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Old 11-14-2020, 08:12 PM   #61
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Originally Posted by audreyh1 View Post
Well the point it illustrates to me is make darn sure you have plenty more than enough for yourself and spouse before gifting it all away while alive. So what if the remaining estate is subject to tax? Judicious gifting is a great idea (and something we ourselves have been aggressive with) but we’re not going to let estate taxes overwhelm other considerations. We’ll be careful to preserve pass through unused exemptions, etc.

We absolutely won’t gift the bulk of our net worth expecting recipients to help us out if we end up overdoing it. Talk about sacrificing financial independence!
+1 million.

I personally know a couple of instances of parents giving most of their estate away to their adult children so they could reduce their income/NW and take advantage of government aids/programs for low-income seniors. They trusted their adult children to take care of them in exchange when they decided to give their money to them, but these adult children ignored/abandoned them once they got their hands on their parents' money.

I love my 2 kids and trust that they would not do something like that to me and DW in similar circumstance, but I also know that human nature is unpredictable, and I would never put us in that position to depend on them. In short, we trust our kids, but we don't want to have to test that trust just so we can save $ on estate taxes.

FWIW, DW and I are a stone's throw away from the current estate tax exemption amount for a couple.

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Old 11-14-2020, 08:38 PM   #62
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Originally Posted by Dash man View Post
That's not how I understand it. The IRS will not claw back on gifts made for the exemption in effect at the time the gifts were made. But I can't find where you claim the higher portability stays in effect.
https://www.irs.gov/newsroom/estate-and-gift-tax-faqs

Q. How did the IRS clarify the law?

A. To address concerns expressed by a number of stakeholders, the proposed regulations clarify that people taking advantage of the increased BEA by making gifts during the period 2018 to 2025 will not be harmed after 2025 when this amount is scheduled to drop. The regulations provide a special rule that effectively allows the estate to compute its estate tax credit using the greater of the BEA applicable to gifts made during life, or the BEA applicable on the date of death. As a result, people planning to make large gifts between 2018 and 2025 can do so without being concerned that they will lose the tax benefit of the higher exclusion level once it decreases.

Q. How does the special rule work?

A. Here’s an example. Before 2018, A had never made a taxable gift. In 2018 when the BEA is $11.18 million, A makes a taxable gift of $9 million. A uses $9 million of the available BEA to reduce the gift tax to zero. A dies in 2026. Even if the BEA is lower that year, A’s estate can still base its estate tax calculation on the higher $9 million of BEA that was used in 2018.
See https://www.federalregister.gov/d/2019-25601/p-66. Your doc above is talking about the proposed regulations, but this one addresses the comments and questions that they got after making the proposal and talks about how they addressed them. The DSUE issue one thing that they clarified.

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(2). A decrease in the BEA after 2025 will reduce the surviving spouse's AEA only to the extent that it is based upon the BEA, but not to the extent that it is based on the DSUE amount. Therefore, the sunset of (or any other decrease in) the increased BEA has no impact on the existing DSUE rules and the existing regulations governing DSUE continue to apply. Examples 3 and 4 of § 20.2010-1(c)(2)(iii) and (iv), respectively, of these final regulations address this situation.
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(iii) Example 3. Individual B's predeceased spouse, C, died before 2026, at a time when the basic exclusion amount was $11.4 million. C had made no taxable gifts and had no taxable estate. C's executor elected, pursuant to § 20.2010-2, to allow B to take into account C's $11.4 million DSUE amount. B made no taxable gifts and did not remarry. The basic exclusion amount on B's date of death is $6.8 million. Because the total of the amounts allowable as a credit in computing the gift tax payable on B's post-1976 gifts attributable to the basic exclusion amount (zero) is less than the credit based on the basic exclusion amount allowable on B's date of death, this paragraph (c) does not apply. The credit to be applied for purposes of computing B's estate tax is based on B's $18.2 million applicable exclusion amount, consisting of the $6.8 million basic exclusion amount on B's date of death plus the $11.4 million DSUE amount, subject to the limitation of section 2010(d).
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Old 11-15-2020, 09:12 AM   #63
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See https://www.federalregister.gov/d/2019-25601/p-66. Your doc above is talking about the proposed regulations, but this one addresses the comments and questions that they got after making the proposal and talks about how they addressed them. The DSUE issue one thing that they clarified.

I stand corrected. But it took me a few cups of coffee and a shower before I could sort of grasp what it was saying. 🤪
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Old 11-15-2020, 10:58 AM   #64
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Another perspective is I inherited $70K when my last parent died.

So if I died with a number at the exemption limit in the future, as long as it was at least $1 million, my kids would still inherit a lot more even if it was only 75% of my estate.

I have seen the work ethic and work motivation destroyed in a relative and in a friend who were routinely gifted substantial amounts.
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Old 11-15-2020, 08:05 PM   #65
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The thing I keep in mind is that politicians themselves are rich, on both sides of the aisle, and self-interest runs strong with that group.
Yes, I believe there will be changes to estate tax law but I suspect they won’t be as drastic as most of the headline numbers would have us worry about. That said, gifting, charitable giving and hosting elaborate Brewster’s Millions style parties are good ways to reduce a taxable estate.
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Old 11-15-2020, 08:32 PM   #66
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- We're splitting up tIRA's beneficiaries between more people now - grandkids as well as kid - so that the 10 years distribution time limit is taxed at lower rates.
- We're also not the beneficiary* of each other's tIRA now so that the distribution time is longer than 10 years of taxing assuming we die at least one year apart. * Since my tIRA is larger, part goes to DW to even up the amounts in each 10 years period assuming I die first.
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Old 11-15-2020, 10:27 PM   #67
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Thanks for a informative thread, I am following
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Old 11-16-2020, 06:01 PM   #68
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Originally Posted by gerntz View Post
- We're splitting up tIRA's beneficiaries between more people now - grandkids as well as kid - so that the 10 years distribution time limit is taxed at lower rates.
- We're also not the beneficiary* of each other's tIRA now so that the distribution time is longer than 10 years of taxing assuming we die at least one year apart. * Since my tIRA is larger, part goes to DW to even up the amounts in each 10 years period assuming I die first.
Does it work that way? The sources I see show that spouses have the same rules as old, which means they can do RMDs same as their own, over their lifetime.

https://obliviousinvestor.com/inherited-ira-rules/

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Death in 2020 or Later

If the IRA owner dies in 2020 or later, we first have to determine whether the beneficiary is an “eligible beneficiary.”

Eligible beneficiaries include:

the surviving spouse of the original account owner,
a minor child of the original account owner,
anybody who is disabled or chronically-ill (per the definition found in IRC 7702B(c)(2)), or
any designated beneficiary who is not more than 10 years younger than the original account owner.

If the beneficiary is an eligible beneficiary, then the old rules apply (see below).
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Old 11-16-2020, 08:11 PM   #69
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Yeah - if beneficiary is a surviving spouse, or not more than 10 years younger than the original account owner, you retain the old rules.
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