Please remember that for a couple the figure is $7 million. How many family farms and family owned businesses are worth more than $7 million? Also, I believe when one spouse dies, the value of the real estate portion of the estate is set at the value it has on the day of death. If one then sells the property, no capital gains is paid on the run up before that person’s death. I am not clear on what happens to the value if the surviving spouse does not sell.
What is clear is that they very stupidly hav failed to put an inflation clause in the legislation, so we need to pressure the Senate to include than so we don’t end up with a big mess like the Alternative Minimum Tax. Dems have a clear majority in the Senate, so this aspect is the best chance we have to save a lot of suffering in the future.
In the late 1950’s, Social Security installed a one time death benefit of $255. This was intended to cover a basic funeral, and/or provide a couple of months financial cushion upon the death of a breadwinner. No provision for inflation was included, so here at least 60 years later we are still getting only $255 when our spouse dies. That figure should also be updated to present realities along with an inflation clause. Tell your Senators and Representatives.
In order to take advantage of the combined exemptions, you must use a spousal bypass trust.
When the first spouse dies, their interest in the asset goes into the trust, and the surviving spouse is the beneficiary (of any income). When the surviving spouse dies, the trust is liquidated and the assets are distributed to the intended heirs.
If you don't do it this way, the estate tax "resets" for the surviving spouse.
A lot of family farms and raches out west have a lot of land. It is necessary because the land is somewhat barren, so it takes a lot to support a viable cow-calf operation or farm. The land value, especially if development has taken place nearby, can easily exceed $7 million, even though the cash flow of the business never came anywhere close to that.
So when the estate tax hits, the entire operation must be liquidated to pay the tax. This one law is really why there are fewer and fewer family farms and ranches.
Who buys it: developers,massive factory farms, and Cargill.