work of others, that has made it possible for us to be successful. We have been given these tools, these gifts. Not to acknowledge that would be criminal.

The dollars and cents… How it works

Our system of gift and estate taxes, allows for an annual tax-free gift of $12,000 to any individual, and a one time lifetime gift or estate transfer of $2.0 million dollars. Transfers between spouses are tax-free, and with proper planning, a husband and wife can pass a total of $4.0 million dollars free of gift or estate tax. The remainder is then taxed at rates up to 46 percent. Under current law, by 2009, this amount rises to $3.5 million per person, $7 million with spouse. The tax then disappears in 2010 under the provisions of the 2001 tax bill, but rears up again a year later.

The push to eliminate the estate tax entirely has been on for some time, backed by some of the wealthiest families in America. It is clear what is at stake. The revenue generated at the top 1% of net worth in America is potentially in the trillions of dollars.

A recent Senate vote of 57-41 fell three votes short of advancing a bill to repeal the estate tax. A small group of senators, knowing Republicans lacked the votes to eliminate the tax, had hoped to keep the issue alive with an agreement to remove the tax from smaller estates and lessen the hit on larger ones.

How many people are affected? According to the most recent statistics available from the Internal Revenue Service, only 1.17 percent of people who died in 2002 left a taxable estate. In spite of that, the push is on to eliminate what opponents call the “ death tax”. Compromise proposals have been made to exempt the first $5 million of an individual's estate, or $10 million of a couple's, from taxation. The size of estates escaping the tax would increase each year to keep pace with inflation. Estates between $5 million and $30 million would be taxed at rates equal to capital gains, and the remainder would be taxed at 30 percent.

Many believe that repealing the estate tax entirely, during this time of fiscal crisis, would be incredibly irresponsible and intellectually dishonest.

Personal Issues

The Terry Schiavo drama moved many of us. The battle over her dignity and her right to control her final care and treatment caused many of us to visit our lawyers, adopt or revise our advance directives and health care powers of attorney.

Of course, anyone who doesn't have a will or has had a significant change in circumstances--a marriage, the birth of a first child, a divorce, a financial windfall, a change in state of residence--needs to act. But for others, it's a tougher call, with the estate tax law now in a state of confusion and flux.

But apart from the confusion, and the debate over social responsibility, estate planning is really our final imprint. It is what we leave behind to ensure a better world for those we love.