Estate Tax Clarification / Comments:
I am a bit surprised that the astute investors on this thread are not a bit more educated on the estate tax laws:
* The estate tax rate is graduated, increasing with assets, beginning at 37% (above $675,000) and climbing to 55%. I am not sure of the break points, but I am sure you could find them at www.irs.gov or use this calculator: estateplanning.com:591/customlc/look3/FMPro?-db=customlc.fp3&-lay=Detail&-format=etcalcnew.htm&IDnum=4813&-token=4813&-script=hit3&-find
* The tax kicks in somewhere around $675,000 (I believe) right now, and will gradually climb to $1,000,000.
* If you are married, it is POSSIBLE to double the $675,000 exemption by using a A-B Trust. Assets have to be titled separately to husband and wife for this to work. It will not work with joint property. You really do need a qualified lawyer to help you through this.
* Taxable assets includes all assets (IRAs, 401Ks, homes, cars, personal property, etc.). Many people forget life insurance, which is included. If you consider life insurance and home values, it is pretty easy to hit $675,000. If you own an asset jointly, I believe half of it is taxable.
* The surviving spouse does not have to pay the estate tax. If comes due after both spouses are deceased.
* Some state (such as PA) have Inheritance Tax, which is above and beyond the estate tax. When you add them both together, it is basically confiscation of capital.
* I am not sure of this point, but my understanding is different that what Bob said on his program. I thought that when you give a gift over $10,000, this reduces your estate tax exemption...say you give a gift of $30,000 (I have never done this), $20,000 exceeds the $10,000 gift tax threshold. My understanding is that this gift would reduce your estate tax threshold by the $20,000...from $675,000 to $655,000. Bob made it sound like the gift tax on the $20,000 was due the year you gave the gift. Does anyone have experience with this?
Personal side comment: If you read the book "Millionaire Next Door", you have to question the wisdom of leaving large amounts of money to your children. Their research shows that it is a demotivating factor that often leads to unproductive lives. I know a couple people who will inherit a million and more, and they are spending like they have it already. Just anticipation of that inheritance is affecting their spending habits. |
