Generational Wealth

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:I wish I did have a solution but I strongly believe the gap between the well off and the poor underlies much of what is going wrong in our society. I’m in favor of something like an inheritance tax. Something where you can leave a reasonable amount of money to each of your children but the rest goes to the government. That’s probably impractical but it might be a start. And by reasonable I mean $5 million or $10 million. Something indexed for inflation. But this idea of having huge amounts of money passed to the next next generation seems a little off to me.

I'm the PP at 14:25 who has studied tax policy in the context of wealth disparity. Like I said, I have never really found an answer. But the closest thing to a good answer was to drastically increase transfer taxes (inheritance and gift). I think it is the most palatable answer all around (if not the best one), but in the US extreme notions about property rights prevail, making this close to politically impossible.

In practice though this would really impact small and medium-sized businesses, not just “farms.” And if all buyers knew the owners were facing big estate tax bills, you wouldn’t even be able to sell them fairly. You can do planning but death is still unpredictable and at a minimum you will leave people with tough choices about using all the liquid assets to pay taxes to keep a business that could be in any kind of shape.

Depends on who you tax. If it's a $1 Billion business, I don't care what they call themselves (mom and pop or Big corp), they should pay up. At that level they should have the wealth and income to hire the right lawyers to prepare for this eventuality. Ownership at that level will be in stock anyways so they can just sell it in the open market.

No, not really. There isn’t generally a market for minority stakes in private businesses at anything close to their valuation. Having stock in a private company isn’t like having it in your investment account. It’s more like okay aunt Myrtle died and she owns 30% of the company. Her share is valued at $50m and she has $10m in other assets. You’re right about the lawyers and people will use trusts and family foundations and other maneuvers to make it work out unless it was a surprise but that kind of just defeats the point, doesn’t it?

[Anonymous]

Anonymous wrote:

Anonymous wrote:I wish I did have a solution but I strongly believe the gap between the well off and the poor underlies much of what is going wrong in our society. I’m in favor of something like an inheritance tax. Something where you can leave a reasonable amount of money to each of your children but the rest goes to the government. That’s probably impractical but it might be a start. And by reasonable I mean $5 million or $10 million. Something indexed for inflation. But this idea of having huge amounts of money passed to the next next generation seems a little off to me.

I'm the PP at 14:25 who has studied tax policy in the context of wealth disparity. Like I said, I have never really found an answer. But the closest thing to a good answer was to drastically increase transfer taxes (inheritance and gift). I think it is the most palatable answer all around (if not the best one), but in the US extreme notions about property rights prevail, making this close to politically impossible.

What happens today in reality is that the really rich pay a lot to lawyers to get around estate taxes, so it falls mainly on the upper middle class instead.

I live in DC, which has a much lower estate tax threshold than the federal government, which, given the price of housing, is not all that hard to exceed.

I have been told I can go to a lawyer and set up trusts to avoid the tax, but why do I have to enrich lawyers by thousands because we naively bought in DC instead of VA (no estate taxes) decades ago?

And if I can do this, what is the point of the estate tax? It constitutes just 0.06% of the District's revenue. But it discourages residency by older, relatively well-off people who are willing to pay the high income tax and use very few city services, but don't want the District to diminish what goes to their heirs.

[Anonymous]

Anonymous wrote:I wish I did have a solution but I strongly believe the gap between the well off and the poor underlies much of what is going wrong in our society. I’m in favor of something like an inheritance tax. Something where you can leave a reasonable amount of money to each of your children but the rest goes to the government. That’s probably impractical but it might be a start. And by reasonable I mean $5 million or $10 million. Something indexed for inflation. But this idea of having huge amounts of money passed to the next next generation seems a little off to me.

