Discussion about the estate and trust tax issues usually centers on political debate about the rates and exemption levels or case-studies of the tax burden for famous or wealthy individuals. Far less often discussed is general information about the tax, including how much was actually collected, the total number of individuals affected, and similar details.
Fortunately, to fill in that gap, every year the IRS releases statistics, including those affected trusts and estates. A rather detailed list of information can be found in various spreadsheet on the IRS website. Also provided is a handy sheet offering a “snapshot” of many interesting trust and estate tax details. The most recent year’s tally was just released, providing a helpful primer for those interested in how these federal taxes actually affect residents.
The Data
All statistics are culled from submitted returns on Form 1041. This is the form used is the “U.S. Income Tax Return for Estates and Trusts.” The snapshot explains that the form is “used to report the income, deductions, gains, and losses of estate and trusts, as well as distributions to beneficiaries and income tax liability.”
All told, in the most recent data released (from 2010), a total of 3 million such forms were filed totaling $91 billion in income–the majority of that income was from capital gains ($32 billion). That accounts for about $72 billion in deductions. About 75% of those filing listed some deductions.
However, these forms were not filed just by high-income earners, as the vast majority were from those listed incomes of $100,000 or less–more than fifty percent lists less than $10,000 in income. In fact, of the 3 million filings in 2010, only 532,000 of those owed any tax burden at all. There was a clear trend year over year in regard to these income filings. In 2009, about 661,000 Form 1041 filings resulted in some tax liability. Keep in mind that these stats are from several years ago, when the country was in a far more dire economic straits.
There are many interesting takeaways from this data. At the most basic level, this is a reminder of the complex tax issues that may attach to an estate well after an individual passes. This is one of many reasons that estate planning attorneys and financial advisors can play a critical role with these matters both with preparing the plan as well as administering it. For example, it is not uncommon for attorneys to work as a trustee to help ensure all of the legal details are handled appropriately.
For help understanding these issues as they may relate to you and your family, contact an estate planning lawyer today.