Vox article on inheritance

Anonymous
Anonymous wrote:
Anonymous wrote:
Anonymous wrote:
Anonymous wrote:
Anonymous wrote:
Anonymous wrote:
As the very kind tax professional told me, this is what happens when people are working with incomplete knowledge. Complete knowledge, it turns out, is incredibly important when you’re dealing with the tax code.

Meanwhile, incomplete knowledge is kind of the human condition. Tax professionals cost money, which can be prohibitive for many people, especially those who’ve received a windfall but worry they’re about to be staring down some enormous bills.


Both parties, but especially Republicans, have made the tax code more complex.

Complexity advantages the rich, who have money to hire advisors.

Simplify the tax code. Raise the estate tax. No one deserves to be born with a silver spoon in their mouth. Make the playing field equal.


People whose parents were prudent with money dont “deserve” it but their parents deserve to pass on what they earned and saved and planned for their kids.



Sounds good. But let's update the tax code so that the step up in basis is eliminated. It's isn't right that people can make millions of dollars and never pay taxes on it.


That money has already been taxed at least once, possibly multiple times.


It's extremely clear that you don't know what the step up in basis is. No, that money has never been taxed.


You are strident, but not that bright. Say the asset is stock. Parent buys stock with salary , which is taxed. Any dividends accrued on stock while held are taxed, If heir sells stock, that is also taxed


DP here, but you don't seem to understand what step up basis is. If the parent sold their stock before they died, they would pay capital gains on the difference between the sale price and their basis (purchase price plus dividends reinvested). The heir doesn't inherit the parent's basis. They get to use a new higher basis from the date of death. Therefore they don't have to pay capital gains on the difference between the original basis and the value on the date of death. It's a good deal for the heir.

https://smartasset.com/financial-advisor/stepped-up-basis
Anonymous
Anonymous wrote:
Anonymous wrote:
Anonymous wrote:
Anonymous wrote:
Anonymous wrote:
Anonymous wrote:
As the very kind tax professional told me, this is what happens when people are working with incomplete knowledge. Complete knowledge, it turns out, is incredibly important when you’re dealing with the tax code.

Meanwhile, incomplete knowledge is kind of the human condition. Tax professionals cost money, which can be prohibitive for many people, especially those who’ve received a windfall but worry they’re about to be staring down some enormous bills.


Both parties, but especially Republicans, have made the tax code more complex.

Complexity advantages the rich, who have money to hire advisors.

Simplify the tax code. Raise the estate tax. No one deserves to be born with a silver spoon in their mouth. Make the playing field equal.


People whose parents were prudent with money dont “deserve” it but their parents deserve to pass on what they earned and saved and planned for their kids.



Sounds good. But let's update the tax code so that the step up in basis is eliminated. It's isn't right that people can make millions of dollars and never pay taxes on it.


That money has already been taxed at least once, possibly multiple times.


It's extremely clear that you don't know what the step up in basis is. No, that money has never been taxed.


You are strident, but not that bright. Say the asset is stock. Parent buys stock with salary , which is taxed. Any dividends accrued on stock while held are taxed, If heir sells stock, that is also taxed


You simpleton. The money represented by the step-up basis is never taxed. If a parent buys stock at 10/share and it is inherited at 100/share, the capital gains on 90/share is never taxed. It's not taxed when the heir sells because the basis is stepped up. It wasn't taxed when the parent had it because they did not sell or the stock could not have been part of the estate. Obfuscating about taxing salary and dividends is completely beside the point, which may be because you don't understand the terms you're using.
Anonymous
Anonymous wrote:
Anonymous wrote:
Anonymous wrote:
Anonymous wrote:
Anonymous wrote:
Anonymous wrote:
Anonymous wrote:
As the very kind tax professional told me, this is what happens when people are working with incomplete knowledge. Complete knowledge, it turns out, is incredibly important when you’re dealing with the tax code.

Meanwhile, incomplete knowledge is kind of the human condition. Tax professionals cost money, which can be prohibitive for many people, especially those who’ve received a windfall but worry they’re about to be staring down some enormous bills.


