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$1M. $5m. $50m. If everything is in trust, it doesn't make much of a difference. The trust doesn't die, so there is no estate tax. If people aren't smart enough to legally protect what is their's then they will eventually lose it anyway. If not to the government, then to someone else.
Agreed. The estate tax has been a punishment on the rich who were stupid, ignorant, and/or procrastinated. I've seen this happen lottery winners, relatively pre-mature deaths, actors/athletes, and salt-of-the-earth "bootstrappers" who built their businesses from scratch, but failed to safeguard the fortune's long term health.
All of those great American fortunes that the masses would love to confiscate for the public treasury have been protected by trust law for decades, or even better, locked up in foundations.
When my parents pass away I should not have to pay taxes on their estate. They have worked hard and paid taxes on it already, so they can leave something to my brother and myself. There is no reason for Uncle Sam to get any of it.
What makes you think that your parents have sufficient wealth ultimately to incur any federal estate tax liability? Are you not actually worrying here about your home perhaps being destroyed during a stampede of elephants?
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Originally Posted by Spazkat9696
FYI I have no issue with taxes. I get that we need them, but I do have issue with this one. Actually if it were up to me we would get rid of income tax in exchange for a federal sales tax. I think it is more fair than the current system in which so many take, take, take, but do not give anything. At least this way when those with no jobs still contribute to the system they take so freely from.
Congratulations on selling yourself to the Romneyists and other right-wing propagandists. I hope you got a good price. Most don't. VAT and other sales taxes are regressive in nature. They shift tax burden DOWN the income scale. This is why Romneyists keep telling you what a wonderful idea they are. Similarly, the federal estate tax -- which Romneyists call the "death tax" in another naked attempt to manipulate you via your emotions -- actually impacts upon a tiny tiny tiny fraction of the very wealthiest Americans. Romneyists want to protect those folks at your expense. You are helping them do it.
I never said dollars should only be taxed once in their life time.
You've implied it repeatedly. Your parents paid tax on their money as they earned ti so why should it be taxed again when you inherit it? Had you forgotten about that already? There meanwhile simply is no linkage between what are two separate events.
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Originally Posted by Spazkat9696
I just don't think it's right to tax family money. If I buy a cake and take it to a party to share with my family I pay the taxes on it. Should they have to pay taxes on it again to eat it?
The value of a cake typically falls under the annual exclusion. If you attempt to make gifts of say a few million dollars to people in order to avoid eventually paying estate taxes, then you should be -- and are -- taxed for that.
$1M. $5m. $50m. If everything is in trust, it doesn't make much of a difference. The trust doesn't die, so there is no estate tax. If people aren't smart enough to legally protect what is their's then they will eventually lose it anyway. If not to the government, then to someone else.
That depends on the type of trust. Revocable trusts (the kind that you can modify or terminate after they are created) do not reduce estate taxes at all. A bypass trust can be used to avoid estate taxes between generations but the current $10.5 million exclusion on taxes between generations (which comes after all sorts of other deductions and credits have been taken) makes bypass trusts entirely unnecessary for almost everyone.
The age structure of the US population vis-a-vis: recipients vs. payees does not look that bad. Adding in expected immigration makes things look better, too. In fact, "converting" illegal into legal aliens should also have a positive impact on payrolls. Dropping the few remaining exemptions should also help. It would also pay to drag the military into the system and do away with their ridiculously short retirement ages and overly-generous retirements benefits. I'm ashamed to say how large my military pension is when all I did after active duty was go to reserve meetings and take an occasional summer cruise!
I would agree. To start with, too much emphasis is put on the worker-per-retiree ratio when it is the worker-per-dependent ratio that matters more. The ratios used in dire reporting concerning Social Security rely on forecasts that both legal and illegal immigration will be virtually flat over most of the next 75 years. Some might question that. Such as actually sensible people for instance. And yes normalizing the coming wave of immigration would noticably and favorably affect payrolls and hence payroll taxes at the margin.
Flag-waving has always been politically popular, and the military has benefitted from that in all sorts of ways. The military has both way-behind-the-lines desk-jockeys and in-theater 11B's. Some of our intelligence services have basic retirement systems but add extra credits for those doing actually dangerous work or working at all in actually dangerous places. Maybe that's a model to work from.
