The State of Estate Taxes

Emerald Publications
Financial Ink Newsletter, 2001

Estate taxes have been around nearly as long as civilization itself. Historical evidence points to death taxes in feudal England, Imperial Rome and even ancient Egypt. Here in the United States, the nation's first estate tax was instituted in 1797 to pay for an undeclared war on France.1 In fact, until the early 20th century, most estate taxes were created as a means to finance wartime expenditures.

Estate taxes have their fair share of supporters and detractors. Opponents decry estate taxes as "double taxation." They maintain that the so-called "death tax" discourages savings and forces the sale of family-owned farms and small businesses to pay Uncle Sam.

Supporters dispute these claims, however. They assert that the Taxpayer Relief Act of 1997 and other changes in the tax code have helped preserve family-owned businesses, and also note that estate taxes encourage charitable giving (both before and after death).

Until estate taxes are repealed or overhauled, though, the government will continue to levy taxes on estates with assets over the current exemption amount.2 In the meantime, a variety of estate planning strategies—including trusts, foundations and partnerships—exist to help ease the tax burden on the living and preserve the legacy of the deceased.


1 Institute for Policy Innovation, 1999
2 The exemption amount (currently $675,000) is scheduled to rise gradually until reaching $1,000,000 in 2006.


©2001 Emerald Publications