Monday, June 24, 2013

Will I have to pay estate tax?

No, unless you are rich and the definition of rich, my friends, has drastically changed recently. Now, don’t get me wrong, I feel rich because I have a wonderful family that loves me, but strictly in dollars and cents, I am far from rich and as of January 1st 2013, so are you. 

Rich people, you see, have to worry about things like estate taxes and thanks to the Obama crew and your friendly Congressional members any couple who jointly owns less than $10.5 million is now completely exempt from federal estate tax (and in California there is no estate tax so you’re basically home free). That is ten and a half million folks! 

Who has that kind of money? Well you may think your neighbor does— we all tend to over estimate what the Jones actually have in their bank account, but I’m here to tell you that unless you live in Beverly Hills your neighbor is exempt from estate tax. According to the U.S. Census, in 2010 the median net worth for American families was around $57 thousand dollars. That is all your assets minus all your debts. In California, it was around $60 grand. Now, you might argue, the country was in recession in 2010 and things are perking up. My real estate agent swears it! Well, in 1984, when just about everyone agrees that times were great the median net worth was only $73 thousand. 

(By the way, the infamous 1%ers didn’t see that level of drop between 1984 and 2010. See here for a great article on how much wealthier they are than you, if you’re in the mood to get depressed or motivated for a revolution).

So maybe your neighbor is a little above the median. He drives a Lexus for goodness sakes. It doesn’t matter. 99.7% of Americans will not have enough net assets to pay federal estate tax. So the bad news? You’re not rich. The good news? Unless you live in one of the few states that has a state estate tax, that is one tax you don’t need to worry about! 

If you want to do more research on net wealth start at www.census.gov or read a great article on American wealth from that site here.

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