Estate Lunacy

ahhh..you're talking about a bypass trust.

by the way...i do this stuff for a living. one of my business partners takes the state bar's estate planning board certified exam in October. wish him luck!!!

 

Because his success in business was made possible by government services, legal system, infrastructure, and stable economic system that are supported by taxes. These taxes have included taxes on estates for decades.

 

i'm sure it will return in 2011. but there's no step up in 2010...largely because there's no estate tax at all if you die that year.

 

I am reading a book called _The Millionaire Next Door_ by Thomas J. Stanley. The book profiles the "millionaires next door". The stereotypes are generally wrong. Most
millionaires don't live in mansions on a hill, drive Rolls, and use their Lear Jet to take vacations. Most are small business owners who live well below their means and who save like crazy. Besides saving 15+% of their income, they also build wealth via unrealized capital gains in their business.

A consumption tax would be their wet dream, along with low capital gains tax and no estate tax.

 

Ah yes. The 3am SamFisher special. He's drunk, but he's still much smarter than you but too lazy to prove it. A page right out of the Beejster himself's Holy Text!

 

But that's not the question. The question is why should they have to pay estate taxes? People always bring up the Waltons or Hiltons and use them as examples, but not everyone who has to pay estate taxes are in that stratosphere.

 

you're exactly right. people talk about the extremes...the Waltons on one side with trust fund babies....and poor family farmers on the other side. this is not who i see this issue affecting.

 

Quite honestly, even a drunk could google and figure out the estate tax was repealed till 2011, or even better, search all the old estate tax threads and see why the recycled arguments against it are invalid. Especially since it's the same people in the same threads from a few years ago.

 

But it could be argued that all working people benfit from those same things and we all pay taxes for those services. Since the "pro" estate tax faction does not like to hear double taxation, how do you rationalize the estate tax funding those services since the taxes he (we) pay thoughout all of our lives fund those services already? It appears he is having to fund them twice, once through his normal taxation and once through his estate.

 

I heard from a tax lobbist that the radical 2009-2010-2011 dance won't happen. My estate attorney told me the same thing.

BTW, do you recommend to your clients to die in 2010 to take advantage of the tax laws? The way the tax laws are now makes estate planning very hard. But good for your business since clients have to keep dragging into your office to get their estate planning up to snuff.

 

I guess your definition of repealed is different than mine. If the tax was repealed, it would not exist at all (at least in my understanding of the term "repeal"). The estate tax currently exists. Folks who die now through 2009 will have to pay estate taxes if their estate qualifies. If you die in 2010, you don't. Currently, if you die in 2011+, you have to pay.

 

they're probably right. but it's very hard to tell your clients what to do about the "dance", as you say, because there's a lot of uncertainty. so the best thing you can do, i believe, is prepare as if they're dying with a $1 million exemption. that's the safest thing, i think. i don't see it going back below that again. and everyone says, "yeah, eventually they'll fix it or something." but i think people are pretty convinced that this won't be resolved until 2010 or so...i fully expect there will be no estate tax in 2010. but i'm not an expert in this stuff...it's really more of my partner's expertise.

and, yes...absolutely!!! die in 2010 if this is an issue for you!

 

Bullsh*t. Sorry for being too subtle. All taxes are unfair. All. Without question.

Making an argument that some tax or another is unfair is like stating that water is wet.

BTW, households (assuming couples) with a net worth of more than twice the exemption is like the top 2% or less. Most people woud consider that the stratosphere.

 

I disagree. I am not trying to change your mind so there is no sense in arguing, but I think taxes are necessary to fund the various services we receive from the various forms of government (local, state, federal).

How would you suggest these entities be funded if it weren't for taxes? I receive services, either implicit or explicit, for the taxes I pay. There is value. Someone(thing) has to pay for it.

 

The collecting the monies and the spending are two separate issues.

Any tax system is going to favor one party over the other. Thus, taxes can never be completely fair. Water is also still wet.

 

Tax revenues aren't currently even coming close to paying for government services. That is why we have such a huge deficit and national debt. Eliminating the estate tax will make this problem worse. Over the past several decades the tax burden has continually shifted from the wealthy to the middle class. Our country has also seen an increasing concentration of wealth in a smaller percentage of the population. I would say these are bad trends that eliminating the estate tax makes worse.

Would you rather the middle class pay an even greater percentage of the tax burden? Because that is what is going to happen when we eliminate the estate tax? Or the costs are just going to continue to be passed down the line until the debt becomes unsustainable and we see a very painful correction that will hurt everyone, but the middle class and the poor will feel most of the pain.

Our system makes it possible for a small percentage of the population to become very wealthy. (That doesn't mean that most of them didn't work hard, but the system enabled their hard work to be translated into great wealth.) I see nothing wrong with asking them to pay a greater percentage of their assets in taxes to support a system from which they received a great benefit.

 

gifford

I am for eliminating the estate tax, but instituting a "recipient" tax. If someone dies with a $10,000,000 estate, let them disburse that entire $10,000,000 and then tax those who get the disbursements. Tax it as ordinary income based on the recipients tax bracket.

 

I don't know why this must morph into the wealthy must pay more tax therefore the estate tax is good.

I agree the wealthy should pay more tax. There are lots of ways to achieve that (though you wouldn't know it by recent trends ).

But the estate tax is a tax on wealth. It doesn't necessarily bare relation to income. And, as it is currently structured, it results in many tax hits I would consider unfair.

Tax income higher. Tax those little dogs Paris Hilton accessorizes with. Tax fancy cars, consumption, real estate deals....I just don't like the estate tax as it is structured.

Of course, if it has been repealed, I stand corrected. I'd like to know more about this -- as I'm currently working on a couple of projects around the US estate tax, and my google skills are obviously lacking.

 

Here is how I would game that tax ...

Say that there is a "personal" exemption of one million dollars.

Say that the estate has 25 million dollars.

The estate could set up 25 separate trusts in Alaska (where legacy trust live on and on). Total tax bill: $0.00.