Why does it "seem a little off"? For someone worth 30-40M, they most likely earned that themselves. And most likely paid high taxes on it already (speaking from experience, it is very high----if earned income, no way to not pay taxes/protect it). Why should the government get to tax it again when you die?
If you are smart, they wont as you will pass it on while still alive and use legal trusts to ensure it's not taxed again.
I'm all for taxes, but one and done please.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:I believe I have generational wealth.
My college was 100% paid for by my parents.
I also started life with about $200k in stock from a grandmother, which enabled me to buy a house early.
I therefore have been able to plow my salary into retirement accounts and 529.
When my parents die, I will likely inherit more money.
My kids will have their college paid. We can help them get a house. They will therefore be better able to save, etc. They will likely inherit money when I die.
With all this comes a philosophical approach to money. You invest for the long term. You are careful with spending. You take advantage of tax advantages. You teach the next generation all of this. So every generation starts life with a little push.

That’s not what’s considered generational wealth but it sure is nice to get help when you’re just starting out.

I consider that to be generational wealth. 200k in your 20s allowing property purchase and early retirement savings will change the lives of this posters kids; it has a very different effect than 200k when someone is nearing retirement or the asset will go immediately to college tuition.

I graduated college in 2009. My parents have given me an annual gift to allow me to max my 401k. Once I got married, they increased that to 2x to allow my spouse to do the same. At 36, both accounts are approaching $1.5mm.

The annual gift is a small portion their net worth. But small gifts, started early and over time, lead to great results.

We do that with our kids---started with Roth IRA when working in HS and college and continue with Roth and 401K. It's really the simplest and best gift you can give your kids. We will continue that with 529 gifting once there are grandkids in the future/arrived.

Your life is much different if you do not have to worry about saving for retirement. Start early and by the time you are 35-40 you will not need to save much more for retirement

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:I believe I have generational wealth.
My college was 100% paid for by my parents.
I also started life with about $200k in stock from a grandmother, which enabled me to buy a house early.
I therefore have been able to plow my salary into retirement accounts and 529.
When my parents die, I will likely inherit more money.
My kids will have their college paid. We can help them get a house. They will therefore be better able to save, etc. They will likely inherit money when I die.
With all this comes a philosophical approach to money. You invest for the long term. You are careful with spending. You take advantage of tax advantages. You teach the next generation all of this. So every generation starts life with a little push.

That’s not what’s considered generational wealth but it sure is nice to get help when you’re just starting out.

I consider that to be generational wealth. 200k in your 20s allowing property purchase and early retirement savings will change the lives of this posters kids; it has a very different effect than 200k when someone is nearing retirement or the asset will go immediately to college tuition.

I graduated college in 2009. My parents have given me an annual gift to allow me to max my 401k. Once I got married, they increased that to 2x to allow my spouse to do the same. At 36, both accounts are approaching $1.5mm.

The annual gift is a small portion their net worth. But small gifts, started early and over time, lead to great results.

These are not “small” gifts.

They are "small gifts" if your parents are worth millions. If you will be inheriting $2-3M+ it is much better to be given it in smaller chunks at a time when it makes more impact on your life (not when you are 50+)

[Anonymous]

Anonymous wrote:

Anonymous wrote:Small to the parents.

Not small, though.

Maybe not to you.....

It is SMALL to the parents. If they are worth millions, it's small to them.
It is all relative.

[Anonymous]

Anonymous wrote:You used to he able to pay for college by working - that is not true anymore, with the costs rising so quickly

Not for all colleges. However, in my state, our 2nd large state U is ranked between 100-150 and costs $25K all in. If your kid has a 3.5+ they are guaranteed admission. My 3.5UW/1250 kid got $4K in merit, my 3.99UW/1500 kid got $8K and could have applied for more scholarships and easily gotten them (didn't want to attend---was a safety). A kid can earn $10-12K in the summer in our state, take the 5.5K in fed loans and you have 5-10K left for the family (or kid can work 10-15 hours PT job during the year to bring in much of that. )

if you pick correctly, it is possible to work and pay for college. Just not the T50 schools.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:I wish I did have a solution but I strongly believe the gap between the well off and the poor underlies much of what is going wrong in our society. I’m in favor of something like an inheritance tax. Something where you can leave a reasonable amount of money to each of your children but the rest goes to the government. That’s probably impractical but it might be a start. And by reasonable I mean $5 million or $10 million. Something indexed for inflation. But this idea of having huge amounts of money passed to the next next generation seems a little off to me.