Both parties, but especially Republicans, have made the tax code more complex.

Complexity advantages the rich, who have money to hire advisors.

Simplify the tax code. Raise the estate tax. No one deserves to be born with a silver spoon in their mouth. Make the playing field equal.


People whose parents were prudent with money dont “deserve” it but their parents deserve to pass on what they earned and saved and planned for their kids.



Sounds good. But let's update the tax code so that the step up in basis is eliminated. It's isn't right that people can make millions of dollars and never pay taxes on it.


That money has already been taxed at least once, possibly multiple times.


It's extremely clear that you don't know what the step up in basis is. No, that money has never been taxed.


You are strident, but not that bright. Say the asset is stock. Parent buys stock with salary , which is taxed. Any dividends accrued on stock while held are taxed, If heir sells stock, that is also taxed


DP here, but you don't seem to understand what step up basis is. If the parent sold their stock before they died, they would pay capital gains on the difference between the sale price and their basis (purchase price plus dividends reinvested). The heir doesn't inherit the parent's basis. They get to use a new higher basis from the date of death. Therefore they don't have to pay capital gains on the difference between the original basis and the value on the date of death. It's a good deal for the heir.

https://smartasset.com/financial-advisor/stepped-up-basis


DP. This is exactly why companies don't pay dividends anymore. Instead they manipulate stock prices with stock buy backs. Dividends are taxed heavily. Capital gains are taxed less, and possibly not at all due to the step up in basis on death.

Please don't with the "The money has already been taxed."
Anonymous
Anonymous wrote:
Anonymous wrote:
Anonymous wrote:This is all so dependent on the family situation.

Barring unforeseen massive medical expenses (which certainly could happen), my sister and I are set to inherit a couple million dollars each + a fully paid off apartment in a pre-war building in Manhattan. Clearly we are exceptionally privileged.

That said, I do think we both have worked hard. My sister is a college professor and I’m a public servant. I don’t think we’ve taken our privilege for granted.

My parents did not come from money. My dad grew up middle class on Long Island, but his parents didn’t give him a penny after he turned 14. He was told to just go out and figure out how to make money. He got his first job from a friend who worked at a movie theatre, who was willing to look the other way around the fact that my dad wasn’t 16 yet (things were different in the late 60s).

My mom grew up working class in Queens (my grandma was a waitress and my grandpa was a glass blower). My mom was first in her family to go to college. My dad’s dad did go to college, but wouldn’t pay for my dad to go, so my dad got a scholarship.

They went to a law school ranked around 100, but graduated on the law review and both got excellent jobs. My mom stopped working when my sister and I were little, and my dad has worked his butt off as a lawyer for the last 40 years. Yes, he’s made a lot of money doing it, but he worked really hard at a job he did not like, to provide for his family.

So are my sister and I privileged? For sure.

Was there a lot of hard work involved? Absolutely.


No one is disputing your hard work of you or your parents. We just think that estates should be taxed. In this country assets are taxed everytime they change hands. Why should estates be different?


Actually most people don’t think estates should be taxed.


Did I say "most people"? Most people don't actually know how taxes work. If they were smart enough to understand they would be appalled.
Anonymous
Anonymous wrote:We will never do this, but the solution is actually quite simple. ALL income should be taxed the same, regardless of the source. Wages, inheritance, dividends, etc. It is all just “income”. Every dollar of income should be taxed at a progressively higher rate than the previous dollar. (Maybe you have a cut-on point where taxes kick in, e.g. at a yearly equivalent of full time minimum wage or something) There should be zero tax exemptions/breaks. The government should bot care if you are married, own a house, have kids, or donate to charity. You as a taxpayer receive some form of income, dollar 2 is taxed a little more than dollar 1. Dollar 3 is taxed a little more than dollar 2, etc. We could just have a GD formula where “x” is the total income you received in a year, from all sources, you plug it in and BAM - there’s your taxes owed.


This. This is the answer.

Don't treat inheritances differently than any other income.
Don't create an elaborate set of loopholes that can be exploited by the well off.
Don't step up the capital gains basis when people die.
Don't set an $11 million dollar estate tax exemption.
And don't set the estate tax rate at 50% either. Just let it match the income tax rate.

