Facing the Innevitable: A Study of the Estate Tax and Effective Planning Methods For the Middle Class

The Estate Tax is a toll that is imposed on the assets of a deceased individual in the United States. This tax, often dubbed the “death tax,” has been a source of great conflict in American politics for generations. The tax seems to ebb and flow with political tides, military conflicts, and societal trends. Because of this, it is often hard to make a solid plan for your future, and for the future of your children. This problem could not be more evident than in the last ten years. The estate tax exemption, or the amount of assets that is exempt from tax, has been changing almost every year for the past decade. In fact, in 2010, the exemption was unlimited and anyone who died in that year could escape tax free. Despite this constant ebb and flow of the tax, 2013 presents a new challenge, a year in which the estate tax exemption will return to $1 million. This, coupled with the likely inflation increase in the coming years, will result in more estate having to pay the tax. Subsequently, the estate tax will no longer be a rich man’s quandary, and the effects will be especially felt in the middle class. If proper planning is not done soon, many middle class families may get blindsided by a tax they never thought would pertain to them. This paper is an attempt to educate the middle class on certain planning techniques that will allow them to preserve their estate in a tax-efficient manner