I'm the PP at 14:25 who has studied tax policy in the context of wealth disparity. Like I said, I have never really found an answer. But the closest thing to a good answer was to drastically increase transfer taxes (inheritance and gift). I think it is the most palatable answer all around (if not the best one), but in the US extreme notions about property rights prevail, making this close to politically impossible.

What happens today in reality is that the really rich pay a lot to lawyers to get around estate taxes, so it falls mainly on the upper middle class instead.

I live in DC, which has a much lower estate tax threshold than the federal government, which, given the price of housing, is not all that hard to exceed.

I have been told I can go to a lawyer and set up trusts to avoid the tax, but why do I have to enrich lawyers by thousands because we naively bought in DC instead of VA (no estate taxes) decades ago?

And if I can do this, what is the point of the estate tax? It constitutes just 0.06% of the District's revenue. But it discourages residency by older, relatively well-off people who are willing to pay the high income tax and use very few city services, but don't want the District to diminish what goes to their heirs.

Up to you, but it will only cost $2-3K to set up the trusts to protect yourself from estate taxes from DC. We live in a state with low level for estate taxes and it would be downright foolish to not hire the lawyer to protect your assets. It's legal, and most people will protect themselves. if you have more than 1-2M in net worth you need to.
I'd rather pay the lawyer a few thousand and not have my kids loose 20% of the estate to our state and another 18-40% for federal. close to 60% of our estate would disappear. Seems worth a few thousand now to protect it legally

[Anonymous]

Anonymous wrote:This thread is evidence that the world is pretty messed up. This kind of weath should not be concentrated in the hands of so few. So called generational wealth is a poison to our society. The current wealth gap will not end well.

A poison to our society? Have you been overseas, those are huge wealth gaps. When are you going to realize we live in a capitalist society? We strive for equal opportunities but you can't guarantee equal outcomes. That isn't the way the world works. Even socialist and communist states have unequal wealth which isn't surprising. Look at the wealth that Putin has accumulated.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:I wish I did have a solution but I strongly believe the gap between the well off and the poor underlies much of what is going wrong in our society. I’m in favor of something like an inheritance tax. Something where you can leave a reasonable amount of money to each of your children but the rest goes to the government. That’s probably impractical but it might be a start. And by reasonable I mean $5 million or $10 million. Something indexed for inflation. But this idea of having huge amounts of money passed to the next next generation seems a little off to me.

I'm the PP at 14:25 who has studied tax policy in the context of wealth disparity. Like I said, I have never really found an answer. But the closest thing to a good answer was to drastically increase transfer taxes (inheritance and gift). I think it is the most palatable answer all around (if not the best one), but in the US extreme notions about property rights prevail, making this close to politically impossible.

What happens today in reality is that the really rich pay a lot to lawyers to get around estate taxes, so it falls mainly on the upper middle class instead.

I live in DC, which has a much lower estate tax threshold than the federal government, which, given the price of housing, is not all that hard to exceed.

I have been told I can go to a lawyer and set up trusts to avoid the tax, but why do I have to enrich lawyers by thousands because we naively bought in DC instead of VA (no estate taxes) decades ago?

And if I can do this, what is the point of the estate tax? It constitutes just 0.06% of the District's revenue. But it discourages residency by older, relatively well-off people who are willing to pay the high income tax and use very few city services, but don't want the District to diminish what goes to their heirs.

Up to you, but it will only cost $2-3K to set up the trusts to protect yourself from estate taxes from DC. We live in a state with low level for estate taxes and it would be downright foolish to not hire the lawyer to protect your assets. It's legal, and most people will protect themselves. if you have more than 1-2M in net worth you need to.
I'd rather pay the lawyer a few thousand and not have my kids loose 20% of the estate to our state and another 18-40% for federal. close to 60% of our estate would disappear. Seems worth a few thousand now to protect it legally

Woah woah woah, what happened to the wealthy paying their fair share y’all?

