inherited 401ks

[Texas Proud]

Now there is an understatement!     Thanks for the reference.  I'll dig into it right after I get tonight's dinner into the marinade. DW is substitute teaching today and I don't want her to be disappointed when she returns from the salt mine.

On the general subject of inheritance taxes.........  I've always believed that laws, rules, regulations, etc., are judged for fairness by their equity across groups.  For example, the marriage tax is hated by dual career married couples because couples "living together," don't have to pay it.  In the case of the inheritance tax, I think the problem is that the folks with the big bux seem able to avoid it.  Only those worth a million, or two, or four, etc., seem to get hit.  I'd like to see the rules adjusted so that all of the famous Kennedy clan would be regular ole middle class folks next generation unless they make every dollar they have themselves.  No benefit from intergenerational wealth whatsoever. Of course, that will never happen. The ultra-rich will continue to essentially escape the inheritance tax regardless of how it is changed.   

 

So, if I keep all my money until I die, the govmt should get it... but if I GIVE it away before I die... well, that is just great estate planning

GIVE ME A BREAK... I earned it for ME and MY FAMILY.. not for YOU and YOUR FAMILY (meaning everybody else.. not just you...)... go earn your own money, keep your grubby hands out of my pockets..

 

[FinanceDude]

There is no "marriage penalty tax."

Really? Are you married??

 

[Martha]

Way wrong on this one... the estate tax is not a wealth redistribution tax... it goes into the large bucket of the gvmt... and it is SO small it is a drop... and the cost of getting that small drop is a hugh percentage of the tax..

The normal income tax is the one that creates wealth redistribution with the various earned income credit etc that is given to the low wages.. none of that helps out the middle class...

And why does the vast majority of people who will never pay this tax want it repealed?  Because THEY think it is unfair and/or hope one day they have that wealth and do not want it taxed...

I earned it and paid tax on it, I saved it instead of spending it... and now you want to tax it again because I die...  geee what a great country...

Many support repeal of the estate tax because they do not know that there is a huge exemption. When they get more facts, their opinions often change. Especially when they learn that only a very small percentage of estates pay the tax. Warren Buffet among many other very wealthy people do not support repeal. Bill Gates father even led a petition drive among the wealthy against repeal of the tax.

The billions of dollars in government revenue lost will have to be made up by increasing taxes on those less able to pay or by cutting government programs. In addition repeal would harm charities, who recieve gifts from the rich to reduce the size of their estate.

For those of you that support repeal, I assume you also support repeal of the step up in basis rules.

 

[mb]

OP:

It used to be that only spouses could rollover an inherited 401k into their own IRA.

Followed by:

Doubt it would have happened with a Democratic majority in Congress..........................

This has to at least tie the record for a change in topic!

Haven't looked at the details but my impression is that they are just making the laws for inherited 401ks consistent with those for inherited IRAs?

MB

 

[dmpi]

Really?  Are you married??   

Yes. That's what I'm thinking too!

 

[scrinch]

I inherited an IRA from my father 5 years ago. I was executor of the estate so I had to dig through Publication 590 to figure out how it worked. IIRC, at least in 2001, if the deceased had not yet reached 70-1/2, then the IRA could be inherited and withdrawals were treated like the heir's IRA...i.e. withdrawals need not begin until the heir reached 70-1/2. If the deceased was over 70-1/2 and had begun required distributions (my father was 71-1/2) then the IRA had to be rolled into an IRA-BDA (Beneficiary Distribution Account) and the heirs had to continue making at least the minimum required withdrawals for their (+spouse) ages. So my siblings and I (in our 40's) have been taking mandatory Inherited IRA distributions for the past 5 years that started at about 2.5%, and we must continue increasing the size of the distributions up through age 82 when the RMD is 100%. As in a traditional IRA (as if we were older than 59-1/2) we could choose to take a larger distribution any time we want to pay taxes on it.

 

[Texas Proud]

Many support repeal of the estate tax because they do not know that there is a huge exemption. When they get more facts, their opinions often change. Especially when they learn that only a very small percentage of estates pay the tax. Warren Buffet among many other very wealthy people do not support repeal. Bill Gates father even led a petition drive among the wealthy against repeal of the tax.

The billions of dollars in government revenue lost will have to be made up by increasing taxes on those less able to pay or by cutting government programs. In addition repeal would harm charities, who recieve gifts from the rich to reduce the size of their estate.

For those of you that support repeal, I assume you also support repeal of the step up in basis rules.

Some quick responses... On your first one.. so what?? Warren Buffet is more liberal... and he could do anything he wants with his money.. but instead of paying a tax, he uses the loophole that you mention.. give it to charity... but why should there be this hugh government incentive to give to charity?? If you think about it, this is money from the government to the charity of YOUR choice...

And on that theme.. I do not think it would harm charities that much.. everybody thought that making charities tell how much something was worth and that is what you can deduct from your tax return did not affect giving that much (from what I had read)... I think changing the estate law will not so much either.. Buffett had said all along that he was giving away his money..

I have NO problem repealing the step up in basis... but then you get into is the capital gain tax on not real gain fair either... if you look at England, they do not have a capital gain tax at all... not having a tax on capital means people will move capital around into its 'best' use.. if you have a tax waiting if you sell, then you do not move because of a tax instead of because it is the best place for capital at that time...

I have no problem in paying some more tax... but I want the govmt to stop spending money like drunken sailors... the prescripton drugs is a perfect example... we are now 'obligated' for paying trillions of dollars over the next few decades with NO funding source.. how smart is that??

Sorry.. I was not short...

 

[Martha]

Texas, I guess we will just have to disagree.

 

[jj]

  if you look at England, they do not have a capital gain tax at all... 

Sorry, but where did you get this notion from?  The UK has a Capital Gains Tax very similar to the one here in the US.  There is an annual exemption of 8,800 pounds sterling (tax year 06-07) and after that CGT is the same rate as income tax, between 10% and 40% depending on income.  There is, however, an indexation allowance for assets owned over long periods to ameliorate the effects of the huge inflation that was experienced in the British economy in the 70' and 80's.  Also personal residences are not taxed as long as various criteria are met (similar to US) but also that the house and land may not be more than one and a quarter acres. 

I just couldn't let this pass. 

Source:  HM Revenue and Customs website (don't know how to attach a link   )

 

[Texas Proud]

Sorry, but where did you get this notion from? The UK has a Capital Gains Tax very similar to the one here in the US. There is an annual exemption of 8,800 pounds sterling (tax year 06-07) and after that CGT is the same rate as income tax, between 10% and 40% depending on income. There is, however, an indexation allowance for assets owned over long periods to ameliorate the effects of the huge inflation that was experienced in the British economy in the 70' and 80's. Also personal residences are not taxed as long as various criteria are met (similar to US) but also that the house and land may not be more than one and a quarter acres.

I just couldn't let this pass.

Source: HM Revenue and Customs website (don't know how to attach a link )

No problem... I was wrong... but, it was what I was told when I worked over there for a bit more than a year.. but since nobody I know would have made 8,800 quid in gains (which is what, about $15K??) ... and then from what you write they are indexed so you do not need a step up for an estate!!!

But then again.. I just got a letter from HM revenue and customs looking for me... maybe they want some more money!!

 

[Texas Proud]

Texas, I guess we will just have to disagree.

YES. but that is the beauty of this country



Now, if they would implement MY thinking... we would be better off

(OK, just had to throw that one in... sorry Martha)

 

[nearly50]

Constitutional Amendment

Before any tax increase in enacted into law, all Representatives and Senators, and their spouses and dependents, must liquidate and pay 95% of their total net worth prior to the tax increase going into effect.