No politics please, thoughts on repeal of the estate tax ?

[Independent]

Uh, no.

One of the reasons I lived so far below my means was to have a shot of creating inter-generational wealth, and that would be the first time in mine (and late DW's) family history.

My teen kids already know that spending every dollar today means less for the future. I am hopeful, but can't be certain, that whatever legacy they receive will be managed by them for long-term benefit.

Hope springs eternal ...

I suppose somebody can go out an do some research on how often that works out.

IMO, without the research to back up my opinion, it doesn't work. Kids who inherit a lot don't respond doing a great job of working hard and LBYM.

 

[Independent]

It hasn’t been 50+ years. It was 1995, so 22 years.

I believe farmland there was going for good money back in the late 1990s and early 2000s, because neighbors sold for some serious $$, but prices have dropped since.

I'm surprised that you can't find the price on a farm sale that was only 22 years ago. In my county, I'd expect the assessor to keep sale data longer than that.

 

[gayl]

Of course there is a 'fair' cut-off point.... one dollar more than i have.

Actually I think it should remain & have no problem with it staying as-is even though that may make my beneficiaries pay

 

[Luck_Club]

The extremely wealthy & smart people have long since figured out ways to avoid the estate tax.

The true "saps" who get stuck with estate taxes, are those who didn't get the plan in place, or didn't plan. Most of which will fall in the sub $100 Million range.

Some of the ways it is done:
Insurance
A/B trusts
Private annuities
Family limited partnerships

The family that it really hurts, in my humble opinion, is the very successful family business, where the owner dies prematurely.

 

[NameRedacted]

>> Right, but you should have said it, otherwise you are not being consistent.

No, you are trying to put words in my mouth. If you want to argue with me then you should argue with the points that I am making rather than the ones that you prefer I'm making.




>> You are trying to tell me that the average higher income person
>> spends less on material goods (the kinds of things we have State
>> sales tax on now in many states) than the average lower income
>> person? That doesn't pass the common sense test.

Again you are trying to put words in my mouth that I never said. I'm saying that if you tax sales rather than income then rich folks would pay less tax than they do now. Mostly cos they would spend it on stocks and bonds - unless you have sales taxon those too.

>> Money isn't 'spent' on investments - it is invested. If companies didn't
>> have investors, it would be a lot harder to hire and pay people, and >> those people would be hurt.

You do understand that when you buy a stock you are now a part owner of that company, right? I know some people get confused and think that the C level executives are the owners but I'm sure you are not one of those people.

In that respect it's similar to any other asset that you buy, like a boat or a painting, once you buy it you own it, regardless of whether or not you bought it as an investment.


>> -ERD50

 

[RobbieB]

I like the estate tax just the way it is.

 

[NameRedacted]

I do get it. The money used to build the estate was taxed when it was first earned. It's not the same as IBM making deductions on wages.

First of all - you can't be sure it was ever taxed. How do you know it wasn't money that was originally earned before income tax even existed.

Secondly. let's consider this scenario. Let's imagine for a minute that I'm an executive at a large company. I earn lots of money and pay lots of taxes. So all my money has already been taxed. Now imagine I hire a gardener and pay him some money to look after my estate. Of course you would agree that the money I pay him, that he has earned, should be taxed even though it has been taxed already. Now let's imagine that I pass away and leave a large amount of money to that gardener. Why should the gardener not be taxed on his inheritance but should be taxed on the money he earned working for me.

You can't use the excuse that the money has already been taxed in one situation but not the other.

 

[NameRedacted]

Uh, no.

One of the reasons I lived so far below my means was to have a shot of creating inter-generational wealth, and that would be the first time in mine (and late DW's) family history.

My teen kids already know that spending every dollar today means less for the future. I am hopeful, but can't be certain, that whatever legacy they receive will be managed by them for long-term benefit.

Right but as you said earlier, "Even with the current taxes in place, I suspect they'll do just fine.". I do understand that you were likely referring to people inheriting a lot more than your kids but - same thing really.

 

[Music Lover]

First of all - you can't be sure it was ever taxed. How do you know it wasn't money that was originally earned before income tax even existed.

Secondly. let's consider this scenario. Let's imagine for a minute that I'm an executive at a large company. I earn lots of money and pay lots of taxes. So all my money has already been taxed. Now imagine I hire a gardener and pay him some money to look after my estate. Of course you would agree that the money I pay him, that he has earned, should be taxed even though it has been taxed already. Now let's imagine that I pass away and leave a large amount of money to that gardener. Why should the gardener not be taxed on his inheritance but should be taxed on the money he earned working for me.

