This topic gets a lot of attention when talking about federal tax reform. A disproportioinate amount I feel. Now, I'm not talking about whether the transfer of wealth upon your death should be taxed...but rather how many people it really affects. The "morality" or justification of whether the transfer of wealth is a taxable event is a topic for another thread.
As a primer, prior to 2001 (I think) estates with a greater net value than $675,000 were subject to some taxation. Keep in mind that generally speaking the transfer of your estate to a surviving spouse was not a taxable event. Beginning in 2001 the levels subject to estate tax began going up, first to $1million then to $1.5million in 2004-2006. Currently your estate is not taxed on the first $2million. Next year the limit rises to $3.5million before you are taxed. After 2009 it is repealed altogether but there are some quirks in the law where it may will revert back to $1million (or even $675K) being the exemption from estate tax unless congress acts. Plan your death accordingly
BUT, I digress...
In 2000 when the deduction was $675K, 52,000 estates of people who died that year were subject to taxation.
In 2006, when the limit was $2million, about 12,000 estates were taxable.
At an estate exclusion of $3.5 million only 7,100 estates will be subject to taxation.
If the exclusion was $5million, fewer than 5,000 estates would be subject to taxation.
Since it affects so few, kinda makes you wonder why it gets so much press, eh?