Estate Tax Will Return Next Year, but Few Will Pay It

[onehandle]

Source: New York Times

Almost no one will have to worry about paying the estate tax under the tax legislation just approved by Congress. By one estimate, from Alan Rothschild, the chairman of the American Bar Association’s real property, trust and estate law section, less than one-half of 1 percent of people who die in 2011 will be hit by the estate tax. In contrast, 10.5 percent paid the estate tax in 1977.

And even for the very few who will be subject to the tax, the increase in the gift tax exemption will allow them to give their heirs tens of millions of dollars before the estate tax even comes into play. “I think people will be seizing the opportunity for next year,” said Carol Kroch, head of wealth and financial planning at Wilmington Trust.

The only caveat for the wealthy is that the tax compromise reached by Republican leaders and President Obama is set to expire in two years and revert to much lower exemption levels and a higher tax rate.

“It seems like to me we’re just setting ourselves up to repeat 2009 and 2010 all over again,” Mr. Rothschild said. “That’s the most frustrating part to me.”

Read more: http://www.nytimes.com/2010/12/18/your-money/taxes/18wealth.html

[xchrom]

1. The nasty little details of this corrupt compromise. Nt

[SouthernLiberal]

2. There have always been ways to avoid the estate tax

All it ever took was planning in advance, and deciding that having your accumulated wealth passed intact to your children was more important than maintaining your position on the 1,000 richest Americans list.

Wealthy Americans never even needed to risk watching their children squander the money. It could be put into a trust fund they could not access until after their parents passed. The trust fund could even provide income for Mom and Dad.

If the kids were more trustworthy, even the existing gift tax exclusion would be enough, with sufficient advance planning.

I have no sympathy for anyone who has to pay an inheritance tax. It is certainly not my problem that there parents did not care for them enough to take the steps that would have avoided the tax.

[bertman]

3. If what you're saying is true, then the Estate Tax law should have been toughened

along with doing away with loopholes like trusts that allow for avoidance.

There's no reason people shouldn't be able to leave substantial sums to their family members, but there should be a reasonable limit. Unless, of course, you want to preserve the moneyed aristocracy.

RECOMMEND.

[rasputin1952]

4. No one has ever paid a huge tax bill when receiving an inheritance...

the first ting any wealthy individual should do is get a good tax lawyer and a good CPA...that's how they have avoided it cor at least a century and a half. Those that didn't still didn't pay exorbitant taxes, there are about 75 ways to avoid paying a large tax bill, and 99.9% of those that would receive such a windfall know this.The whole thing is nothing more than a way for R's to weasel more cash out of those that have gobs of the stuff laying around.

For the record, I'd close the loopholes; to me, it's income if I inherit money or property. I didn't work for it, it's a windfall...I'd expect to pay the same way I'd be expected to pay if I won a lottery.

[bertman]

6. I agree with you, rasputin1952.

[mbperrin]

10. Well said!

Years ago when I was selling life insurance, our training program said that two main classes of people needed it:
the rich to pay their estate tax, since life insurance proceeds are non-taxable, and modest people who could not leave any sort of estate any other way.

It IS a genetic lottery, and I agree with you that it should be taxed just that way.

[customerserviceguy]

5. You're absolutely right

There have always been ways to minimize the estate tax if you hired a good CPA or tax attorney. It was middle class folks who didn't spend money on the tax pro who were the ones who ended up being part of the 10-11 percent of people who paid estate tax way back in 1977.

Reagan made the estate tax exemptions generous enough, with a bit of inflation on top of the exempted amounts, we could have left the estate tax alone. Most states have a confiscatory estate tax anyway, they simply use the same rules and rates as the Federal goverment, so the tax is exactly the same. Since you're always allowed a dollar-for-dollar credit on your Federal estate tax return for anything you pay to the states, those estates never paid any Federal tax anyway.

Perhaps things have changed a bit, but that's my recollections from my days as a tax accountant in the 1980's.

[primavera]

8. I'm in my third year of law school now...

... and it astonishes me how much of our coursework has been devoted to tax evasion. Property law, estate planning, wills, trusts... ultimately, they're all about legitimizing tax evasion, all devoted to finding ways for the rich to get richer at the expense of the poor. It's no wonder people hate lawyers.

[indypaul]

9. Tax avoidance

Evasion is criminal.

[primavera]

11. And so should be the things we study in law school

That's what is so disheartening: discovering the extent of private activity that by rights ought to be criminal, but is perfectly lawful, at least if you happen to be rich or a corporation.

[customerserviceguy]

12. The best thing to do is expose what's there

If they let us on a tax reform writing committee, I'd bet we could come up with a lot of things that most people have no idea exists where taxes are avoided.

[lostnfound]

7. Would we better off having estates taxed as ordinary income? Equalizing capital gains & income?

There is no reason that income earned by buying and selling stock should be taxed at only 15% while a person earning their income from their labor is taxed at (25% or 30%) +7.65%(employer side SS & Medicare) +7.65%(employer side SS & Medicare).