Comments on: The State of the Estate Tax

By: USAA is Giving Away a Car!

USAA is Giving Away a Car! — Tue, 05 Oct 2010 09:41:13 +0000

[...] Taxpayer covers the 2010 estate tax rules. Keep in mind, these may be changing next [...]

By: Weekend reading: Britain worst place to live in Europe, apparently

Weekend reading: Britain worst place to live in Europe, apparently — Sat, 25 Sep 2010 08:18:59 +0000

[...] Taxpayer outlines the estate tax rules in the [...]

By: Estate Tax Changes Mean You Need A Living Trust Update

Estate Tax Changes Mean You Need A Living Trust Update — Mon, 13 Sep 2010 15:31:36 +0000

[...] in case, here’s more info on 2010 Estate Tax rules. Bookmark [...]

By: David Frees

David Frees — Tue, 17 Aug 2010 02:16:52 +0000

Average Joe’s family could be subject to the federal estate tax after January 1, 2011. Why? Well, for starters, the million dollar exemption from tax doesn’t equate to 2 million per couple. It takes some serious advanced planning and the right will and trust provisions to shelter the maximum. And, since the tax applies to life insurance proceeds (unless held in an ILIT- Ittevocable Life Insurance Trust) An average family with a nice home, some private insurance, and some insurance from work could have the tax applied to his or her estate.

By: George

George — Sat, 31 Jul 2010 19:18:20 +0000

We could always have the Japanese solution, where it’s something like a 90% death tax (going by a weak recollection here… need to get the absolute numbers).

I have a 90-yr-old aunt that probably is near the old $3.5 million threshold as she has been aggressively gifting nieces & nephews (no direct lineage).

If people figure they need $1.5 million for today’s upper middle class retirement at a safe withdrawl rate of 4%, then $1 million threshold for estate tax is a bit tight. On the other hand, $10 million threshold would be too loose (everybody with a reliable $400k retirement income gets to pass that source to their heirs?).

Financial Samurai is probably right in suggesting a $5 million limit which could be left alone for a couple decades. That should easily help 95% of nation’s population.

By: Financial Samurai

Financial Samurai — Sat, 31 Jul 2010 05:11:26 +0000

I hope nobody dies next year! Lez go gov’t! Increase the limit to $5 mil+!!

By: Evan

Evan — Fri, 30 Jul 2010 18:34:07 +0000

I spend almost all my working time preparing and planning for the Estate Tax (other people’s not mine lol). But regardless, No one in my family is black am I allowed to have an opinion on Affirmative Action? No one to my knowledge is gay, can I have an opinion on same sex marriage?

As far as the family farm there are exceptions and you can use IRC 6166.

By: JOE

JOE — Fri, 30 Jul 2010 17:13:03 +0000

I don’t know (to the first question.)
I don’t mind answering – My father is deceased. My mother’s entire ‘estate’ consists of a house worth about $400K and about $300K tops. I have a sister who is the beneficiary per my request. The estate tax doesn’t impact this situation either way. On my mother in law side, the numbers are not so different, and also are not an issue.

I can and do have opinions on matters that may never impact me. In my own case, for my daughter, our situation will be better than our parents. Between current assets and insurance, it’s not too tough for otherwise middle class people to blow right through $1M. My $1M term policy was bought when I was young enough that the premium was $600/yr. So is it tough to imagine a working couple both owning smaller policies, a house and their retirement money, now exceeding the $1M number? The exemption goes back to $1M next year.

To be clear – I’m not looking for total elimination. You understand the 2010 rules don’t mean zero taxes, just a cap gain rate on the untaxed (while living) gains. The difference between 2009, 10, and 11 are so dramatic that each case requires separate planning strategies.

2009 – a $3.5M exemption, so a couple with moderate planning could leave $7M.
2010 – no tax on death, just on gains when assets sold.
2011 – $1M exemption. With no planning, a couple might leave $1.5M and find $500K is taxed. The beneficiary may need to sell the house (if that’s part of the estate) just to raise cash to pay those taxes.

From a purely selfish standpoint, I say pick one. Stick with it. I can handle any of the three, it’s the jumping back and forth I find so crazy.
From a planner’s view, I am sympathetic to the “family farm” issue Dave highlights. 2010 rules actually take care of it. 09 and 11 don’t .

I’ve answered your questions. What do you think is a fair way to address this issue?
As always, I appreciate the comments my readers leave, thank you.

By: Len

Len — Fri, 30 Jul 2010 14:46:48 +0000

Just out of curiosity, has anyone commenting on this post ever had to pay an estate tax? If so, and if you don’t mind revealing it, what percentage of your inherited estate was taken by the estate tax?

By: Dream Home Roundup

Dream Home Roundup — Fri, 30 Jul 2010 10:21:57 +0000

[...] The State of Estate Tax at Joe Taxpayer [...]