Have you ever seen the movie Failure to Launch with Sarah Jessica Parker and Matthew McConaughey? If so, you may remember that the movie is a chick flick where Paula (Parker) is hired by Tripp’s (McConaughey) parents to convince him to finally move out of their home. There is a minor detail in the movie where one of Tripp’s friends explains to Tripp that technically he is more grown up [than Tripp] because he has already purchased his parents’ home in order to avoid the inheritance tax. So technically, Tripp’s friend is living in his own home…not that of his parents.

I found it really interesting that (1.) Such an important aspect of life was thrown into a romantic comedy and (2.) I had no idea about this inheritance tax before it was mentioned in the movie. It got me thinking that maybe I wasn’t alone and other people might not know this fact either!

Many times people are left property through a will that is made by the deceased. What they may not realize, is that they can also be taxed on top of this property and do not get it for “free.” (To find out more about written wills, check out this Geezeo article called Importance of Your Will!)

An inheritance tax is more commonly known to many as the ‘death tax’ or an ‘estate tax’ (even though they don’t always mean the same exact thing). This tax is so unpopular that the government is looking to get rid of it altogether. However, for now it remains. From 2006-2008, any inheritance below $2 million is tax free; in 2009 this number will increase to $3.5 million. Here’s the catch though – for every dollar over this amount you are taxed. Many tax rates vary state by state, but I can definitely see that number adding up fairly quickly!

One of the largest affected areas by this death tax is family businesses. Many families are not able to pass down the business through generations because those receiving the business cannot afford to pay off the tax that comes with it. In my mind it is really sad that a family tradition cannot continue when someone passes away. If the company was thriving in the first place, it should not be closed down just because someone cannot afford to pay a tax…if the person who passed away had survived, there would have been no tax anyway! It is hard enough to lose a close family member, let alone the business that has been passed down through generations as well.

One of the problems that the government is facing by getting rid of the ‘death tax’ is that it generates a fairly large amount of revenue for the government. According to USA Today, ending this tax would reduce the government’s revenue by about $290 billion to $745 billion over 10 years. That definitely is a lot of money, but that doesn’t mean that this tax is fair.

Losing a loved one is hard enough; dealing with financial difficulties after their death just makes it worse. Like I mentioned earlier, I hadn’t really heard about this topic until recently. If any of our Geezeo users have any stories surrounding the ‘death tax’ it would be interesting to hear how you dealt with it. I personally can’t imagine anything worse than having to deal with financial uncertainty at an already uncertain time, but I have not gone through this scenario and do not know firsthand. From what I have heard and read however, the ‘death tax’ sounds like anything but a good time!

© Photo by Kenn W. Kiser

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Can You Buy a House After Death?
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