We’ve all heard about the estate tax, aka the death tax, which is a tax that the federal government levies when assets are transferred from a deceased person to someone else. So how does the super-rich work within the law to protect their family assets?
To be clear, the U.S. tax code is written so if the assets are transferred to a spouse or a charitable organization there is no tax. Also, there are credits against the tax that ensure assets up to $2 million dollars that are transferred to children, as an example, are not taxed.
Where the problems start happening is in places like southern California, or other areas of the country which have high property values. Once more than $2 million of assets are transferred, which can be very easy to reach if you are inheriting a home and a small business, the federal government wants a cut of the transfer.
This is immoral; the income made to purchase these investments has already been taxed. To keep it simple, for every dollar over the $2 million credit, the government wants 45 percent.
If you inherited $3 million in assets–not just cash–would you be able to fork over almost $500,000 in cash? Probably not. You’ll have to sell assets or take out mortgages to keep from going to jail.
I used the $2 million credit that is available in 2008, but that credit goes up to $3.5 million in 2009. Will that limit continue to go up? Who knows; this tax break is set to sunset in 2010 and go back to the $1 million level. Using my example above you’d owe not $500,00 in taxes, but almost $1 million.
Of course, there are ways to get around the system so your assets can be transferred with very little tax burden. As a matter of fact, the Kennedy clan does quite a good job of keeping their money and continuing to demand that the rich are not paying their fair share. These hypocrites keep most of their inheritance by moving assets into trusts funds and only paid $135,000 in tax on assets of more than $300 million.
Hat tip to HotAir and Michelle Malkin – check out his reaction. He thinks they pay their fair share. Heck, I pay more than my fair share, how about you? Kudos to Young America’s Foundation who had the guts to go and ask the question the main stream media won’t.