Inheritance tax: Make the case for and against

[MarkGrace]

Exactly. The inheritance tax is just the federal government justifying stealing from citizens. Again.

That's a pretty simplistic view.

[Mormon Red Death]

One of the best things to come from the inheritance tax is the amount of money put into private foundations, given to charity, or donated to schools. If we did not have the inheritance tax then I believe many rich people would just pass the funds onto their children which would devistate the not-for-profit industry.

I don't believe that. People don't give to Charity for the tax break. They give to Charity and Non-Profits for other reasons and the tax break is just a nice side benefit.

[Uncle Ted]

The GOP calls it a "Death Tax." Libs call it an "Inheritance Tax." The correct term is an estate tax.

I've seen otherwise politically conservative estate planning attorneys root against the abolition of the estate tax. You've got the bread and butter trusts and wills, but the high net worth clients are the ones that require quite a bit ongoing estate planning work and you can charge big fees for things like structuring buy-sell agreements of family owned LLCs (set up purely for EP purposes) that receive valuation discounts of the assets owned by the LLC.

Kind of like if we got government out of the business of marriage there would be no need for most of the field of family law.

The reality in 2000, prior to the passing of the Bush estate tax cut, the estate tax exemption was too low. A lot of families that weren't particularly wealthy were getting nailed. A better equilibrium would be something around $3 million or so for a married couple.

It is interesting that next year the death estate tax resets back to a $1 million exemption with a top 55% rate. Unless congress acts I suspect there will be a lot of small businesses that will be forced out of business due to the death of the owner and liquidation of assets by the heirs to pay the estate tax.

[MarkGrace]

We did a pretty extensive section on this in my tax policy course, and I think each side of the debate has merit to their arguments. I came away from the course unconvinced by either, and mostly decided that at the pre-2010 limits (3.5mm per person, 7mm per couple) it was affecting so few people that it probably wasn't worth getting worked up about ("death tax" was certainly a stroke of genius that made it sound more widely applicable than it actually is). I did always find it interesting that some of the wealthiest citizens in our country (Gates, Buffet) were major proponents of it.

It will be interesting to see what happens next.

[Uncle Ted]

I don't believe that. People don't give to Charity for the tax break. They give to Charity and Non-Profits for other reasons and the tax break is just a nice side benefit.

Let's not forget that donations to one's favorite ivy league school does help with getting your heirs accepted. How do you think George W. Bush got into Yale and Harvard?

[MarkGrace]

It is interesting that next year the death estate tax resets back to a $1 million exemption with a top 55% rate. Unless congress acts I suspect there will be a lot of small businesses that will be forced out of business due to the death of the owner and liquidation of assets by the heirs to pay the estate tax.

I think I would be opposed at 1mm. Curious that said amount is pretty the same as what Gates claims he's giving his kids. According to him, "enough so that they have something, not so much that they have nothing." Which of course is a play on the idea that Jacob mentioned -- most inheritors spend frivolously and don't efficiently use what they take at the tansfer.

[Color Me Badd Fan]

Kind of like if we got government out of the business of marriage there would be no need for most of the field of family law.



It is interesting that next year the death estate tax resets back to a $1 million exemption with a top 55% rate. Unless congress acts I suspect there will be a lot of small businesses that will be forced out of business due to the death of the owner and liquidation of assets by the heirs to pay the estate tax.

That and it will be a boon to the life insurance business. ILITs (Irrevocable Life Insurance Trusts) have become more rare over the last several years when the exemption ballooned. There are quite a few households that had a net worth over the exemption back in 2000, far fewer in 2009 (and none this year).

[Indy Coug]

That and it will be a boon to the life insurance business. ILITs (Irrevocable Life Insurance Trusts) have become more rare over the last several years when the exemption ballooned. There are quite a few households that had a net worth over the exemption back in 2000, far fewer in 2009 (and none this year).

Yes

[Jeff Lebowski]

We did a pretty extensive section on this in my tax policy course, and I think each side of the debate has merit to their arguments. I came away from the course unconvinced by either, and mostly decided that at the pre-2010 limits (3.5mm per person, 7mm per couple) it was affecting so few people that it probably wasn't worth getting worked up about ("death tax" was certainly a stroke of genius that made it sound more widely applicable than it actually is). I did always find it interesting that some of the wealthiest citizens in our country (Gates, Buffet) were major proponents of it.

It will be interesting to see what happens next.

Yes. They have lobbied hard to keep it in place.

I support the estate tax but think the limit should be higher. Somewhere in the $3-5M range. According to my estate attorney friend, this would cover more than 99% of us. I don't think it is a good idea for society to have massive amounts of wealth passed through generations.

[Scott R Nelson]

I've seen the problems of inheritance taxes locally with Tim Koopman. His son Clayton played on the same baseball team as my son one year and we got to know them. Tim is a third-generation cattle rancher that almost had to sell because his parents didn't put the ranch into a trust, or whatever legal magic protects things like that. He ended up owing $750,000 in inheritance taxes because they hadn't filled out the right paperwork first. I blame the lawyers.

Here's an article about it:
http://www.californiaagnet.com/pages...24&feedID=2523

[Jacob]

So is the beef with the tax or that the government is not a wise steward with tax revenue?

There is the old adage that you can't take it with you, or that you won't need it where you are going or something to that affect.

Either way, why should the next generation live of the hard work of the parents or grandparents. The wealthy should spend their money while they are living or give it to charity (a better choice in my opinion) and the next generation should have to work to support themselves.

Or just put your children on the board of your foundation and give them lavish paychecks for doing next to nothing. Whatever makes you happy.

I'm sorry you haven't yet received any inheritance. That's no reason to despise those who do, or those those who have saved enough to be able to leave an inheritance.

[Mormon Red Death]

We did a pretty extensive section on this in my tax policy course, and I think each side of the debate has merit to their arguments. I came away from the course unconvinced by either, and mostly decided that at the pre-2010 limits (3.5mm per person, 7mm per couple) it was affecting so few people that it probably wasn't worth getting worked up about ("death tax" was certainly a stroke of genius that made it sound more widely applicable than it actually is). I did always find it interesting that some of the wealthiest citizens in our country (Gates, Buffet) were major proponents of it.

It will be interesting to see what happens next.

Buffet supports it so he can buy family business that are crushed by the tax.

[Jacob]

Buffet supports it so he can buy family business that are crushed by the tax.

Bingo. That and he's already figured out how to game the system so that he doesn't have to pay it and doesn't have to give much of anything away before he dies. If the tax were so good, he wouldn't have avoided it. His support for it reveals that he merely wants his personal preferences written into law.

[Mormon Red Death]

Either way, why should the next generation live of the hard work of the parents or grandparents. The wealthy should spend their money while they are living or give it to charity (a better choice in my opinion) and the next generation should have to work to support themselves.

Or just put your children on the board of your foundation and give them lavish paychecks for doing next to nothing. Whatever makes you happy.

Why should the government live off the hard work of the parents or grandparents? Especially when they have already gotten their share.

[Sullyute]

I don't believe that. People don't give to Charity for the tax break. They give to Charity and Non-Profits for other reasons and the tax break is just a nice side benefit.

I disagree. People may choose one charity or not-for-profit over another for personal reasons, but tax breaks is a large factor in the giving in the first place.

A bigger factor may be self-aggrandizement of self-perpetuation. Who wouldn't like to have their name on the side of a building at their favorite University or on the church pew that they alway sit on.

I think that I am getting off topic but I do believe it is a factor.