The next anti-estate tax argument that you may hear is that the estate tax taxes assets that have been taxed already. While this may be true in some instances, it is false when appreciated assets are considered.

To understand this requires attention to the interplay between income taxes and estate taxes.  For the rest of this discussion an equation must be remembered.  The equation is unrealized gain = current fair market value - tax basis.  Onward and upward to an example.

Assume “A” purchased a home in 1965 for a total purchase price of 100k. “A” passes away in 2009 and that house is now worth 4 million.  In this example “A’s” tax basis is the cost of acquiring the assets, or 100k, and “A” had an unrealized taxable gain of 3.9 million dollars that has never been subject to income tax. Under 2009 estate tax law, there will (Click here for more…)

The U.S. Senate has failed to make any move on estate tax legislation reinstating the federal estate tax for the year 2010. It is not expected to do so before the end of this year.

The sticking point seems to be that Republicans want a 5M dollar exemption and a thirty five percent highest tax bracket, while Democrats want to keep the current 3.5M dollar exemption and forty five percent rate.

It is reported by the Wall Street Journal that the Senate will revisit this issue early next year and enact retroactive legislation reinstating the estate tax as of January 1, 2010. As to what the parameters of that estate tax will be, you will just have to stay tuned.

This will be an easy one.  The argument is rather simple and attempts to pull at your heart strings.  “It is immoral to tax people when they die.”  

Why is it any more immoral to tax people on assets they own when they die than it is to tax people on their weekly pay checks?  Are not taxes the price we pay to live (or die) in a civilized society?  Particularly now in our almost bankrupt civilized society?  Does this argument also mean that there should be no income tax return filing for the year of death?

Can one tax really be (Click here for more…)

“Why can’t I just take a copy of the Revocable Trust to the bank and have them give me the money in the account”, asks your client.  “The trust says that I am the beneficiary.”

My answer to this is always (Click here for more…)

Well, my prediction of last night may prove incorrect.  The House voted today to extend the current federal estate tax law.  This would continue the current $3,500,000.00 exemption and keep the top rate at 45 %.  It will also keep the estate tax in effect for the year 2010.

I am for this legislation.  I would even like to see (Click here for more…)

Alas, after many months of health care debate (if we can really call it that) in the U.S. Congress seemingly drowning out all other issues, come signs of life on the federal estate tax front.  The House of Representatives is considering an extension of the current estate tax law. 

You may or may not know the current state of the federal estate tax. For deaths in the year 2009, there is a (Click here for more…)

The terms above refer to two major categories of trusts.  An inter vivos trust is a trust that was created during the lifetime of the Trust Grantor/Settlor.   A testamentary trust is set up upon the death of the Trust Grantor/Settlor, typically in a Last Will. 

Some distinctions are that an inter vivos trust may be freely revocable by the Grantor/Settlor, whereas the testamentary trust is irrevocable.  The inter vivos trust may be set up to accomplish asset management, incapacity planning, or Medicaid planning for the Settlor/Grantor.  A testamentary trust is useful to protect the Settlor/Grantor’s eventual beneficiaries from dissipating their inheritance through immaturity, creditors’ claims, divorce, and the like.