rethinking the 'death tax' and other stuff I'm learning

[callmeslick]

Clearly, I'm still at the beginning of the 8-12 month process of probate/executorship of my dad's will. However, I am already learning quite a bit. Much of it is about exactly the extent to which the Federal Inheritance Tax(and state taxes pegged to that one) can be EASILY circumvented, to the point of making the current laws meaningless. For seemingly ever, I've heard about how Estate taxes kill people, rob beneficiaries of hard-earned gains etc, and I'm quite sure that happens, but I'm starting to suspect the only victims of such are folks inheriting real estate, as it is proving staggeringly simple to avoid the taxation limits on cash and securities. Going through accounts, I came across a goodly number of CDs which were set up as POD(payable upon death) to me as a beneficiary. The banker tells me, and it is confirmed by the Registar of Wills, that all of these are IMMEDIATELY my property, no taxes due at any level. Essentially, they can be thought of as a further Life Insurance Policy. OK, cool, I'm ok with this. I mean, we aren't talking of a massive amount of cash, but still a fair little pile. Then, I contact his brokerage. Turns out his major investment account, which does make 8 figures is ALSO set up as POD, to me. I ask, 'how can that be handled, as part of the probated estate?'. 'No, Mr. Slick, I'm told, those are yours immediately with a death certificate and photo ID'. I ask again, 'no taxes, no probate fees, nothing?'. 'Yes sir, nothing, the whole portfolio is yours now, free and clear'. A conversation with them, and later the Registar of Wills confirms not only that this correct, but further that one has no limit on the size of such a transaction. Hence, if one held one Billion dollars of securities, they can be set up Payable on Death, and the beneficiary sees ZERO tax liability. Strikes me as quite unfair, and completely negating the effect of the estate tax even on the very wealthy. I am starting to think that the laws need to be tightened, and perhaps the tax levels dropped from 40% to, say, 20%. Yet another example of how those writing the laws(yes, both political parties) set the rules of the game so as to benefit those at the top of the economic ladder, the rest be damned.

[Tunnelcat]

And yet, the wealthy STILL complain about those burdensome "death taxes". What I think they really want is no taxes on family wealth, AT ALL. We're going to see the rise of spoiled, powerful and arrogant family dynasties again, long after they were brought down by the Great Depression and the policies of FDR.

[callmeslick]

I don't know about your statement there, TC. I know a fair number of folks you'd call wealthy or even 'super' wealthy, and NONE of them have ever whined about the 'death tax' Not a single one. Frankly, there are so many workarounds for most assets beyond real estate(and any decently planned estate contains no more than 1/4 of all assets as real estate) as to make the Inheritance Tax laughable. In fact, many of my peers, and myself, wonder at times if Andrew Carnegie had it right, to a great extent. He proposed a 90% or more tax on all estates, before distribution to heirs. His thinking was that doing so would negate any need for excise taxes(good for business) or income taxes(again, good for business), and, at the same time, force each generation to have the cream of the human crop rise to the top and create innovation and capital, propelling progress and the general good.

Oh, and who told you that story about FDR or anyone EVER 'bringing down' the dynastic families? Most of such FLOURISHED under FDR, and many have stayed near the top of the economic heap for 150 years or more. And the Depression? Like EVERY financial downturn, the Great Depression retrenched the wealthy, as they both saw the downturn coming, and were left with the liquid assets to buy up dirt cheap stocks. A good half of my families money was put into the pot by my great-grandfather who owned a bank during the depression. He bought forclosed land, and stocks at pennies on the dollar, some of each remaining in my possession to this day.

[Tunnelcat]

Well, after some researching, you're right. I've watched too many old movies about that era. The dirty secret is that lot of wealthy families did prosper during the Depression, while of course everyone else suffered greatly. But during FDR, the top marginal tax rates and estate tax rates were quickly raised up very high. FDR wanted a 100% marginal tax rate, but had to "settle" for a 94% tax rate. Neither of those rates were lowered significantly, until Reagan, except for estate taxes, which have remained higher for the both the top and bottom rates compared to those in 1916. So I guess the about 50+% top rate estate tax we currently have for the wealthiest is still too much for most of them, even with all those exemptions you've been discovering.

[callmeslick]

I believe the estate rate is 40% at present, TC. Interesting, and I never realized this before, but during that period of higher top marginal rates, the lowest end rate was double the present amount. Worth noting, too, during those years, two very positive things can be seen. First off,wealthy people didn't simply stop garnering a bit more capital, just at a reasonable rate reflective of overall economic growth. Second, due to obscene takeout on all income over what today would equate to $800,000, salaries for top execs were effectively capped. Thus, to attract and keep top performers, longer term stock options were the bonus of choice.That necessitated strong long-term planning and execution for a corporation to keep building value over 5 year or more periods. Today we see management by the quarter-year. There is much to be said for that type of taxation scheme.

[woodchip]

Slick, a little friendly advice. Edit your OP as flashing how much you are now worth on the internet is not the brightest thing you can do. Unless of course you just enjoy gloating then do as you want.

