History of Estate Planning and Trusts
As part of the new tax plan, Congress has once again said "no" to the federal estate tax. In 2010, it will be repealed. This change is the latest chapter in the federal government's long history of enacting and repealing estate taxes. There are big changes on the fiscal horizon, but they've happened before.
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1797 Beginning of Estate Planning
The Stamp Act of 1797 was the first federal estate tax in the United States and was passed to help fund an undeclared war with France; it was repealed in 1802. The Revenue Act of 1862 reinstated the estate tax in order to fund the Civil War; it was abolished in 1870. To finance the Spanish American War, the War Revenue Act of 1898 was passed, and subsequently abolished in 1902. Due to the costs of World War I, the Revenue Act of 1917 reinstated an estate tax that, in some form or other, has been in effect ever since. The new tax plan aims to abolish the estate tax in 2010.
Exemptions Rise Important in Estate Planning
In the meantime, the applicable exclusion amount (the portion of an estate that is exempt from federal estate taxes) will more than triple — rising from the current $1 million level to $1.5 million in 2004, and gradually reaching $3.5 million in 2009. In addition, the top estate tax rate will fall gradually from the current 50% rate to 49% in 2003, until it gradually falls to 45% in 2007.
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The history of estate taxes in America has been a long and winding road. Careful estate planning is still one of the most important ways to manage and protect your assets for your heirs.
Under budget rules, the estate tax is repealed for one year — 2010. Unless Congress acts in the upcoming years, the estate tax will be reinstated with pre-2002 rates.