(MONEY Magazine) – Listen to House Majority Whip Tom DeLay denounce the "death penalty," and you might think the Texas congressman was no longer a supporter of capital punishment. Not to worry. DeLay's rhetoric actually reflects the animosity some Americans feel toward that longtime political football, the estate tax.

First, some background. During the 18th and 19th centuries, the estate tax (which is imposed on transfers of wealth at the time of the holder's death) was used on rare occasions to raise money during national emergencies; by the 1880s, the idea had gained favor as a way to encourage people to distribute their wealth charitably before death and to close the gap between rich and poor. Steel magnate Andrew Carnegie, for example, wrote approvingly that "by taxing estates heavily at death, the state marks its condemnation of the selfish millionaire's unworthy life." A few decades later, Woodrow Wilson signed legislation that taxed estates worth more than $5 million--in 1916 dollars--at a 10% rate. The law provided a significant source of revenue during an age when wealth was more concentrated and there were fewer taxes and taxpayers. During the Depression and the early 1940s, in fact, the estate tax brought in as much as 7% of the government's total tax take.

Ever since its inception, though, benefactors have tried to figure out ways to dodge the tax--first by giving huge untaxed gifts to their spouses, children and friends, a tactic Congress soon discouraged by passing a gift tax. Since then, the feds have closed other loopholes while creating new ones. The cumulative result? These days you can avoid the estate tax altogether unless you're extremely wealthy or unaware of your planning options. The tax is now paid by fewer than 1% of households and contributes less than 1% of federal tax dollars. And its basic function is to curb very large inheritances. In 1996, for instance, estates valued under $1 million had average net estate taxes of just $47,000, while estates valued at $20 million or more paid average estate taxes of $11.2 million, according to the Internal Revenue Service.

Even the vast transfer of wealth to baby boomers may not change things too much. Today, the estate tax ranges from 37% to 55%; estates worth less than $650,000 (a figure that will rise to $1 million by 2006) are exempt. And while it's true that Americans are accumulating wealth so quickly that the IRS expects the number of people filing estate taxes to grow 5.5% a year through 2004, only a very slender fraction of Americans will ever pay them.

Still wondering if that includes your family? Reviewing will and trust options with your parents and a lawyer will take any guesswork out of the matter (see "Making a Plan" on page 198). Until then, don't worry about unloading heirlooms or the family home to qualify for the exemption. Odds are you won't have to--even if the politicians say otherwise.

--P. K. and Brian P. Murphy