Skip to comments.Planning For The Estate Tax's Return (It it is unlikely your estate will get a free pass)
Posted on 02/24/2010 6:56:05 AM PST by SeekAndFind
Do not be fooled by the estate tax lapse of 2010. It is true that the estate tax--which imposed a 45% tax on all assets in excess of $3.5 million--was repealed for 2010 as part of the sweeping Bush tax cuts of 2001. But it is unlikely your estate will get a free pass.
For one thing the repeal is only in place for one year. In 2011 the estate tax is slated to be reinstated with a higher rate of 55% and an exemption of only $1 million per estate. Also even though the federal estate tax is (as of this writing) dormant for 2010, state-level estate taxes are still very much alive, and some kick in at levels well below $3.5 million. (For details of the state levies, see "Where Not To Die In 2010.")
It gets worse. In place of the estate tax in 2010, there's a capital gains income tax on an estate's appreciated assets, such as stock, real estate and homes, when they are sold. Under the 2009 estate law all assets got a "step-up" in basis when someone died, meaning they could be sold right away with no taxes due. But under the 2010 law, all gains in excess of $1.3 million on assets passed to non-spousal heirs (and an additional $3 million for certain gifts to a spouse) are now subject to the capital gains tax.
In acknowledgment of the obvious accounting nightmares this capital gains tax on inherited assets will create, it is widely believed the Obama administration will try to overturn the repeal this year, reinstating the estate tax retroactively to its 2009 levels as well as the step-up in basis.
(Excerpt) Read more at forbes.com ...
First order of action for me -- VOTE OUT ANY POLITICIAN WHO DOES NOT SUPPORT THE ELIMINATION OF THE ESTATE TAX FROM OUR LAWS.
I find this tax repulsive, along with many others.
Which will be challenged in the Supreme Court.
Which will be challenged in the Supreme Court.
There are no liberals, only communists. To the communists all citizens are slaves of the state. Taxing is only a part of the takeover, your freedoms must be taken away. Are we not there yet? Some day Americans will get it.
But under the 2010 law, all gains in excess of $1.3 million on assets passed to non-spousal heirs (and an additional $3 million for certain gifts to a spouse) are now subject to the capital gains tax.
But I am still in favor of eliminating the estate tax.
Marxism, whether it's imposed by Hillary Clinton, Barach Obama, or other Saul Alinsky disciples, is going to severely cripple or eliminate small businesses in America.
Time's running out.
Congress has delayed and dithered so long on this issue, I'm not convinced they will do anything this year -- especially an election year. As a result, a some people will be facing a serious ethical dilemma in December: whether to prolong life into 2011, or end it in 2010.
My comment is not really referring to families that are trying to decide whether to continue life support for a loved one. It's referring to individuals that know they are nearing their end of life, either due to age or illness. I suspect we will see a sudden increase in suicides late in 2010, but before the holiday season.
However, if Congress appears to be planning to repeal the estate tax exemption, New Year's Eve is going to be a interesting day.
I read a quote from a WSJ article yesterday: a wealthy entrepreneur was suffering from a terminal illness in late 2009. His attorney said that he was waking up every morning and asking: "Is it January 1 yet?". He was determined to survive until 2010, so that his heirs would avoid the estate tax.
This means that the day after the mid term elections all hell will break out against working, saving, productive Americans.
And will probably be upheld.
In United States v. Carlton, the U.S. Supreme Court in a 1994 opinion unanimously held that retroactive tax laws did not violate the constitutional prohibition on ex post facto legislation, provided their retroactive application was "supported by a legitimate legislative purpose furthered by rational means."
At the rate the government is going in taking things, I’ll outlive my “estate”.
My MIL died last week. Her husband had died decades ago, so her estate is being divided up by her three children. Apparently, she was rather well off, even though she lived frugally. I would hate to think that she did without so the government could have more.
The lunacy is that you can blow your entire estate in Las Vegas on hookers, booze and gambling without the feds getting involved, but if you live right and leave it to your kids the vultures will pounce.
Perhaps the family needs to go to Vegas, and have a "freindly" poker game, in which the patriarch unexpectedly loses all the accumulated wealth to the kids?
Would the tax rate on gambling proceeds be less or more than the estate tax?
I used to do some estate planning work.
If mom and pops start transfering small parts of an estate in nibbles it can be ‘gifted’ away.
Ie a 120,000 estate
gift away $12K in 1/10th increments of the deed /stocks etc to a trust not controlled by them, or to son, daughter etc.
so for that example, they would give away 1/10th of their estate per year until all of it has been ‘gifted’ away to the kids.
Or, if their health is good, have them take some of the money in savings and deposit it into a life insurance/long term care policy to cover the estate taxes.
There are a number of different ways to slice it up, but most involve an estate planning attorney, trusts being set up, etc.
Most of “Pop’s” beloved business will, in effect, be confiscated by the government — divided among Mr. Obama-and-Friends and "Pop's" wife and children. Since much of the equipment, computers, furniture, etc. will have been sold to pay the taxes, the little business likely will close its doors forever, and Mom and the kids will divide the leftovers and face unemployment. Remember, these kids likely have worked for this business since they could hold a broom. Through the years they've filed, run errands, and learned the trade.
Now, their income and modest inheritance will be redistributed to the clients of Acorn, the activist “students”, non-citizens illegally in our country, and the perennial welfare crowd. Am I angry? You bet.
“Pop” may be a business owner, but needs to rely on a professional/professionals who know trust law.
Too many small business persons make the fatal mistake or running a small business by themselves and forget that so much of what they do needs to be augmented by professionals who know the ins and outs of the tax code, accounting, etc.
It is no different for estate planning. You can beat “the man”, the IRS etc, but you have to have the right team in place.
One example may be to have a seperate “corp” own the assets for Pops business and that corp may be owned by the sons or daughters. Similar concepts may work whereby others “own” the assets that the business owner controls.
We’re playing a much more complex game of business than we used to back in the day.
also, 99% of people don’t want to face their own mortality and unfortunately because of that mindset, screw themselves, and their family in the process when and if that horrible day unexpectedly come.
Prior Planning Prevents Poor Performance.
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