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Inheritance question

With economic deficits rising, I heard this presidential administration is looking at taxing inheritances at a ridiculous rate (like 50%-80%).

Any strategies you know of that can avoid this tax, if it indeed goes into effect anytime in the future? Like if you bleed your inheritance to your children at a certain age (like 70)? Move it into a specific type of account?

Answer Question
 
SlightlyPerfect

Asked by SlightlyPerfect at 7:53 AM on Jan. 4, 2011 in Money & Work

Level 10 (473 Credits)
Answers (11)
  • A financial planner is the best way to go; people put property in their children's names, set up trust accounts, I believe there are even options with IRA-type accounts.
    Scuba

    Answer by Scuba at 7:58 AM on Jan. 4, 2011

  • Give all your stuff you want your kids to have before you die. Is the only way to do it. What ever it is. If it is a house. Put it in your childs name(sell it to them) and stay in it tell you die.
    louise2

    Answer by louise2 at 8:00 AM on Jan. 4, 2011

  • The money can be set up as a trust, that way the person has control of the money during their life, but it passes tax-free to children or spouse at death. Give the children everything while you're alive and they spend it and then you need it for medical (even to help them or grandchildren). Not a very smart idea. Plus you can only gift a small amount each year without that person incurring a tax. Best to find out the specifics of your state from a financial planner. It doesn't cost anything for a first appointment to discuss the situation.
    SweetLuci

    Answer by SweetLuci at 8:12 AM on Jan. 4, 2011

  • Thanks, ladies. This is for my dad, and he keeps running into advisers who are 30-year-old DINKs (double income, no kids), so they keep telling him to give the kids nothing. My dad has a significant portfolio as well, which will become ours (mine and my brother's) upon his and my mom's death. He's only 56, though, so he's starting now, and I am trying to help as much as I can.

    But regarding trusts, which kind would my dad want to set up? How many? I assume there's a cap on them, right?

    He has property, too, but I believe it's more cash/equities/bonds/etc.

    Thanks so much for any advice.
    SlightlyPerfect

    Comment by SlightlyPerfect (original poster) at 8:17 AM on Jan. 4, 2011

  • How about a tax attorney? (I know what you're talking about with financial advisers, that's why we don't have one! LOL) I know that there is a cap on "gifts" (if your father were to turn properties or assets over to you) as well as on trusts - the tax law is so stinkin complicated, it really takes a pro to figure out the best way to go. As an aside, how incredibly sad is it that people have to worry about this, you know?
    Scuba

    Answer by Scuba at 8:46 AM on Jan. 4, 2011

  • I never thought of using a tax attorney before. Great idea!
    SlightlyPerfect

    Comment by SlightlyPerfect (original poster) at 8:50 AM on Jan. 4, 2011

  • Plus you can only gift a small amount each year without that person incurring a tax.

    You can give up to 13000 per person you are gifting to without having to pay the gift tax. A married couple can give up to 26,000k together to anyone they choose without paying the gift tax. The gift tax is paid by the person giving the money not the person recieving the gift.
    Anonymous

    Answer by Anonymous at 9:01 AM on Jan. 4, 2011

  • All of my MIL's assests are owned jointly with her kids, mainly to prevent squabbles when she's gone, but I think it would work in this situation. My grandfather set up multiple savings accounts before he passed away - with his name and the name of one of his children or grandchildren, that was his way of trying to make sure everyone got what he wanted them to.
    scout_mom

    Answer by scout_mom at 9:03 AM on Jan. 4, 2011

  • My in-laws set up savings accounts for each grandchild and when the second one died the lawyer dumped all the money into the main account and divided it amoung the children, not the grandchildren. We got to sort it back out later. If your lawyer is a moron, these things can still get screwed up. Open communication is key.
    LoveMyDog

    Answer by LoveMyDog at 11:16 AM on Jan. 4, 2011

  • First of all, you only have to worry if your assets are over 2 million dollars. If they are, then you can set up trusts, do annual gifting,etc.
    rkoloms

    Answer by rkoloms at 11:46 PM on Jan. 4, 2011

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