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:I believe I have generational wealth.
My college was 100% paid for by my parents.
I also started life with about $200k in stock from a grandmother, which enabled me to buy a house early.
I therefore have been able to plow my salary into retirement accounts and 529.
When my parents die, I will likely inherit more money.
My kids will have their college paid. We can help them get a house. They will therefore be better able to save, etc. They will likely inherit money when I die.
With all this comes a philosophical approach to money. You invest for the long term. You are careful with spending. You take advantage of tax advantages. You teach the next generation all of this. So every generation starts life with a little push.

That’s not what’s considered generational wealth but it sure is nice to get help when you’re just starting out.

I consider that to be generational wealth. 200k in your 20s allowing property purchase and early retirement savings will change the lives of this posters kids; it has a very different effect than 200k when someone is nearing retirement or the asset will go immediately to college tuition.

I graduated college in 2009. My parents have given me an annual gift to allow me to max my 401k. Once I got married, they increased that to 2x to allow my spouse to do the same. At 36, both accounts are approaching $1.5mm.

The annual gift is a small portion their net worth. But small gifts, started early and over time, lead to great results.

How old were you when you got married? I'm 45 and have always maxed my 401k and I have about the same amount. So you must have married at 20? Otherwise, I have a hard time believing this because there are contribution limits.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:I wish I did have a solution but I strongly believe the gap between the well off and the poor underlies much of what is going wrong in our society. I’m in favor of something like an inheritance tax. Something where you can leave a reasonable amount of money to each of your children but the rest goes to the government. That’s probably impractical but it might be a start. And by reasonable I mean $5 million or $10 million. Something indexed for inflation. But this idea of having huge amounts of money passed to the next next generation seems a little off to me.

I'm the PP at 14:25 who has studied tax policy in the context of wealth disparity. Like I said, I have never really found an answer. But the closest thing to a good answer was to drastically increase transfer taxes (inheritance and gift). I think it is the most palatable answer all around (if not the best one), but in the US extreme notions about property rights prevail, making this close to politically impossible.

What happens today in reality is that the really rich pay a lot to lawyers to get around estate taxes, so it falls mainly on the upper middle class instead.

I live in DC, which has a much lower estate tax threshold than the federal government, which, given the price of housing, is not all that hard to exceed.

I have been told I can go to a lawyer and set up trusts to avoid the tax, but why do I have to enrich lawyers by thousands because we naively bought in DC instead of VA (no estate taxes) decades ago?

And if I can do this, what is the point of the estate tax? It constitutes just 0.06% of the District's revenue. But it discourages residency by older, relatively well-off people who are willing to pay the high income tax and use very few city services, but don't want the District to diminish what goes to their heirs.

Up to you, but it will only cost $2-3K to set up the trusts to protect yourself from estate taxes from DC. We live in a state with low level for estate taxes and it would be downright foolish to not hire the lawyer to protect your assets. It's legal, and most people will protect themselves. if you have more than 1-2M in net worth you need to.
I'd rather pay the lawyer a few thousand and not have my kids loose 20% of the estate to our state and another 18-40% for federal. close to 60% of our estate would disappear. Seems worth a few thousand now to protect it legally

DP
So much misinformation! Currently, unless you have more than 12.92M (in 2023) you don't pay estate tax. Most people don't pay estate tax in this country. That said, we did set up a trust, but not to avoid tax - to avoid probate. We own property in different states and if ownership doesn't change hands, then we don't go through probate, so we streamline the process. Most people don't need a trust either.

[Anonymous]

I'm rather agnostic on the topic of raising inheritance taxes on the very rich. Yes, it's easy to look at the top 1% and think, my god, they have so much money. But then I look at the bottom 20 or 30% of society and wonder why they deserve the wealth transfer? Because many if not most don't. A lot of people at the bottom of society are leeches who never produce anything useful for society and just feed off the welfare state.

