Death but no taxes

[Bob]

Estate Tax Dormant, Billionaire’s Bequest Is Tax-Free - NYTimes.com y DAVID KOCIENIEWSKI
Published: June 8, 2010


A Texas pipeline tycoon who died two months ago may become the first American billionaire allowed to pass his fortune to his children and grandchildren tax-free.


Dan L. Duncan, a soft-spoken farm boy who started with $10,000 and two propane trucks, and built a network of natural gas processing plants and pipelines that made him the richest person in Houston, died in late March of a brain hemorrhage at 77.

Had his life ended three months earlier, Mr. Duncan?s riches ? Forbes magazine estimated his worth at $9 billion, ranking him as the 74th wealthiest in the world ? would have been subject to a federal tax of at least 45 percent. If he had lived past Jan. 1, 2011, the rate would be even higher ? 55 percent.

Instead, because Congress allowed the tax to lapse for one year and gave all estates a free pass in 2010, Mr. Duncan?s four children and four grandchildren stand to collect billions that in any other year would have gone to the Treasury.

 

[Lynnie]

I was in a meeting yesterday and we discussed this. Not only 55% beginning 2011 for Estate Taxes, but the exemption of only $1MM goes into effect. Offshore insurance is looking better and better.

 

[Here4Good]

Good for them. I cannot understand the reasoning behind the estate tax.

 

[Lynnie]

Good for them. I cannot understand the reasoning behind the estate tax.

For the Fed to raise money. I have to admit that in quickly doing the math here, it's hard not to realize the potential reduction in the deficit. But, multi-billionaire oil typhoons don't die everyday.

 

[Here4Good]

Doesn't the estate tax kick in at $600K? That's a LOT of estates.

I say kill the estate tax and change the laws on taxation of compensation for hedge fund managers to tax their pay as normal income instead of long-term capital gains.

Ought to be a wash.

 

[idlewind]

Your dollar is taxed when you earn it. You invest it and make a profit and they tax you again ( capital gains) and then you die and they tax it again. And people wonder why the savings rate is so low.

 

[Lynnie]

Doesn't the estate tax kick in at $600K? That's a LOT of estates.

I say kill the estate tax and change the laws on taxation of compensation for hedge fund managers to tax their pay as normal income instead of long-term capital gains.

Ought to be a wash.

It was increased to $660K under H.W. Bush or Clinton, I can't remember. Then, up to $3.5MM under W. Bush? Back down to $1MM 2011. It's zero for 2010.

In 1974 it was $60K.

I'll agree with you regarding hedge fund managers. I am not certain how they are taxed, but when you do hedge on short positions, it's all taxed as short term capital gains.

 

[beachFool]

I agree Americans do not save enough but it is not because of estate taxes.

I like a lot of other American own plenty of assets that have never been taxed iota (unrealized capital gains, cash value life insurance, deferred annuities and growth in tax-deferred qualified plans are examples).

If you don't have a lot of these re-consider where you are getting your financial advice. Watch out for the annuities though.

This anomoly in the tax code (zero for 2010 and back to 1M for 2011) was a bi-partisan budgetary gimmick.

Also, it is very simple for married couples to double the allowable exclusion amount. Last year these estates up to 6M saw no estate liability.

There are numerous ways with varying degrees of complexity to minimize or to eliminate estate tax liability.

 

[idlewind]

I agree Americans do not save enough but it is not because of estate taxes.

I like a lot of other American own plenty of assets that have never been taxed iota (unrealized capital gains, cash value life insurance, deferred annuities and growth in tax-deferred qualified plans are examples).

If you don't have a lot of these re-consider where you are getting your financial advice. Watch out for the annuities though.

This anomoly in the tax code (zero for 2010 and back to 1M for 2011) was a bi-partisan budgetary gimmick.

Also, it is very simple for married couples to double the allowable exclusion amount. Last year these estates up to 6M saw no estate liability.

There are numerous ways with varying degrees of complexity to minimize or to eliminate estate tax liability.

Buz:

You missed my point. It is the widespread perception that we are taxed excessively that contributes to the lack of savings. While it is true that there are a myrid of loopholes in the tax code, these loopholes contribute to the perception that the system is fixed to protect the wealthy and the common people are getting hammered. Most people do not believe the tax system is fair and that is a huge problem for all governments.

There are many other systemic issues behind our failure as a society to save and re-invest in our economy but the perception of unfair/excessive taxation is certainly a major factor.

 

[Lynnie]

Idlewind, you're for the flat tax, right? I looked into that a few mos. ago and for a moment was on board, but not any longer. I agree with your post here - our current code carries a misperception of unfair taxation. I think it is pretty forgiving for those in all tax brackets. Under a flat tax, I would be paying a lot more to Uncle Sam.......just sayin.