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Old 03-18-2017, 05:52 PM   #41
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Are Estate taxes calculated on the full $6m (less the tax free allowance of $5.4m)?
Given the high end possibilities laid out by FIRECalc this would be good to know. I believe anything earmarked for charity via will or trust is ignored when figuring estate value for Estate Tax purposes.
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Old 03-18-2017, 05:57 PM   #42
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Given the high end possibilities laid out by FIRECalc this would be good to know. I believe anything earmarked for charity via will or trust is ignored when figuring estate value for Estate Tax purposes.


Yes, gifts to charity are deducted from the gross estate to arrive at the taxable estate.
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Old 03-18-2017, 05:57 PM   #43
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Given the high end possibilities laid out by FIRECalc this would be good to know. I believe anything earmarked for charity via will or trust is ignored when figuring estate value for Estate Tax purposes.
I thought it's double that for a couple. It's $10 million plus.
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Old 03-18-2017, 06:18 PM   #44
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Whatever the exemption amount is, once exceeded does federal estate tax apply from the first dollar or only to the excess?
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Old 03-18-2017, 08:22 PM   #45
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Whatever the exemption amount is, once exceeded does federal estate tax apply from the first dollar or only to the excess?
Only to the excess over the unified credit (doubled by portability)
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Old 03-19-2017, 07:36 AM   #46
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I thought it's double that for a couple. It's $10 million plus.
When we are talking about estate taxes, it is defined as that of the decedent. So not double.
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Old 03-19-2017, 07:41 AM   #47
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Yes, I'm aware of the issues surrounding pensions, it's just that my pension is so big that to ignore it for net worth calculations would make any calculation of net worth meaningless. And after all, net worth calculations are really only useful (once retired) for making you feel good and comparisons, so..... Also, I have elected for full survivor benefits so the pension does continue till my spouse dies. Agree about not including SS (Canadian equivalent) as this would not be material.
Yes we always include the NPV of pension to make our projections. We also exclude real estate.
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Old 03-19-2017, 07:49 AM   #48
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I thought it's double that for a couple. It's $10 million plus.
You might be thinking of the UK where the spouse "inherits" the additional exemption amount of the other when they die.
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Old 03-19-2017, 07:54 AM   #49
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I deduct "obvious tax": basically everything in my LLC goes -1/3, and I have a tax deferred savings account which will taxed at 25% at the end, that goes out too. Reason is that no matter how I twist it, including moving to a tax-free country, I'll never see that money. It's not mine, I just babysit it.

Everything else tax-wise is only used in cash flow projections. That includes a very small tax benefit I will have when/if I get more income into the LLC. It may materialize, but it's not there.
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Old 03-19-2017, 09:42 AM   #50
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Yes, I'm aware of the issues surrounding pensions, it's just that my pension is so big that to ignore it for net worth calculations would make any calculation of net worth meaningless. And after all, net worth calculations are really only useful (once retired) for making you feel good and comparisons, so..... Also, I have elected for full survivor benefits so the pension does continue till my spouse dies. Agree about not including SS (Canadian equivalent) as this would not be material.


Was reflecting on this answer and it got me to thinking.

Assuming the purpose for you calculating NW is to see SWR on portfolio wouldn't it be better to handle each separately (i.e. not calculate PV/taxes owed on pension to add to NW)?

In other words, calculate SWR on NW (for simplicity all NW are investable assets).

Then, once having that figure add to it after tax Pension payment (and SS) for the year to determine what you can spend safely for the year?

That is how I am looking at any SS or Pension payments (i.e. additive to the WR I'm comfortable with).
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Old 03-19-2017, 10:00 AM   #51
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You might be thinking of the UK where the spouse "inherits" the additional exemption amount of the other when they die.
Well, you can get it to work that way too in the US.