That depends on the type of trust. Revocable trusts (the kind that you can modify or terminate after they are created) do not reduce estate taxes at all. A bypass trust can be used to avoid estate taxes between generations but the current $10.5 million exclusion on taxes between generations (which comes after all sorts of other deductions and credits have been taken) makes bypass trusts entirely unnecessary for almost everyone.
I guess that explains why I have an irrevocable trust. One of these days I am going to take the time to learn all this stuff but for now, I have a very good lawyer handling it. Also, and you probably understand this more than I do, my life insurance has to be owned by the trust as well to avoid taxes to my beneficiaries. I'm not sure how the trust avoids taxes on life insurance. It's one of those things I have been meaning to ask the lawyer, but never think about it when I am with him.
Can someone tell me what the limit was in 1998? Seems to me our government keeps finding more ways for the rich to keep their money while the poor struggle.
All of those great American fortunes that the masses would love to confiscate for the public treasury have been protected by trust law for decades, or even better, locked up in foundations.
The actual tax advantages of trusts and foundations are often mis- and over-stated. Their principal value arises in helping to fulfill a desire to give back to society. This of course is a near-universal feeling and motivation among actually wealthy people. Those who will never be more than whiner wealthy-person wannabe's don't nearly as often exhibit this sort of sentiment.
The actual tax advantages of trusts and foundations are often mis- and over-stated. Their principal value arises in helping to fulfill a desire to give back to society. This of course is a near-universal feeling and motivation among actually wealthy people. Those who will never be more than whiner wealthy-person wannabe's don't nearly as often exhibit this sort of sentiment.
You are absolutely right. It is a responsibility that most people with money eventually feel. Once a person is in a position to have whatever they want, the quickly learn that the greatest happiness is not derived from the things that they acquire, but from other people. Mansions and fancy cars are nice, but after a while it just becomes a house or a car. At some point, most people learn that more is not necessarily better, and that more can be used for the betterment of society instead of the individual. Also, you eventually realize how short life really is and it doesn't matter if you are rich or poor because everyone dies as equals. If you are lucky you will be remembered for 2 or 3 generations and then it is as though you never existed. Nobody is going to remember you for the stuff you owned, but they will remember you for the things you did. Our family also has a foundation that raises money for pediatric cancer. It is often hard work, but we get great enjoyment out of it.
I always loved this quote from Einstein...
"There are only two ways to live your life. One is as though nothing is a miracle. The other is as though everything is a miracle.
But without deeper reflection one knows from daily life that one exists for other people; first of all for those upon whose smiles and well-being our own happiness is wholly dependent, and then for the many, unknown to us, to whose destinies we are bound by the ties of sympathy.
A hundred times every day I remind myself that my inner and outer life are based on the labors of other men, living and dead, and that I must exert myself in order to give in the same measure as I have received and am still receiving.
A human being is part of a whole, called by us the "Universe," a part limited in time and space. He experiences himself, his thoughts and feelings, as something separated from the rest -a kind of optical delusion of his consciousness. This delusion is a kind of prison for us, restricting us to our personal desires and to affection for a few persons nearest us.
Our task must be to free ourselves from this prison by widening our circles of compassion to embrace all living creatures and the whole of nature in its beauty.
I guess that explains why I have an irrevocable trust. One of these days I am going to take the time to learn all this stuff but for now, I have a very good lawyer handling it.
You'll need to hope so.
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Originally Posted by AnesthesiaMD
Also, and you probably understand this more than I do, my life insurance has to be owned by the trust as well to avoid taxes to my beneficiaries.
Insurance proceeds paid because of the death of an insured person are (with rare exceptions) not taxable to a beneficiary. This is true without regard to the type of policy under which the proceeds upon death arise. This has nothing to do with estate taxes however. What you are describing is an irrevocable life insurance trust, wherein the trust owns the policy and receives the proceeds from it when the time comes. The named trustee then invests those proceeds and distributes benefits as the trust agreement has specified. This is a sensible approach if one's assets plus insurance benefits less expected deductions, credits, and exclusions is an amount likely to exceed the estate tax threshhold. This is something that the majority of even wealthy people will not actually need to worry about. Trusts and trustees result in fees. It's best not to pay those unless you actually do need the services being provided.
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So we should discriminate against rich??
