The "Death Tax"

Americans who die in 2010 will pay no federal tax on their estate, thanks to the "sunset provision" of the "Bush Tax Cuts". For 2009, any amount over $3.5 million was taxed at over 40%. Prior to that, the threshold was even lower and the rate was even higher.

But starting in 2011, the federal estate tax (aka the "Death Tax", to those who lament the matter) returns--any amount of one's estate over $1 million will be taxed at 55%, unless the law is changed by Congress and signed by the president.

So, the heirs of someone with a net worth of $3 million will have to come up with $1.1mm cash to pay the federal government. That, after the "benefactor" has paid a lifetime of income, capital gains, dividend and interest taxes while building-up the $3mm net worth; and we should remember that the companies that paid-out the dividends did so after being taxed on their earnings already.

Food for thought.