Tags: denis | kleinfeld | estate | tax

Revisit Estate-Tax Plan to Keep More of What Is Yours

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Monday, 13 Dec 2010 08:45 AM Current | Bio | Archive

The well-publicized, debated, criticized federal estate tax should have only one result for you, although its own fate is still unknown. Any estate-tax planning that you have done in the past will need to be reviewed and revised immediately.

I had high hopes that the "death tax" would meet its own well-deserved, and long overdue, demise. It is clear that like some vampire, it will live on only because there is no real political will to put a stake through its heart once and for all.

Basically, the tax system of the United States works like this. During your life, the income tax and other taxes take 50 percent to 70 percent (or more) of everything you make. Anything left over is taxed again when you die.

So if you and your estate-tax professionals don't plan to save your estate from being wiped out, don't look to the government to save you. Even with having professional planning to assure compliance with tax-code requirements, the government doesn’t give up if it can squeeze even more money out of the dead.

In one recent case, an estate filed an election, as specifically provided for in the tax code, to defer the payment of tax on the value of closely held stock at the date of death. You would think ... that would be that.

Not when it comes to the government and their quite different view of tax law. In this case, the government got the court to agree that the transferees of the estate were still liable for more tax some 10 years later.

Technically, it was a question of whether the tax applied to the value of the closely held stock at the time the estate tax return was filed, or was it when the stock was sold? Not so unexpectedly, the district court held that the date which generates more tax is the right date to use when applying the statute of limitations on collection of tax.

Basically, estate planning is going to be your sole means to control — or have at least some influence over — whether a lifetime of hard work will be wiped out by being taxed or whether it will go to your family instead.

It has been said time and time again, every estate is planned. It is either by you or by the state and federal government.

I usually like to give, as an example, the idea of an insurance trust. What's referred to as an ILIT.

Essentially without planning, for example, if you have a $1 million life insurance policy and you die, then the government gets half and your family gets half. If that same insurance policy is in an irrevocable life insurance trust — the ILIT — then the government gets zero and your family get the million bucks.

All estates have difficult estate-planning problems. Tax is but one of them. Dealing with business exigencies, the fragilities of human beings or lack of liquidity are among a long list of issues that have to be considered, balanced and compromised in any plan.

It is clear that any tax compromise between the Congress and the president will still include the estate and gift tax (and generation skipping transfer tax and excise taxes for that matter) in some new format.

The consequence to you is that any prior estate plans will need to be reviewed and likely revised.

The sooner, the better.

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Kleinfeld
The well-publicized, debated, criticized federal estate tax should have only one result for you, although its own fate is still unknown.Any estate-tax planning that you have done in the past will need to be reviewed and revised immediately. I had high hopes that the death...
denis,kleinfeld,estate,tax
567
2010-45-13
Monday, 13 Dec 2010 08:45 AM
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