What is Inheritance Tax?
The main source of revenue for the government is through taxation. There are many different kinds of taxes that have to be paid and which enable governments provide services. Inheritance tax is one of the many taxes levied by the government. It is also known as estate tax and happens to be one of the most controversial taxes. Inheritance taxis charged to the heirs of the estate according to their individual inheritance. It is sometime confused with estate tax which is charged to the estate of the deceased before the heirs are awarded their individual inheritance.
The laws on inheritance tax vary as per the different states in the US and also in other countries. However there are some commonalities in that most countries will charge higher taxes on non lineal heirs such as friends. Beneficiaries will pay lower taxes if they are closely related and this tax increases as the relationship becomes more distant. Children and spouses pay lower taxes as compared to brothers who in turn pay less than cousins.
There have been very many debates on the morality and legality of inheritance in many countries where the tax is charged. The first argument looks at the morality of taking money from a family which has just lost a loved one. There are many who feel that this is simply immoral as the government is seen to be profiting from death. This has been a very sensitive issue with many people who oppose inheritance tax. Proponents of the tax however argue that the tax only applies to wealthy members of society who can afford it. They reason that those who pay inheritance tax will not be left destitute because of making the payment.
In many countries there is a minimum value of inheritance that can be taxed. This usually means only a very small portion of the population pays this tax with most people actually ignorant of its existence. There are many countries that have stopped collecting inheritance tax due to the strong opposition it has faced. There are others that continue to collect it while reasoning that the heirs should have no problem paying since they did not really work for their new found wealth and neither did they expect it.
With the help of a resourceful attorney, many people are today finding ways to avoid paying inheritance tax. By applying for exemptions and cleverly distributing the inheritance among children, spouse, including donations to charity and creating trusts, those leaving the inheritance can make sure that their heirs pay a minimal amount in taxes.
Politicians have on many occasions used this tax as a campaign tool so as to get backing from those who oppose it. There are very few people who pay inheritance tax and this is the least efficient form of revenue collection for most countries where the tax is levied. The controversy that surrounds inheritance tax continues to generate heated debate that is not likely to die down any time soon.