Problem solved.
Anonymous
Anonymous wrote:
Anonymous wrote:
Anonymous wrote:This is all so dependent on the family situation.

Barring unforeseen massive medical expenses (which certainly could happen), my sister and I are set to inherit a couple million dollars each + a fully paid off apartment in a pre-war building in Manhattan. Clearly we are exceptionally privileged.

That said, I do think we both have worked hard. My sister is a college professor and I’m a public servant. I don’t think we’ve taken our privilege for granted.

My parents did not come from money. My dad grew up middle class on Long Island, but his parents didn’t give him a penny after he turned 14. He was told to just go out and figure out how to make money. He got his first job from a friend who worked at a movie theatre, who was willing to look the other way around the fact that my dad wasn’t 16 yet (things were different in the late 60s).

My mom grew up working class in Queens (my grandma was a waitress and my grandpa was a glass blower). My mom was first in her family to go to college. My dad’s dad did go to college, but wouldn’t pay for my dad to go, so my dad got a scholarship.

They went to a law school ranked around 100, but graduated on the law review and both got excellent jobs. My mom stopped working when my sister and I were little, and my dad has worked his butt off as a lawyer for the last 40 years. Yes, he’s made a lot of money doing it, but he worked really hard at a job he did not like, to provide for his family.

So are my sister and I privileged? For sure.

Was there a lot of hard work involved? Absolutely.


No one is disputing your hard work of you or your parents. We just think that estates should be taxed. In this country assets are taxed everytime they change hands. Why should estates be different?


If my parents have already paid taxes on all of that money as they earned it, why should that money be taxed again?
\

It won't be taxed again while your parents have it. It'll be taxed again before you get it after doing absolutely nothing to earn it.

Signed, another Gen X-er who is likely to inherit several million dollars one day from parents and has already inherited several hundred thousand from grandparents, and is in favor of taxing all that much more heavily
Anonymous
Anonymous wrote:So just to be clear, specifically what estate tax are we proposing here?

Bernie has the most extreme proposal out that’s out there at the moment — 45% on estates between $3.5M and $10M and 77% for anything above $1 billion.

https://www.bloomberg.com/quicktake/the-estate-tax

Now, you may say that $3.5M is unequivocally a rich person’s estate (and on many metrics, it is), but it isn’t hard to imagine a lot of people in this area hitting that. If someone has a fully paid off home, and has invested relatively well over a 30-year career, it isn’t at all hard to imagine all of that coming out to at least $3.5M.

So people need to be ok with their kids paying 45% in taxes off of the sale proceeds from a home they inherited + any investments.


When my parents die, I strongly doubt they'll have an opinion on what tax rate I should pay on the proceeds of selling their home. They will be dead. Won't matter to them one way or the other. What you mean is people who otherwise will get tax-free windfalls will need to be OK with ... not getting tax-free windfalls.
Anonymous
Anonymous wrote:
Anonymous wrote:
Anonymous wrote:
Anonymous wrote:
Anonymous wrote:This is all so dependent on the family situation.

Barring unforeseen massive medical expenses (which certainly could happen), my sister and I are set to inherit a couple million dollars each + a fully paid off apartment in a pre-war building in Manhattan. Clearly we are exceptionally privileged.

That said, I do think we both have worked hard. My sister is a college professor and I’m a public servant. I don’t think we’ve taken our privilege for granted.

My parents did not come from money. My dad grew up middle class on Long Island, but his parents didn’t give him a penny after he turned 14. He was told to just go out and figure out how to make money. He got his first job from a friend who worked at a movie theatre, who was willing to look the other way around the fact that my dad wasn’t 16 yet (things were different in the late 60s).

My mom grew up working class in Queens (my grandma was a waitress and my grandpa was a glass blower). My mom was first in her family to go to college. My dad’s dad did go to college, but wouldn’t pay for my dad to go, so my dad got a scholarship.

