The term “death tax” has been used since the nineteenth century to refer to a broad group of taxes (estate taxes, inheritance taxes, legacy taxes and succession taxes) imposed after the death of an individual. Today, however, the term is more commonly used to negatively refer to the estate tax.
The estate tax is a federal tax on the transfer of a person’s property following that person’s death. It is different from an inheritance tax, which is a similar tax imposed on the state level, and a gift tax, which applies to transfers of property during a person’s life.
The estate tax takes into account a person’s “gross estate,” consisting of the fair market value of everything they owned (cash, securities, real estate, insurance, trusts, annuities, business interests and other assets) at the time of their death. Certain deductions (including mortgages and other debts, estate administration expenses, and property that passes to surviving spouses and qualified charities) are allowed in arriving at your “taxable estate.”
For a person dying in 2015, an estate tax is collected if the estate’s combined gross assets and prior taxable gifts exceed $5,430,000. Thus, the estate tax does not apply to most relatively simple estates.
The first scene of Death Tax takes place in 2010. At that time, a law was in place to repeal the estate tax for the year and reinstate it in 2011 at a new exemption level of $1 million with a maximum tax rate of 55%. This means that if a person with an estate worth more than $1 million died in 2010, their entire estate would have been exempt from federal taxes, but if that same person died in 2011 or later, their estate would have been taxed at a rate of up to 55%. However, on December 17, 2010, Congress passed the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 to reinstate the estate tax in 2010 with an exemption level at $5 million and a maximum tax rate of 35%.