@Iglooo, except for my non-Roth retirement plans, I am pretty sure that I have eliminated Federal income tax using just some of those approaches I described and that will not change if the limit drops. So whether I pay any Federal estate tax at all will depend upon how long I live (e.g., how much I have already withdrawn from the 401k) and what they drop the limit too. For people with flexibility and advance planning, I think it is not that hard to take the estate tax to zero.
Salaried employees probably wonāt have the flexibility to avail themselves of the planning tools and so may have to pay estate taxes. For that group, lowering the exemption will increase the number of people who have to pay tax.
Having lived in DC suburbs for 38 years I am well acquainted with that .
The houses being built in the city are not quite as large and showy. The city lots are of limited size and the designs are done to fit in with the look of the older homes.
Ok people Iām officially confused (and off topic). Please, what college had a sub 5% acceptance rate back when people old enough to be parents were applying to college? I thought Harvard was only at like 6% as of 2015. TIA
None that I know of. From what I can see (publicly) rates didnāt drop below 10% until 2010 or so. Back in 1990 (otherwise known as the dark ages) a couple of the Ivies had acceptance rates above 30%.
If high net worth clients think the exemption amount will be lowered in 2026, they will (most likely) utilize their lifetime gift exemption in the next couple of years (if they havenāt already).
The anti-clawback regulations (with some exceptions) make it really attractive as a first line of defense.
I disagree. When we started our estate planning the exemption amount was $650,000. That was a great incentive to find a way for many to get around the estate tax. There are a few things one can do to reduce but in the end the bulk was taxed unless given away to a charity. Yes, one can transfer the lifetime gift amount when the limit is high. There was no limit under the second Bush for a while. The method the Waltons applied isnāt practical for most.
Not really if everyone maneuvered to have 0 estate tax as you say. It wouldnāt make that much difference. Yet it does looking at IRS chart. IMO, that means most people canāt avoid the estate tax.
Actually for most people the step up in basis on death is a huge tax break. IIRC in the year the estate tax went away, the step up in basis went with it, which led to complaints from āregularā taxpayers about the extra tax payable when they sold inherited assets.
I struggle to see why there should be a big tax break given to those inheriting assets, so it seems to me that instead of arguing about the estate tax threshold, it would be better to get rid of that step-up (and I guess credit any capital gains tax paid in liquidating the estate against estate tax that was due).
There are huge negative effects of appreciated real estate being tied up waiting for the owner to die so the heirs can save millions of dollars in taxes.
The original rationale (back in 1921) was that the inherited assets had already been taxed through estate tax. However, that rationale no longer applies to assets from the vast majority of estates that pay no estate tax. But other arguments against repeal, such as the bookkeeping and research burden needed to find purchase records of assets, may make repeal politically difficult (as found in the 1970s), even though it makes sense in many ways.
The research āburdenā will end in about 10 years as folks who bought stock in the pre-computer age die or sell to pay their medical expenses! Yes, itās burdensome to figure out the original price of the AT&T stock you bought in the early 1970ās, but itās MORE burdensome to make your kids pay for your assisted living facility!
Be careful with yoru assumptions. Yes, purchasing life insurance is a way to maximize your estate payout to your heirs but it doesnāt necessarily eliminate federal estate taxes, but just gives tax-free death insurance benefit to the estate/heirs to pay some/all of the estate taxes due.
(Brokers just love the commissions on such life policies.)
The argument I often heard for step up was about small businesses and farmers. I can see how intractable it can get to obtain the cost basis for a small business. I think lowering the exemption limit will bring in more taxes if we have to choose either no step up or lower limit. Of course, one can do both.
There is definitely a difference between a collegeās promotional materials and what is reported in their common data sets as recently as 2018. My memory is from the collegeās promotional materials at the time. I know Iām not remembering wrong because my school guidance counselor was begging me to apply to this school. I had gotten a lot of pamphlets in the mail and this was one. I showed it to him and told him there was no way and it wasnāt even worth applying. This was a while back and I donāt see the common data sets for that year for this school readily available online. I also didnāt save the brochure. But I donāt have dementia yet, so Iām sure Iām not misremembering, either.
Anyway, this has nothing to do with wealth or inheritance.
I donāt really understand this. If you sell a business without dying then you need a cost basis. And if you are inheriting the family farm or business and intend to continue farming it then the basis really doesnāt matter, itās the estate taxes that are the problem (if itās sufficiently valuable). Not having a step up in basis and being exempted from estate tax would actually provide an incentive to continue instead of selling up.
What is truly ridiculous is the California situation where you can inherit the original Prop 13 capped property tax on your parentās house but avoid hundreds of thousands (if not millions) of dollars in capital gains tax through the stepped up basis.
Unlikely schools would market a lower acceptance rate (particularly as dramatic as they evidently would have been) because that only would have dissuaded people from applying.
Me, neither except with step-up, you get to reset once in a generation. It may help. If we are choosing no step up or lowering the limit, I vote for lowering the limit. Step-up applies to all regardless of the size of the estate. With setting the limit, smaller estates are protected.
There are schools that do have a very low acceptance rate, but they are not what the CCers think of as a typical very selective college. Music schools, for example.
This advise is likely too belate to help HImom/brother. But this I want to mention something Iāve posted before. I found this book really insightful, made me better able to support my motherās wishes in the end. (And kudos to the local Hospice organization who helped us navigate the last months.). Being Mortal: Medicine and What Matters in the End by Atul Gawande | Goodreads
The book also gave me food thought for my own priorities in later years (quality vs quantity of end months/yeas).