They went to a law school ranked around 100, but graduated on the law review and both got excellent jobs. My mom stopped working when my sister and I were little, and my dad has worked his butt off as a lawyer for the last 40 years. Yes, he’s made a lot of money doing it, but he worked really hard at a job he did not like, to provide for his family.

So are my sister and I privileged? For sure.

Was there a lot of hard work involved? Absolutely.


No one is disputing your hard work of you or your parents. We just think that estates should be taxed. In this country assets are taxed everytime they change hands. Why should estates be different?


If my parents have already paid taxes on all of that money as they earned it, why should that money be taxed again?


Because you didn't earn it.


Ok fine, but what if that wealth was in the form of a business, as has been stated above, which makes it much more difficult to manage, tax-wise?

Are we supposed to put people inheriting small businesses in a tough situation? Do you propose somehow differentiating between liquid and non-liquid assets? How would one do that?


Small businesses get alot of tax deductions. They should either restructure their business to an ESOP or similar or accept the consequences of all those years of tax breaks.
Anonymous
Anonymous wrote:
Anonymous wrote:
Anonymous wrote:
Anonymous wrote:This is all so dependent on the family situation.

Barring unforeseen massive medical expenses (which certainly could happen), my sister and I are set to inherit a couple million dollars each + a fully paid off apartment in a pre-war building in Manhattan. Clearly we are exceptionally privileged.

That said, I do think we both have worked hard. My sister is a college professor and I’m a public servant. I don’t think we’ve taken our privilege for granted.

My parents did not come from money. My dad grew up middle class on Long Island, but his parents didn’t give him a penny after he turned 14. He was told to just go out and figure out how to make money. He got his first job from a friend who worked at a movie theatre, who was willing to look the other way around the fact that my dad wasn’t 16 yet (things were different in the late 60s).

My mom grew up working class in Queens (my grandma was a waitress and my grandpa was a glass blower). My mom was first in her family to go to college. My dad’s dad did go to college, but wouldn’t pay for my dad to go, so my dad got a scholarship.

They went to a law school ranked around 100, but graduated on the law review and both got excellent jobs. My mom stopped working when my sister and I were little, and my dad has worked his butt off as a lawyer for the last 40 years. Yes, he’s made a lot of money doing it, but he worked really hard at a job he did not like, to provide for his family.

So are my sister and I privileged? For sure.

Was there a lot of hard work involved? Absolutely.


No one is disputing your hard work of you or your parents. We just think that estates should be taxed. In this country assets are taxed everytime they change hands. Why should estates be different?


Actually most people don’t think estates should be taxed.


Did I say "most people"? Most people don't actually know how taxes work. If they were smart enough to understand they would be appalled.


Oh, yes, I love listening to my in-laws spew conservative talking points about how to government can't take most of their hard-earned money they want to leave to the kids - they literally do not believe that the first $11M was exempt and are squirrelling away cash to avoid the excessive estate tax they think will be due on their maybe $100K estate if they try to leave it to their kids/grandkids through traceable channels.
Anonymous
Anonymous wrote:
Anonymous wrote:
Anonymous wrote:
Anonymous wrote:
Anonymous wrote:How is it fair to heavily tax an estate but not life insurance proceeds?



I'm open to taxing life insurance appropriately. But as it stands now, most life insurance pay outs are WELL below the $11 million dollar estate tax exemption. There is no point in taxing life insurance without changing the estate tax exemption.


That may be true but if you're looking to tax all estates, and we know most estates are well below $11 million AND many people have life insurance coverage even with small estates, it seems to make sense that you'll likely get far more in taxes if you tax life insurance proceeds.



The purchase of life insurance is a gamble--and unlike wealth that is accumulated in real estate or other assets (and notwithstanding the vicissitudes of the stock market), term life is an all or nothing proposition. But it's a gamble the government wants to incentivize (which is also why you or your employer can probably buy life insurance with pre-tax dollars in your workplace).


Whole life is not a gamble though. And it’s special tax status is why it’s used in many estate tax strategies.


That's true but see above re: what the government wants to incentivize.