The "deceased spouse unused exclusion amount" can be carried over to the surviving spouse's estate.
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Is portability automatic? No. The executor handling the estate of the spouse who died will need to transfer the unused exemption to the survivor, who can then use it to make lifetime gifts or pass assets through his or her estate.
https://www.forbes.com/sites/deborah.../#294d70d52d82

So the 2017 estate tax exemption can be $10.98M per couple, as long as the executor does things right.
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Old 03-19-2017, 10:08 AM   #52
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You might be thinking of the UK where the spouse "inherits" the additional exemption amount of the other when they die.
Since 2013's American Taxpayer Relief Act in the US there has been exemption portability, which is very similar, however the benefit of cost basis step-up would go away if estate tax is repealed.
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Old 03-19-2017, 10:11 AM   #53
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Well, you can get it to work that way too in the US.

The "deceased spouse unused exclusion amount" can be carried over to the surviving spouse's estate.
https://www.forbes.com/sites/deborah.../#294d70d52d82

So the 2017 estate tax exemption can be $10.98M per couple, as long as the executor does things right.
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Since 2013's American Taxpayer Relief Act in the US there has been exemption portability, which is very similar, however the benefit of cost basis step-up would go away if estate tax is repealed.

Cool, thanks for the info.
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Old 03-19-2017, 10:13 AM   #54
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I used to 'adjust' after tax/cost worth of every asset when calculating my networth early on. In realized that, it is lot of extra work so I started taking current prices without worrying about tax/cost. The networth tracking is just for fun so constant error is OK.
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Old 03-19-2017, 10:32 AM   #55
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I see trying to estimate after tax value for IRA and investments pretty much a crap shoot as it depends on how and when I do roth conversion, how much harvested capital losses I have to offset gains and how much capital gains harvesting I can do. Trying to predict effective tax rates for transactions over the next 20, 30 or more years is kind of a wild guess. If I estimated based on a couple years to convert... then I'd likely be pessimistic.

So... I just sum the totals. I usually just use investable assets and ignore others.
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Old 03-19-2017, 11:04 AM   #56
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I see trying to estimate after tax value for IRA and investments pretty much a crap shoot as it depends on how and when I do roth conversion, how much harvested capital losses I have to offset gains and how much capital gains harvesting I can do. Trying to predict effective tax rates for transactions over the next 20, 30 or more years is kind of a wild guess. If I estimated based on a couple years to convert... then I'd likely be pessimistic.

So... I just sum the totals. I usually just use investable assets and ignore others.
So how do you estimate your retirement expenses when you are apparently unable to make an estimate on income taxes?
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Old 03-19-2017, 11:19 AM   #57
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So how do you estimate your retirement expenses when you are apparently unable to make an estimate on income taxes?
Yep.

With RMD's kicking in, our retirement tax rate (effective, not marginal; fed + state) is sliding up into the 20% range. Planning spending without considering the impact of writing those checks would be capricious.

Generally, the details of how one calculates NW depends on what you're planning to use the answer for. There's no doubt that folks in medium or high tax brackets who have significant deferred savings need to consider the impact of taxes for some calculations.
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Old 03-19-2017, 11:28 AM   #58
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You might be thinking of the UK where the spouse "inherits" the additional exemption amount of the other when they die.
No it's US, UK has much lower limit per person.
See the link below, it's $10.90 million for a couple. This has been my understanding for a while. Not something new.

Estate Taxation | ElderLawAnswers
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Old 03-19-2017, 12:33 PM   #59
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So how do you estimate your retirement expenses when you are apparently unable to make an estimate on income taxes?
estimate your retirement expenses-- took my 2013 expenses, added 10k for health insurance, added 10k for out of pocket health expenses. I used that as a baseline. Ran simulations to 95, 105 and 115 years old. Bumped up the spending until I was on the edge of failures. Figured I now had some estimates of the margin of my baseline spending plan.

I can estimate the taxes, but it really depends the distribution level that I use. This years roth conversion cost 6% in federal tax. I figure that by the time we have RMDs the TIRAs will be reduced enough to still be in a modest tax bracket. But I expect SS will be taxed assuming no law changes.
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Old 03-19-2017, 02:37 PM   #60
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I include the full amount of my tax deferred accounts to calculate net worth. But like others have mentioned, on the surface, net worth is kind of just a pulse check number for me.

From there, the key for me is how I'm taking components of my net worth and converting it after tax cash flow. Tax rates are obviously subject to change but I run my numbers through a tax calculator with this year's rates and how much I expect to draw from each bucket to get get an estimate of what my cash flow is going to look like.
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