Benjamin Franklin famously said, “Our new Constitution is now established, and has an appearance that promises permanency; but in this world nothing can be said to be certain, except death and taxes.”
As an estate planning attorney whose work revolves around planning for death and taxes, I can’t help but reflect on this statement as we celebrate our nation’s 250th anniversary. What’s changed in death and taxes since Mr. Franklin helped found a country?
Death…but not so fast
While death may be a certainty, it’s also a certainty that people are living longer. Much longer.
In Ben’s time, the average life expectancy was between 35 and 38 years old. (Although this was skewed by infant and child mortality rates; Mr. Franklin himself lived to be 84.)
According to the National Center for Health Statistics, the current average life expectancy for American males is 76.5 years, and for women it’s 81.4 years. As a result, financial planning must anticipate a longer period of retirement.
Planning for incapacity has also become almost as important as estate planning for one’s death. Elder law has become its own specialty within estate planning, with a focus on Social Security, Medicare and Medi-Cal planning.
Also, sadly, elder abuse claims, whether they be physical or financial, are on the rise, and laws have been enacted to handle these. California established an Adult Protective Services program in 1998, as compared to Child Protective Services, which was established beginning in 1935.
Income taxes
The 16th Amendment was ratified in 1913, granting Congress the constitutional authority to levy taxes on incomes.
According to the IRS, the first permanent income tax was then enacted levying a 1% tax on net personal incomes above $3,000, and 6% on incomes over $500,000.
As anyone who’s ever filed an income tax return knows, those numbers have changed greatly over time, with income tax rates now starting at 10% and increasing to 37% in the highest tax bracket. Interestingly, the highest tax bracket begins not much higher than it did in 1913 — it’s currently $640,600 for a single person, and $768,700 for a married couple filing jointly.
Estate taxes
The federal estate tax was introduced in 1916. Gifts have been subject to gift tax since 1924. The first estate tax had a 10% top rate.
During the 1930’s and 1940’s, the estate tax rose sharply, reaching a top rate of 77% during World War II. Estate taxes became a hot debate topic between political parties in the 1970s and still today, with the top rate lowered from 70% to 45% by 2009.
Since 2013, the top federal estate tax rate has stabilized near 40%, with prior fluctuations including a 35% rate and temporary repeal in 2010.
But perhaps the biggest change has been to whom the estate tax applies.
Beginning in 2026, the estate tax exemption is $15 million per person. That means a couple can pass $30 million down to their children with no estate tax at all. And that number will increase with inflation. For most folks, estate tax is no longer a certainty.
Final feuds
I can’t say whether our founding fathers, many of whom actively participated in the Revolutionary War, would be surprised at the family feuds taking place today in probate courts, but I know I am.
It seems in these modern times, family members waging ugly legal wars over mom or dad’s estate has become all too common.
Whether it’s step-children fighting a surviving step-parent, children fighting each other, or even children fighting a surviving parent, litigation has become an action of first, rather than last, resort.
Perhaps that’s a sign of our times — when our leaders resort to name calling (“loser” and “piggy,” anyone?) and billionaires use money as a way of keeping score, bad behavior and looking out only for oneself becomes normalized.
I’d like to think ol’ Ben would be appalled, but then again, he disinherited his own son for remaining loyal to Britain.
Dogged determination
To end on a positive note, one other significant but welcome change in estate planning has been the popularity of including one’s pets in one’s estate plan.
Whether it’s a fear of dying before one’s pets or saving taxes by making a charitable contribution to an animal rescue, people are motivated to make sure they’ve made arrangements for their pets and other less fortunate animals.
Benjamin Franklin famously had pet squirrels, and while he didn’t provide for them in his will (squirrels have short lifespans), I like to think he’d be happy to see that pets are something people think about when contemplating the certainty of death and taxes.
Teresa J. Rhyne is an attorney practicing estate planning and trust administration in Riverside and Paso Robles, CA. She is also the #1 New York Times bestselling author of “The Dog Lived (and So Will I)” and “Poppy in The Wild.” You can reach her at Teresa@trlawgroup.net