To be fair, some of this is because of the lobbying power of the life insurance industry--it's not that the govt thinks life insurance is good for us, it's that the people who want to sell it have their ears.
Anonymous
From the article:

"But Wolff also says, surprisingly, that inherited wealth isn’t a huge driver of inequality in America — it actually has had an equalizing effect. And there’s no indication that the next decades will be any different.

The reason is deceptively simple: While much (much!) more money flows among the rich, for middle- and low-income people who receive gifts or inheritance, they represent a larger percentage of wealth. So large, in fact, that for some people, a gift from mom or dad is the thing that will keep them middle class."
Anonymous
Anonymous wrote:
Anonymous wrote:
Anonymous wrote:Not really surprised by this, the net worth of the top 10% is >1M so why not a 500k+ inheritance?


This. My parents were very middle class, and my sister I should inherit about $1m each.


My parents were middle class, I likely will inherit nothing.


+1

Right?
Talk about completely immature, naive and tone deaf (other PP).
Anonymous
Anonymous wrote:From the article:

"But Wolff also says, surprisingly, that inherited wealth isn’t a huge driver of inequality in America — it actually has had an equalizing effect. And there’s no indication that the next decades will be any different.

The reason is deceptively simple: While much (much!) more money flows among the rich, for middle- and low-income people who receive gifts or inheritance, they represent a larger percentage of wealth. So large, in fact, that for some people, a gift from mom or dad is the thing that will keep them middle class."


I'd like to see the data to back this up. Otherwise, I'm calling BS.

But ultimately, I don't care. The current estate taxes (lack thereof) is crazy. We are incentivizing bad things.
Anonymous
Anonymous wrote:
Anonymous wrote:
Anonymous wrote:
Anonymous wrote:
Anonymous wrote:
Anonymous wrote:
Anonymous wrote:
As the very kind tax professional told me, this is what happens when people are working with incomplete knowledge. Complete knowledge, it turns out, is incredibly important when you’re dealing with the tax code.

Meanwhile, incomplete knowledge is kind of the human condition. Tax professionals cost money, which can be prohibitive for many people, especially those who’ve received a windfall but worry they’re about to be staring down some enormous bills.


Both parties, but especially Republicans, have made the tax code more complex.

Complexity advantages the rich, who have money to hire advisors.

Simplify the tax code. Raise the estate tax. No one deserves to be born with a silver spoon in their mouth. Make the playing field equal.


People whose parents were prudent with money dont “deserve” it but their parents deserve to pass on what they earned and saved and planned for their kids.



Sounds good. But let's update the tax code so that the step up in basis is eliminated. It's isn't right that people can make millions of dollars and never pay taxes on it.


That money has already been taxed at least once, possibly multiple times.


It's extremely clear that you don't know what the step up in basis is. No, that money has never been taxed.


You are strident, but not that bright. Say the asset is stock. Parent buys stock with salary , which is taxed. Any dividends accrued on stock while held are taxed, If heir sells stock, that is also taxed


DP here, but you don't seem to understand what step up basis is. If the parent sold their stock before they died, they would pay capital gains on the difference between the sale price and their basis (purchase price plus dividends reinvested). The heir doesn't inherit the parent's basis. They get to use a new higher basis from the date of death. Therefore they don't have to pay capital gains on the difference between the original basis and the value on the date of death. It's a good deal for the heir.

https://smartasset.com/financial-advisor/stepped-up-basis


I know all about stepped up basis, thanks. That doesn’t change that the fact that the money underlying that asset has already been taxed multiple times. An rarely is an asset sold immediately at death, so heirs still pay a capital gains tax, just in a lower amount.
Anonymous
Anonymous wrote:From the article:

"But Wolff also says, surprisingly, that inherited wealth isn’t a huge driver of inequality in America — it actually has had an equalizing effect. And there’s no indication that the next decades will be any different.

The reason is deceptively simple: While much (much!) more money flows among the rich, for middle- and low-income people who receive gifts or inheritance, they represent a larger percentage of wealth. So large, in fact, that for some people, a gift from mom or dad is the thing that will keep them middle class."


How about we tax estates at 90% and have a flat income tax rate for the living of 10%.
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