Inheritance entitlement problems

[mrkajz44]

I've said it before, but I always take the "my family would never argue over my parent's estate, I hope they spend every dime on themselves" comments with a grain of salt. No one truly knows how a dispute involving money will actually affect them until it happens to them. Basically a "talk is cheap" type approach.

As for the estate tax, I echo those who say getting taxed twice (once when earned and once when inherited) is unfair. And for those saying that only higher value estates will be subject to the tax, where (and how) do you draw that line? What is considered "wealthy enough" to afford an estate tax. Apparently the US drew the line at $5.4M, but I doubt everyone would agree on that figure.

[Derek Sutton]

An inheritance tax, especially on assets can really screw over the families. I remember hearing about the potential problems here long before Ralph Wilson died, I'm not sure what ever came of this though.

http://www.bizjournals.com/buffalo/n....html?page=all

Same story, different article
http://www.rouletlaw.com/library/fed...alo-bills-.cfm

[MoneyGuy]

Originally Posted by Phanuthier

Foolishly, I've always assumed that and had somewhat of a target # for when I reach 55... what is the expected $$ expected value to be used in your last year you survive?

I'm not sure that number exists as they would vary widely, but I've read somewhere that we spend more on health care in the last two years of life than all of our years prior to that. On average. Again, it will vary widely. There is long-term care insurance for this purpose.

I tell my clients there are three stages to retirement - GO GO, GO SLOW and NO GO. The last stage (late life) can be the most expensive.

[Phanuthier]

Originally Posted by MoneyGuy

I'm not sure that number exists as they would vary widely, but I've read somewhere that we spend more on health care in the last two years of life than all of our years prior to that. On average. Again, it will vary widely. There is long-term care insurance for this purpose.

I tell my clients there are three stages to retirement - GO GO, GO SLOW and NO GO. The last stage (late life) can be the most expensive.

Do you have a number for that range?

[Slava]

Originally Posted by mrkajz44

I've said it before, but I always take the "my family would never argue over my parent's estate, I hope they spend every dime on themselves" comments with a grain of salt. No one truly knows how a dispute involving money will actually affect them until it happens to them. Basically a "talk is cheap" type approach.

As for the estate tax, I echo those who say getting taxed twice (once when earned and once when inherited) is unfair. And for those saying that only higher value estates will be subject to the tax, where (and how) do you draw that line? What is considered "wealthy enough" to afford an estate tax. Apparently the US drew the line at $5.4M, but I doubt everyone would agree on that figure.

I think people would fight over money more than they care to admit. Everyone thinks that the splits should be "equal", but as a guy who sits down and talks to people about money all the time, people have different ideas of what that equal figure should be. Throw in some factors like one party worked in the family business more than the other, one party took care of dad/mom when they were sick, one party got bailed out by mom and dad through the years while the other didn't, or one party never visited and the list goes on. Then there are times when frankly parents have children they favor and give them more than the other kids. Sometimes kids who worked in a family business for years end up not getting as much as kids who didn't; it's just plain favoritism and that's tough to accept I think. I haven't personally been in that position, but have seen these scenarios for clients, and it gets nasty very fast.

I've given up my arguing for the no-tax on inheritance. Its pointless; I have my belief that it shouldn't be taxed and the other side has theirs. We're not going to convince each other, and just have to agree to disagree on that issue.

[Slava]

Originally Posted by Phanuthier

Do you have a number for that range?

Which range are you after a number for? Age 55? Call it $4M.

[Flamenspiel]

Originally Posted by Slava

I already noted this in my other response, but the social engineering aspect is disturbing. Because someone else decides that my heirs "didn't work hard" or the government feels the need to dissuade certain "behaviors" is not a reason to tax this money. Frankly, its appalling. My heirs could use that money to cure cancer or have some amazing impact on the world. They might use it for hookers and blow, but regardless I want them to make that decision, not the government because I didn't get a chance to spend it all.

Its OK though, in my will I have everything converted to travellers checks and put into my coffin. I'm taking it all with me!

Wow, you've got my vote on this point. The general idea that taxes are a more productive way of spending money as a society is absurd. I can't believe people still think that way.

[CorsiHockeyLeague]

Originally Posted by Slava

We're not going to convince each other.

I could actually totally be convinced either way.

[Phanuthier]

Originally Posted by Slava

Which range are you after a number for? Age 55? Call it $4M.

I'm looking for a number on how much $$ I expect to use in my last year or 2 of my life

[Slava]

Originally Posted by CorsiHockeyLeague

I could actually totally be convinced either way.

Maybe, but I just got bored. I looked at this thread yesterday and decided not to post...should've gone with that first thought of mine.

[Ashartus]

Originally Posted by mrkajz44

As for the estate tax, I echo those who say getting taxed twice (once when earned and once when inherited) is unfair.

Is that different than any other money transfer though? If I earn money, so long as I keep it I only pay tax on it once. If I go and hire someone to do some work for me, then when I transfer that money to them they pay tax on it. If I use it to buy stuff at a store, they pay tax on it. Why is it any different if I transfer that money to my descendants?

