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1 Buck  Wed, Dec 15, 2010 12:33:55pm

In Canada we don’t have an estate tax.
However a large amount of a persons assets should be in a tax sheltered account.
During his or her life, they should have contributed into a tax deferred account as much as they wanted to save for retirement. Then during retirement, they withdraw a little at a time, and only pay the tax on the money they withdraw, hopefully at a lower tax rate than when they earned it originally.

Now when that person dies, and the money is transferred to the estate the entire amount is immediately called income for the estate and taxed. So if the deceased had $500,000 in the account, the estate would pay tax (about 45%) on that amount, and anything left could be distributed. Remember no one paid tax on that money yet. It was contributed tax free.

The only way around it is if the account is shared. Then the survivor (spouse?) can continue to withdraw and pay tax only on what they take out.

Just thought I would share.

2 Bob Dillon  Wed, Dec 15, 2010 1:50:53pm

Not well thought out. The author is not aware of or does not understand how large and influential the insurance lobby is in DC. While tax reform would be good - most of the “suggestions” don’t have a snowballs chance in hell.

3 samuraishake  Wed, Dec 15, 2010 5:56:42pm

Another unintended consequence of eliminating the estate tax - charities.

I work with several in the area, and the finance directors noticed a steep drop in estate donations the moment the estate tax was eliminated (money donated to a charity upon death is not counted in the taxable estate). It turns out super-wealthy folks don’t really like to give to charities unless they have to - even when they’re dead.

Now most of the non-profits are in a budget crunch, aside from the other economic turmoil.

4 Bob Dillon  Wed, Dec 15, 2010 6:16:22pm

re: #3 samuraishake

“It turns out super-wealthy folks don’t really like to give to charities unless they have to - even when they’re dead.”

I find it a matter of education. Explaining that every estate has three beneficiaries, heirs, charity and the IRS. With careful planning they get to pick two - tends to get their attention.

Then, showing IRS safe harbored strategies that are properly implemented and the planned giving increases while heirs are happy with the outcome - in my experience anyway.


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