obgyn65
Thinks s/he gets paid by the post
Sorry if my question is a bit naive, but is the problem about giving one's assets to your friends and family while keeping control of it and declaring it as not being yours for tax reasons ?
41 looking to retire 45
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BreathFree
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I'll just leave this here.
Judge Learned Hand famously wrote in the case of Gregory v. Helvering 69 F.2d 809, 810 (2d Cir. 1934), aff'd, 293 U.S. 465, 55 S.Ct. 266, 79 L.Ed. 596 (1935):
“Anyone may arrange his affairs so that his taxes shall be as low as possible; he is not bound to choose that pattern which best pays the treasury. There is not even a patriotic duty to increase one's taxes. Over and over again the Courts have said that there is nothing sinister in so arranging affairs as to keep taxes as low as possible. Everyone does it, rich and poor alike and all do right, for nobody owes any public duty to pay more than the law demands."
Judge Learned Hand famously wrote in the case of Gregory v. Helvering 69 F.2d 809, 810 (2d Cir. 1934), aff'd, 293 U.S. 465, 55 S.Ct. 266, 79 L.Ed. 596 (1935):
“Anyone may arrange his affairs so that his taxes shall be as low as possible; he is not bound to choose that pattern which best pays the treasury. There is not even a patriotic duty to increase one's taxes. Over and over again the Courts have said that there is nothing sinister in so arranging affairs as to keep taxes as low as possible. Everyone does it, rich and poor alike and all do right, for nobody owes any public duty to pay more than the law demands."
kmt,
I know you have to speculate to model healthcare costs into the future, but have you actually looked at the cost projections? The delta between the 400% subsidy level and unsubsidized is not that big, and I think your marginal savings may not be anywhere close to being worth the complexity of managing all those gifts.
Separately, I'm a fan of working the tax system within the bounds of the code, but even successful legal defenses are expensive. Just one audit might trigger a cascade of expenses that wipe out all the savings you were trying to achieve, even if you are in the right with your "gifts." (And I'm not at all sure that you are.)
I know you have to speculate to model healthcare costs into the future, but have you actually looked at the cost projections? The delta between the 400% subsidy level and unsubsidized is not that big, and I think your marginal savings may not be anywhere close to being worth the complexity of managing all those gifts.
Separately, I'm a fan of working the tax system within the bounds of the code, but even successful legal defenses are expensive. Just one audit might trigger a cascade of expenses that wipe out all the savings you were trying to achieve, even if you are in the right with your "gifts." (And I'm not at all sure that you are.)
I'm kind of living out your option 1. I'm 44, retiring next Friday. Similar income range, though its mostly from me, wife makes a relative pittance (though good $ in most parts of the country).
We are moving from the city to a town near you with our preschooler this spring. So we are signing up for the high RE taxes (26k for us) but its still a significant financial downsizing since the house we purchased cost about 35% of what we'll sell our NY loft for.
The benefit I have is my wife really likes her job - so while her income doesn't cover our expenses, it does provide health care. I don't know how many more years she'll want to do it, but at the end of the day we can afford a policy in the individual plan market without jumping through hoops for a subsidy. For us the key is *access*, since we have pre-existing conditions to deal with. Fortunately ACA takes away that concern.
Welcome to the forum!
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Just read your post about living on the DE/PA border. You seem to be optimizing one particular variable (minimizing taxes) while ignoring lots of other factors. THink about it, of that 120k you spend in a year, how much is actually subject to sales tax? Is the 4 figure sum you'll save worth planning your life around? (i'm talking being in PA vs being in PA next to DE).
Yes, with the added expectation that the money will come back to you when you ask for it because it's not really a gift or even a loan.
But, hey, a tax lawyer approved the plan. That means it's legit, right?
Now having read about your 13k/relative/year gift 'repo' plan -
Seems really risky. If you're 'giving away' 3MM in assets over that time it must be to a good number of relatives - more than just parents. Are 10-12 people really to be trusted with this over a 40 year timeframe? What about their heirs?
Seems like a lot of trouble and risk to go through just to pay reduced amount of healthcare costs for 20 years.
Also - you're going to work extra years to give yourself time to 'gift' away the money? Why not just work 1 year at full rates to earn enough to pay for non-subsidized health premiums between 45-65?
Seems really risky. If you're 'giving away' 3MM in assets over that time it must be to a good number of relatives - more than just parents. Are 10-12 people really to be trusted with this over a 40 year timeframe? What about their heirs?
Seems like a lot of trouble and risk to go through just to pay reduced amount of healthcare costs for 20 years.
Also - you're going to work extra years to give yourself time to 'gift' away the money? Why not just work 1 year at full rates to earn enough to pay for non-subsidized health premiums between 45-65?
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Live And Learn
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travelover
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
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I'd just like to volunteer to hold $13,000 a year. PM me for my post office box number.
Jay_Gatsby
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Questionable scheme, but no judgment here. I still wonder what the OP will do with himself at age 45 after retiring. He's talking about being retired for pretty much half his life - 45 years (or so) is a VERY long time. Absent a clear plan for post-retirement, it's hard to imagine the scenario sufficiently to give any practical advice.
Is being retired for 45 years materially different than being retired for the "normal" 30 years when it comes to entertaining oneself?
Jay_Gatsby
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I believe it does. Most of your same-age cohorts will still be at work rather than retired. Furthermore, we've seen discussed on this board the significant mindset adjustment needed to handle true ER (i.e., below the age of 50). Indeed, to FIRE so young often requires, as the OP has described, a high-paying, high-stress career. It's not so simple to "turn it off".
To me, FIRE does not mean true retirement from work. Rather, it means the freedom to choose whether to work and what to do. The closest the average person comes to this type of freedom is in college, and even then, only the choice of one's career is available - choosing not to work is not an option.
Is that based on your own experience of retiring below the age of 50?
Personally I see a lot of young folks milling about every day. Heck, it's hard sometimes to get a table at Starbucks in the middle of the week.
EvrClrx311
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You said you'll live right on the border. I take that to mean that you are restricting your home search (potentially sacrificing home happiness). I also take that to mean you'll pay a premium for the house. Much of that tax break you'll be saving is probably priced into the homes - that is, the exact same house on the other side of the border might cost 5% less because everyone else is doing the same thing.
Just seems a bit penny-smart..., at least from a high level view. The plan to take advantage of Obama-care seems to step in line with this also. Is it really worth the hassle, stress and work involved to micro manage those 8 people and control your money that you've attached a long leash to? Might seem like it now, because you are used to juggling lots of work and stress... when you're retired, do you really want all of that on your plate? I'd create a spreadsheet and try to factor all of these things in. How much are these plans really saving you when you look at everything... how much is the stress worth to you?
Just seems a bit penny-smart..., at least from a high level view. The plan to take advantage of Obama-care seems to step in line with this also. Is it really worth the hassle, stress and work involved to micro manage those 8 people and control your money that you've attached a long leash to? Might seem like it now, because you are used to juggling lots of work and stress... when you're retired, do you really want all of that on your plate? I'd create a spreadsheet and try to factor all of these things in. How much are these plans really saving you when you look at everything... how much is the stress worth to you?
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Bestwifeever
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Manipulating your considerable assets (and dh and I are good for $13k each, and sure, we'll give it back) to save your anticipated subsidy strikes me as really funny. I would suck it up and pay full freight and count my blessings.
