Posted on 12/03/2009 11:51:04 AM PST by MaestroLC
The House votes 224-199 to cancel a one-year repeal of the estate tax, set to begin next month, and instead permanently extends the current tax, with a top rate of 45 percent on estates larger than $3.5 million.
Can you move some of your assets into indexed universal life. I believe insurance is the best way to leave money to heirs tax free IIRC
You need to do a liitle more homework before you start posting.
Life insurance proceeds are INCOME TAX FREE to the BENEFICARY of the policy, but are included in the ESTATE TAX if the NAMED INSURED is also the OWNER of the policy.
There are three parties to the life insurance policy/contract > the OWNER of the policy, the NAMED INSURED, and the BENEFICIARY.
Ask your agent to explain the difference; if he cannot tell you explicitly the difference, he is not a professional agent. If he has the CLU designation, he should be able to explain the difference to you.
You will pay ESTATE TAX on life insurance proceeds when the total value of assets, including the life insurance proceeds paid by the life insurance company, exceeds the exclusion amount, currently 3.5 million, when the NAMED INSURED is also the OWNER of the policy. If you own it, farm, small business, life insurance policy, you pay ESTATE tax.
It is the BENEFICARY of the policy who does not pay income tax on the proceeds. The proceeds of the policy then become part of the assets of the beneficiaries estate and then could be subject to estate tax when combined with other assets owned by that beneficiary person.
This is a tricky area of the estate tax law that requires competent legal counsel to set up irrevocable trusts and a competent and professional life insurance agent who also knows what needs to be done and how to properly complete the application for the life insurance policy. This is serious business and not for incompetents, lawyer or agent.
The estate tax is due and payable NINE months after death of the estate holder and the IRS only takes CASH, not real estate potatoes, or stock in a small business. Yes, I know there is an installment plan, but then you are in bed with the IRS for the duration of the installment. Do you really want to be in bed with the IRS for years....
The properly designed estate plan that needs cash, farms and small businesses, can utilize a life insurance policy to provide the CASH needed to pay the estate tax. The competent legal counsel is needed to keep the life insurance proceeds from also being included in the property owned by the deceased that will be subject to the estate tax. Some lawyers have a personal bias against insurance being used, if so, seek a second opinion.
Keep in mind that attorneys normally do not do post problem consulting work, unless specifically asked to do so. They will make more money/legal fees off the estate tax problem than setting up a trust concurrent with the purchase of a life insurance policy than providing you with post problem solutions to the estate tax problem.
There is no way to avoid the estate tax if you are the owner of the assets that are in excess of the current exclusion amount.
You can EVADE the tax, but sooner or later the IRS will catch up with the EVADER... The EVADER is a rank amateur, the IRS is the professional and every day deals with the attempts of the rank amateur to evade this onerous tax that is part and parcel of the communist manifesto.
The use of life insurance proceeds in the properly drawn estate plan is neither AVOIDANCE OR EVASION, but simply a way to have the cash proceeds to pay the tax, without having to liquidate the farm or the small business or enter into an installment plan with the IRS.
Yes, you will have to pay a premium for the policy and it will not be tax deductible. If you want to keep the farm / small business in the family, you will have to deal with estate tax, IN CASH and that is what the life insurance policy will deliver to the trust for the purpose of paying the tax. Such is life, until the Congress will somehow permantely do away with this tax burden that really impacts the owners of farms and small business.
Deal with this problem while you are still in good health. After the heart attack, diabetes, stroke, etc., you may become uninsurable and then you will not have this option available to you.
Hey, that's just like in the USSR. When people left, the government wanted recompense for the cost of their education. Of course the opinion makers in the States made huge complaints and noise about this. Now that the shoe is on the other foot, only silence.
No, the $3.5M is an exemption. Anything up to $3.5M is free of estate tax.
Any amount over $3.5M is subject to the estate tax. For an estate worth $4.0M, $500,000 would be taxed.
I don't know if the exemption is indexed for inflation. But, historically, the people that have been hit hardest by this are family-owned farms and businesses, that are illiquid and have grown in value over several generations.
There have been many documented cases of children inheriting the family farm or business and having to sell it to pay the estate taxes.
In order to take advantage of the combined exemptions, you must use a spousal bypass trust.
When the first spouse dies, their interest in the asset goes into the trust, and the surviving spouse is the beneficiary (of any income). When the surviving spouse dies, the trust is liquidated and the assets are distributed to the intended heirs.
If you don't do it this way, the estate tax "resets" for the surviving spouse.
...the sodomite speaks!
Can anyone with a tax background tell me, if I put all my accounts and my house in both mine and my kids names, and I die will they escape this redistribution? Not that I have $3.5 mill, but someday I’d like to.
If you own it or have “strings attached” to the property, it is still yours and subject to tax.
Can anyone with a tax background tell me, if I put all my accounts and my house in both mine and my kids names, and I die will they escape this redistribution? Not that I have $3.5 mill, but someday I’d like to.
If you own it or have “strings attached” to the property, it is still yours and subject to tax.
Can anyone with a tax background tell me, if I put all my accounts and my house in both mine and my kids names, and I die will they escape this redistribution? Not that I have $3.5 mill, but someday I’d like to.
If you own it or have “strings attached” to the property, it is still yours and subject to tax.
And it just isn't fair. With the outsourcing of technological and middle class jobs starting with the Immigration Act of 1990 and the H1B visa program, I would have to say that this nation, the USA, has sabotaged our wealth instead of fostered it. Congress and the Executive should compensate all technological degree holders for their undermined wages and months (or years) of unemployment.
Worse, those who have experience outside the States know that in some other countries, their talents are compensated at a much higher level. That is upshot of a subverted and sabotaged labor market. Thanks Congress!
Whatever happened to the General Welfare clause?
We need need to return to the Constitutional roots.
Right on.
Great tome, er time.
Please don’t lecture me when your first paragraph is wrong. Investment grade indexed universal life gains and does not lose prinicple. Funds can be taken outr for up to a 40-45 year period without paying taxes. That’s wghat also makes it a great retirement method. That feature has nothing to do with beneficiaries. I won’t bother reading the rest. You lost credibility right off the bat.
Then he bought the wrong policy or has a dunce for an agent. Please don’t say something is not true because your father’s agent made a mistake. There are three IRS guidelines, which if followed properly, allow tax free withdrawls including on the gain.
Good Republicans.
We need to remember that there is a difference and a big one.
I was thinking that emo is punk music on estrogen. Fitting, no?
Me too. See my post 136.
Are you a CPA?
Why would I want to be a CPA? Since you believe CPAs, ask them about indexed universal life insurance written to follow the IRS TAMRA, DEFRA, and TEFRA guidelines. Ask them if you take money out after following the guidelines if it's taxable.
Emo-crat actually works for me ...
According to my kids, someone who is “emo” is overly dramatic and prone to making big decisions based on emotions instead of facts.
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