The IRS study analyzed an estimated 36,706 estate tax returns with total assets of $2 million or more, which was the filing threshold for 2007.
General highlights include:
- Estate tax returns were required for only about 1.5 percent of U.S. decedents.
- The total dollar value of the filing estates was approximately $225 billion.
- Publicly traded stock represented the largest asset class, accounting for $56 billion, or approximately 25 percent of the total gross estate, on average.
- Just under half of the returns reported a deduction for a transfer to a surviving spouse.
- More than 19 percent of estates included a deduction for charitable bequests.
- Fewer than half of the estates, 45 percent, reported an estate tax liability.
General demographic profile of decedents
The average age of the estimated 36,706 decedents who filed estate tax returns was 80. Overall, female decedents tended to be older, at 82 years of age, than males, at 78. Both male and female estate tax return filers lived slightly longer than other decedents in the general population. Many Sharpe studies have obtained similar results, finding that the average age at death for bequest donors is in the early to mid-80s, depending on the demographic makeup of a particular constituency.
Males accounted for 57 percent of the estate tax return population. Almost half of all decedents, 49 percent, were married at the time of death.
The breakdown by marital status for men versus women was dramatically different. For male decedents, 64 percent were married at the time of death and 36 percent were widowed or otherwise single. By contrast, only 28 percent of female decedents were married at death and 72 percent were widows or otherwise single. This statistic may in part explain the fact that many charitable recipients report that 70 percent or more of their bequests come from women.
These differences for traditional married couples are a result of different life expectancies for men and women and the fact that men tend to be older at the time of first marriage than women.
As noted in the highlights, the gross estates totaled approximately $225 billion. The largest asset class (25 percent) was publicly traded stock. Investment real estate made up the second largest share of the estate assets, at 14 percent. Tax-exempt bonds accounted for almost 10 percent of the assets, followed by cash at 9 percent. Closely held stock also amounted to 9 percent of the assets. Personal residences were 8 percent and retirement assets, 7 percent.
Limited partnerships, farms, federal bonds, insurance, mortgages and notes, and other financial and miscellaneous assets each accounted for less than 5 percent of total gross estates.
Just under 20 percent of all estate tax return decedents left bequests to qualified charitable organizations. This statistic has remained in the 20 percent range since the IRS first began reporting such information.
Larger estates were more likely to include charitable bequests than smaller ones. In fact, among estates of $20 million or more, some 40 percent included charitable provisions. The largest estates also left a larger percentage of assets to charity.
The $20 million-plus estates left an average of 28 percent of the estate to nonprofits, totaling $20 billion for charitable purposes in 2007. As is typical, many of the largest estate gifts for that year went to private foundations. Other categories, in order from most to least amount received, included education, religion, health, human services, arts/culture, disease/disorder, animal-related and environmental.
Even among estates valued at $2 million or more, fewer than half incurred an estate tax liability. The combination of the marital deduction and charitable deduction served to eliminate federal estate tax liability for the majority of these estates.
Development executives will want to closely follow legislative developments that could affect the number of taxable estates in the future. The exemption equivalent of $5,120,000 per person (see Page 1) as of Jan. 1, 2012 is scheduled to revert to the $1 million level on Jan. 1, 2013. Few expect the exemption to fall to that level, but the fact that it is scheduled to happen unless Congress acts to prevent it makes it highly likely we will see legislation aimed at providing more stability in estate planning during 2012.