You can't use the excuse that the money has already been taxed in one situation but not the other.

Inheritances are not wages and shouldn't be treated as if they are. An inheritance, for all intents and purposes is your "last wish"...you're leaving the results of what you worked your entire life for to those who are closest to you. I don't think the govt. deserves a cut.

 

[pb4uski]

First of all - you can't be sure it was ever taxed. How do you know it wasn't money that was originally earned before income tax even existed.

Secondly. let's consider this scenario. Let's imagine for a minute that I'm an executive at a large company. I earn lots of money and pay lots of taxes. So all my money has already been taxed. Now imagine I hire a gardener and pay him some money to look after my estate. Of course you would agree that the money I pay him, that he has earned, should be taxed even though it has been taxed already. Now let's imagine that I pass away and leave a large amount of money to that gardener. Why should the gardener not be taxed on his inheritance but should be taxed on the money he earned working for me.

You can't use the excuse that the money has already been taxed in one situation but not the other.

It is quite unlikely that the money was originally earned before the income tax went into effect over a century ago in 1913... but even if it was the income from the assets of the estate have been subject to tax since 1913... so perhaps we can try to find more realistic arguments.

The second one is easy...income is the result of an exchange... I perform labor and receive income in exchange.... I lend money to another party and receive interest income in exchange.... I provide capital and receive income in exchange (either dividends or realized appreciation). In the case of inheritance or gifts, there is no exchange so it is not income to the recipient... the recipient does not do anything in exchange for the money.

If there is some condition that must be satisfied in order to receive the money (labor, use of capital) then it is an exchange transaction and is income. If there is no condition that must be satisfied to receive the money then it is a gift and an inheritance is similar to a gift.

 

[razztazz]

Inheritances are not wages and shouldn't be treated as if they are.

A simple assertion without basis. The fact is, an inheritance is whatever we say it is and can be treated in any manner described and agreed upon within the context of how the affected society determines these things. It has no magic powers and did not descend from heaven with a divine nature. Altho to the recipient it is tantamount to that.

Not taxing great wealth subsidizes sloth. Owning something and profiting therefrom by a genial happenstance of life and law is not productive behavior. It is simply collecting. Why should that not be taxed the same or more than an honest day's wages? And the fact that it has been "taxed before" means nothing in this context.

 

[Texas Proud]

Right and that right there is the unfairness part.

Why? If I gave you a million dollars out of my accounts as a gift, do you think that is income to you? If your parents gave you that money? I do not think so....

So if a gift is not income when you are alive, then why is it income when someone dies?

PLUS, who said taxes are supposed to be fair....

 

[audreyh1]

I'm surprised that you can't find the price on a farm sale that was only 22 years ago. In my county, I'd expect the assessor to keep sale data longer than that.

The farm wasn't sold 22 years ago. It was inherited 22 years ago.

 

[Texas Proud]

I know that counties track sale prices so they can set tax assessments. I thought they kept those records forever. Did you try that?

Or, someone has some average values or typical values for farm sales. Something like this https://www.extension.iastate.edu/agdm/wholefarm/html/c2-70.html

If it's really been 50+ years, I'd think the basis is trivial, anyway. The average price of Iowa farmland is about $7,200/acre. It was $261 in 1960. So, an inheritance of 320 acres has a market value of $2.3 million, and a basis of $0.1 million. The cap gains on the basis are $0.02 million.

Note that if we had never had this step-up rule, your dad would have paid cap gains when he inherited it, and he would have known that you would do the same someday. He would have kept the records when he inherited it.

All that said, I could see special rules for farmland that isn't used as farmland.

LOL... you reminded me of a family trust that had significant amount of land.... and had it for many generations.... they sold some of this land to the state for $45 million (which was a discount from market) and the basis was somewhere in the $30,000 range...

 

[pb4uski]

....Not taxing great wealth subsidizes sloth. ...

Well, you got it right in a backasswards way.

A simple assertion without basis. ...

 

[RAchip]

The estate "tax" should be completely repealed. It isn't really a "tax"; its the government confiscating your assets plain and simple. It is just grossly unfair in my view.

 

[marko]

I suppose somebody can go out an do some research on how often that works out.

IMO, without the research to back up my opinion, it doesn't work. Kids who inherit a lot don't respond doing a great job of working hard and LBYM.