In reality, inheritance tax is a red herring concept, a feel-good policy which never, ever, raises anywhere near the amount of revenue it theoretically promises as the wealthy find ways around it or simply stop producing more wealth. And the argument that it's a double tax, taxing incomes and wealth that has already been taxed at least once, is a valid one. And there's no question it involves class jealousy.

If you really want to increase tax revenues on a significant scale to fund all your pet programs, you have to raise taxes across the middle classes. Not just the wealthy.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:I wish I did have a solution but I strongly believe the gap between the well off and the poor underlies much of what is going wrong in our society. I’m in favor of something like an inheritance tax. Something where you can leave a reasonable amount of money to each of your children but the rest goes to the government. That’s probably impractical but it might be a start. And by reasonable I mean $5 million or $10 million. Something indexed for inflation. But this idea of having huge amounts of money passed to the next next generation seems a little off to me.

I'm the PP at 14:25 who has studied tax policy in the context of wealth disparity. Like I said, I have never really found an answer. But the closest thing to a good answer was to drastically increase transfer taxes (inheritance and gift). I think it is the most palatable answer all around (if not the best one), but in the US extreme notions about property rights prevail, making this close to politically impossible.

What happens today in reality is that the really rich pay a lot to lawyers to get around estate taxes, so it falls mainly on the upper middle class instead.

I live in DC, which has a much lower estate tax threshold than the federal government, which, given the price of housing, is not all that hard to exceed.

I have been told I can go to a lawyer and set up trusts to avoid the tax, but why do I have to enrich lawyers by thousands because we naively bought in DC instead of VA (no estate taxes) decades ago?

And if I can do this, what is the point of the estate tax? It constitutes just 0.06% of the District's revenue. But it discourages residency by older, relatively well-off people who are willing to pay the high income tax and use very few city services, but don't want the District to diminish what goes to their heirs.

Up to you, but it will only cost $2-3K to set up the trusts to protect yourself from estate taxes from DC. We live in a state with low level for estate taxes and it would be downright foolish to not hire the lawyer to protect your assets. It's legal, and most people will protect themselves. if you have more than 1-2M in net worth you need to.
I'd rather pay the lawyer a few thousand and not have my kids loose 20% of the estate to our state and another 18-40% for federal. close to 60% of our estate would disappear. Seems worth a few thousand now to protect it legally

DP
So much misinformation! Currently, unless you have more than 12.92M (in 2023) you don't pay estate tax. Most people don't pay estate tax in this country. That said, we did set up a trust, but not to avoid tax - to avoid probate. We own property in different states and if ownership doesn't change hands, then we don't go through probate, so we streamline the process. Most people don't need a trust either.

You missed the post the PP was responding to.

It was not about federal estate taxes, but DC estate taxes. They kick in at $4 million, and there is no portability between spouses.

[Anonymous]

Anonymous wrote:I'm rather agnostic on the topic of raising inheritance taxes on the very rich. Yes, it's easy to look at the top 1% and think, my god, they have so much money. But then I look at the bottom 20 or 30% of society and wonder why they deserve the wealth transfer? Because many if not most don't. A lot of people at the bottom of society are leeches who never produce anything useful for society and just feed off the welfare state.

In reality, inheritance tax is a red herring concept, a feel-good policy which never, ever, raises anywhere near the amount of revenue it theoretically promises as the wealthy find ways around it or simply stop producing more wealth. And the argument that it's a double tax, taxing incomes and wealth that has already been taxed at least once, is a valid one. And there's no question it involves class jealousy.

If you really want to increase tax revenues on a significant scale to fund all your pet programs, you have to raise taxes across the middle classes. Not just the wealthy.

Many overlook this inconvenient fact. While the rich may have great wealth, the number of rich people just isn't great enough to produce a lot of revenue, particularly given that they afford the best lawyers to avoid taxes.

The middle class, however, are great in number and, as a bonus, they can't afford the lawyers. That is where the money is.