[flamesfever]

Originally Posted by Slava

I think people would fight over money more than they care to admit. Everyone thinks that the splits should be "equal", but as a guy who sits down and talks to people about money all the time, people have different ideas of what that equal figure should be. Throw in some factors like one party worked in the family business more than the other, one party took care of dad/mom when they were sick, one party got bailed out by mom and dad through the years while the other didn't, or one party never visited and the list goes on. Then there are times when frankly parents have children they favor and give them more than the other kids. Sometimes kids who worked in a family business for years end up not getting as much as kids who didn't; it's just plain favoritism and that's tough to accept I think. I haven't personally been in that position, but have seen these scenarios for clients, and it gets nasty very fast.

I think that's why it's extremely important for parents to communicate with their children what will happen with their estate when they die. That way, a certain level of acceptance will have already taken place when the time comes to administer the estate. I still think dividing the estate equally among the children is the safest approach to avoiding problems, regardless of need and all the other things that might make a child think they should get more than the others.

[troutman]

Originally Posted by Erick Estrada

Everyone has the same opportunities in life to build wealth. You can even be a corporate fat cat if you put in the work.

“Superstar lawyers and math whizzes and software entrepreneurs appear at first blush to lie outside ordinary experience. But they don't. They are products of history and community, of opportunity and legacy. Their success is not exceptional or mysterious. It is grounded in a web of advantages and inheritances, some deserved, some not, some earned, some just plain lucky - but all critical to making them who they are. The outlier, in the end, is not an outlier at all.”
― Malcolm Gladwell, Outliers: The Story of Success

“To build a better world we need to replace the patchwork of lucky breaks and arbitrary advantages today that determine success--the fortunate birth dates and the happy accidents of history--with a society that provides opportunities for all.”
― Malcolm Gladwell, Outliers: The Story of Success

[JackJack]

Originally Posted by CorsiHockeyLeague

It should be taxed if imposing the tax will, in addition to increasing the tax base (which is an end in itself), promote behaviours we want in society while discouraging behaviours we don't want. So, if doing this would have the effect that more people would be spending more money rather than hoarding it, that's one reason to tax it. The only good reason not to is that doing so would lead to negative social consequences - for example, it could conceivably lead to MORE hoarding for non-liquid people who are worried about their estate having to be sold off when they die because of a tax bill (which is already an issue).

My parents immigrated here in the 80's with nothing. They worked extremely hard and slaved with a single goal in mind. Creating a better life for their family. They were frugal and diligent with their money, always living within their means. It took years of immeasurable sacrifice on their part, but now they are 'quite comfortable'.

My parents worked hard for their wealth. They had friends who lived the same way. They drove second hand cars, didn't go on expensive trips, no timeshares, no expensive clothes for the kids, eating out was reserved for special occasions, and quality time was tough to come by as they were busy with work. My point is they made tough sacrifices. To suggest the offspring of the wealthy are lazy is ignorant. My sister and I sacrificed a great deal too.

They also had other friends and colleagues around them who didn't.

Fast forward 35 years - retirement and estate planning is fully staring them in the face. I wouldn't agree at all with a 'wealthy tax' or an 'inheritance tax', especially given they did everything 'right' to make their dream come true in Canada.

Why should they be penalized for saving and creating a better future for their family? They sacrificed, lived within their means, made the hard choices to improve the standing of their family and always thought about the future.

Isn't that the type of behavior that should be encouraged, especially when society is continuously in a state of enormous debt?

[CorsiHockeyLeague]

*Insert rebuttal tearjerking anecdote*

If I'm setting tax policy I look at the country on a macro level. I give not the least bit of a f*** whose parents came from where or how rough their kids say they had it.

To wit,

To suggest the offspring of the wealthy are lazy is ignorant. My sister and I sacrificed a great deal too.

I didn't say any such thing. You even quoted and highlighted a post that says nothing of the sort. The reason I didn't say that is because I don't care in the slightest how lazy or hard-working you and your sister are.

[Teh_Bandwagoner]

Originally Posted by MoneyGuy

Nope. If that was true 99% of people would be ****ed.

Is it also true that if you don't use it, you lose it?

[Oil Stain]

Originally Posted by CorsiHockeyLeague

*Insert rebuttal tearjerking anecdote*

If I'm setting tax policy I look at the country on a macro level. I give not the least bit of a f*** whose parents came from where or how rough their kids say they had it.

If we are really interested in being fair, shouldn't we take all of the inheritance tax and send it off to Africa and India where we stole all of our wealth from in the first place?

[bizaro86]

Originally Posted by Phanuthier

Foolishly, I've always assumed that and had somewhat of a target # for when I reach 55... what is the expected $$ expected value to be used in your last year you survive?

In fairness, since I believe you're in the US, I bet the number for middle/upper income folks has the potential to be much higher due to potential for expensive private end-of-life care.

[CorsiHockeyLeague]

I'm not really trying to be fair. Fairness is only a utilitarian goal in so far as it's instrumental. Also, there's an argument that the Canadian tax system should produce Canadian benefit and so should only go overseas to the extent that it benefits us. I'm open to debate about a broader vision though.

[JackJack]

Originally Posted by CorsiHockeyLeague

I didn't say any such thing. You even quoted and highlighted a post that says nothing of the sort. The reason I didn't say that is because I don't care in the slightest how lazy or hard-working you and your sister are.

You're right. I can't remember which post I had read that comment in. My thoughts were all get mushed together. My bad.