Have no research, just empirical observation.
Have lots of friends/school chums who were/are trust funders. Major money from well known families.
Some are now bankers, politicians, lawyers, philanthropists, businessmen and pillars of society.
Some are layabouts who spend their days sitting on a beach or skiing (claim to be 'artists').
Some are dead or drug addicts on their way to being dead or penniless.

The money just seems to amplify the positives/negatives of the individual's personality.

LBYM is relative to one's income.

 

[pb4uski]

+1 marko... I know some as well and the ones I know are upstanding and productive citizens.... one friend I can thing of who cam from money worked until he was 50 (he was eligible under our employer's plan and offer of early retirement) and after he retired he did a lot of volunteer work. Some people like to paint with a very wide brush.

 

[Music Lover]

A simple assertion without basis. The fact is, an inheritance is whatever we say it is and can be treated in any manner described and agreed upon within the context of how the affected society determines these things. It has no magic powers and did not descend from heaven with a divine nature. Altho to the recipient it is tantamount to that.

Not taxing great wealth subsidizes sloth. Owning something and profiting therefrom by a genial happenstance of life and law is not productive behavior. It is simply collecting. Why should that not be taxed the same or more than an honest day's wages? And the fact that it has been "taxed before" means nothing in this context.

1. You don't have the right to my money when I die.
2. You especially don't have the right to my money when I die to correct the projected behaviour of my offspring (that you've never met) at some undetermined time in the future.

 

[USGrant1962]

... taxing great wealth [to fund transfer payments] subsidizes sloth.

I fixed your post - something like 65% of Federal spending is now transfer payments. I'm not opposed to a government safety net, but your "academic" arguments are ridiculous.

 

[ERD50]

.... Again you are trying to put words in my mouth that I never said. I'm saying that if you tax sales rather than income then rich folks would pay less tax than they do now. Mostly cos they would spend it on stocks and bonds - unless you have sales taxon those too. ...

You can't possibly know that, since in this hypothetical, we haven't even set the sales tax rate, or the "pre-bate" (to offset the current standard deduction) that is built into the plans that are being tossed about. Clearly, upper income people spend more on average than lower income people. There are few that invest more of their annual wages than they spend. Maybe a few on this forum, but few in general.

See the "Quote" button on posts? And the "+" button? Please use them, not the " >>" copy/paste or whatever you do, it's how this forum works.

-ERD50

 

[devans0]

As I mismember history, the estate tax was created to prevent a gentry class from permanently passing wealth, creating a rich 'lord' royalty class who are hoarding wealth.. America had a strong self-made ethic that prized those traits proving America could be a place where anyone could make it.

In general, statistically, most inheritances are spent in a generation or two. The few that continue are family businesses with family reinvesting and earning their fortune, albeit with a head start to boost them.

I grew up with Irish American 'family farm' values. We were stewards of the land and were to leave it better than we had received. I still feel that I have a duty towards our children, in that regard.

 

[FlaGator]

Hope springs eternal ...

I suppose somebody can go out an do some research on how often that works out.

IMO, without the research to back up my opinion, it doesn't work. Kids who inherit a lot don't respond doing a great job of working hard and LBYM.

Maybe mine will, maybe they won't. All I can influence is what they are taught in my house. What they do with that when they leave home, or after I'm gone, is an unanswerable question at this point.

I don't want social policy implemented through the tax code to preclude that question from being eventually answered.

 

[Sunset]

If the powers that be do decide to remove the step up basis.
They could make it easier by implementing a grandfather event, the basis will be set to the value on the date of the law being passed, so anyone dying later would have their estate base LTCG from that basis value.
You would have to die to use it, so not a lot of tax cheaters are that determined

I personally want to keep the step up basis, and my plan is to spend enough that we don't have to worry about crossing any inheritance tax amount.

 

[kcowan]

The difference is that if you do it for your own, you kind at least have an idea of when you bought them, within a few years. Trying to figure out when your grandfather bought them is another issue entirely, and I don't think people deal with that "all the time".

If you get audited and can't provide a good explanation for the basis you use, I suspect the IRS might call the basis 0. That's what they did to me when they found a stock sale I missed reporting one year. Of course I had records and could file amended with the correct basis, but I'm just saying 0 is what they'll start with, given no information.

I have downloaded all the transactions from my broker back to 1992. I have used that data to determine my actual acquired cost. For MIL, I used my best estimate and it was accepted back in 2008.