[callmeslick]

not thinking the readership here is much of a threat, woody(all 15 of us). Not gloating, either. I was trying to make a point about the current status quo. Would I post similar detail on, say, Facebook or such? No, and the detail above isn't going to get anyone too far into my personal finances. Still, thanks for the consideration, I think.

[snoopy]

not thinking the readership here is much of a threat, woody(all 15 of us). Not gloating, either. I was trying to make a point about the current status quo. Would I post similar detail on, say, Facebook or such? No, and the detail above isn't going to get anyone too far into my personal finances. Still, thanks for the consideration, I think.

I sort of agree with Woody... Don't make yourself a target

You also exemplify an annoyance that I have with "your type" of left-leaning thinkers: You seem to love the idea of taking money away from all of us to fund your social stuff while simultaneously hoarding your own resources and living in the comforts of wealth. If you are really serious about your ideology, why don't you give all of your eight figures to the poor and live on a poverty-level yourself?

[Ferno]

You also exemplify an annoyance that I have with "your type" of left-leaning thinkers: You seem to love the idea of taking money away from all of us to fund your social stuff while simultaneously hoarding your own resources and living in the comforts of wealth. If you are really serious about your ideology, why don't you give all of your eight figures to the poor and live on a poverty-level yourself?

I'm sorry, what? I'm pretty bewildered how you got that out of the OP.

[snoopy]

I'm sorry, what? I'm pretty bewildered how you got that out of the OP.

The OP: Maybe we should change the law about "death taxes..." I'm really finding it very easy to hold on to all of my inherited riches. (Between the lines: if only the law was changed, more people would benefit from the the services that could be funded by inheritance taxes... I'm sure Slick wasn't thinking about defence budgets when he proposed closing the loopholes.)

[woodchip]

not thinking the readership here is much of a threat, woody(all 15 of us).

Perhaps not but what about Google and Spider bot

[Ferno]

No, snoopy. You're doing what's known as 'projection'.

Finding something easy to do is not the same thing as 'loving it'. Note; he did say he found it unfair.

[callmeslick]

You also exemplify an annoyance that I have with "your type" of left-leaning thinkers: You seem to love the idea of taking money away from all of us to fund your social stuff while simultaneously hoarding your own resources and living in the comforts of wealth. If you are really serious about your ideology, why don't you give all of your eight figures to the poor and live on a poverty-level yourself?

first off, you haven't a clue about how much both my late father, and myself give away, nor to whom for what purpose. Secondly, I am literally begging to have different rules put in place for people of my socioeconomic class to pull our weight in financing government. We have not, especially in light of the fact we receive a huge amount of the government largesse(all the while, the political class would have you think it's the welfare recipients and abortion clinics sucking the money dry). I may not 'live on poverty level', nor do I have the first plan to, but I do live pretty frugally, precisely in order to afford largesse in giving. So yes, I'm serious about my ideology, and my ideology very much values a nation in which folks can build their family's fortunes up over generations. I am the beneficiary of 12 generations in this nation, going back to the Virginia colony. My big issue, politically, is that we've gotten this ginned up system that kowtows exclusively to the investor class and the nouveau riche, and screws over the average, working American. What that philosophy has to do with what I keep or give away, I'm not quite sure. As for funding government, I probably do fund far more than most of you, even with the avoided inheritance tax. My whole point in this thread was that were we to have a legitimate, fair process of inheritance taxation, the need for income taxation for EVERYONE would be less.

[callmeslick]

not thinking the readership here is much of a threat, woody(all 15 of us).

Perhaps not but what about Google and Spider bot

and, they'll only get so far, without a name, address or other info. Plus, if you pay financial institutions(or deposit enough cash), they watch your account activity like hawks. Mine just hunted down someone attempting to buy cigars on one of my accounts.

[callmeslick]

I'm sorry, what? I'm pretty bewildered how you got that out of the OP.

The OP: Maybe we should change the law about "death taxes..." I'm really finding it very easy to hold on to all of my inherited riches. (Between the lines: if only the law was changed, more people would benefit from the the services that could be funded by inheritance taxes... I'm sure Slick wasn't thinking about defence budgets when he proposed closing the loopholes.)

of course, defense budgets are part of it. Why the hell wouldn't taxation be funding necessary defense spending? That isn't to say I'm about to cheerlead for an aggressive, imperialistic approach,but what is budgeted should be paid for FAR more by the wealthy than it currently is. You simply PROJECT that I am only for funding selected parts of a budget. Life, and government, doesn't work that way.

[snoopy]

Yes, maybe I am projecting.

Like I said, it touched a nerve... specific to the OP because it came off as rubbing my nose in your wealth. In a more general sense, it touched on an observation (which is probably very stereotypical) that it seems to me like extreme wealth seems to incubate liberal leanings... which makes me think (again, quite unfairly) that it must be easy to get all "let's make the world a better place" when you're surrounded by golden parachutes and silver spoons - leading to charity which never seems to change to person's socioeconomic status, but does try to make them feel better (penance, anyone?). In the mean time, us normal folks have to lower things on Maslow's hierarchy to worry about.

So, yes it's not fair and yes I'm projecting and no I don't know all about your charitable giving slick... but I also believe that if you want to change the world you have to be willing to step up and lead the way self-sacrificially.