Retired plastic surgeon

[dennis]

Most of the advisors I've talked to feel the estate tax exemption is going to be significantly reduced to try to help pay for all the spending. Of course that can change many times in the next 20 yrs.

[artemis]

Welcome! Glad to have a new voice here. With your perspective, you have a lot to offer here.

[Lithium]

The current exemption is scheduled to sunset at the end of 2025. I wouldn’t bet on it being extended.

[FIREshrink]

The current exemption is scheduled to sunset at the end of 2025. I wouldn’t bet on it being extended.

We have a midterm and presidential election between now and then. Too early to say much of anything.

[Lithium]

We have a midterm and presidential election between now and then. Too early to say much of anything.

Oh sure. But we make a lot of decisions (traditional vs. Roth, how much is it worth it work, etc) based in part on our best guesses of future taxation, and I’m not sure that everyone realizes that the default outcome of congressional inaction/gridlock is NOT for the estate exemption to stay where it is.

[Hatton]

OP welcome to the forum. As others have commented it does skew young. I am almost 64 and have been retired for 2 years. I hope you will stick around and add to the conversation. In my view having people comment who have actually gone through the process of deciding I have enough and pulling the retirement trigger is very useful.

[jfoxcpacfp]

Most of the advisors I've talked to feel the estate tax exemption is going to be significantly reduced to try to help pay for all the spending. Of course that can change many times in the next 20 yrs.

I recommend you NEVER allow any advisor’s “feelings” to influence you one way or another. Ever. Although it may appear to lend a whiff of credibility to their judgment, we know exactly as much about the future as you and all of the other participants on this forum. Personally, I try to avoid giving any advice about the future other than referring to the history that we know. There is just so much we don’t know and we don’t know what we don’t know...but, truthfully, it can be a heady - and dangerous - sensation to be asked this opinion by a doctor or other highly-paid professional.

[SLC OB]

Estate tax exemption is currently $23.4 million for a married couple so hardly impoverishing his heirs.

welcome.

FIREshrink Questions about this (not that we are even close to this number).... is this if the married couple dies together? (Accident, etc.) If you are widowed and you die 2 years later, is it now half that? Just curious.

[jfoxcpacfp]

FIREshrink Questions about this (not that we are even close to this number).... is this if the married couple dies together? (Accident, etc.) If you are widowed and you die 2 years later, is it now half that? Just curious.

It is 1/2 allotted to each person. The surviving spouse (SS) receives an unlimited exemption (no tax on the amount inherited, regardless how much). However, at the 2nd spouse’s death, a trap awaits. If $5M was in the 1st to die’s name and $15M in the 2nd to die’s name, that leaves the surviving spouse with an estate tax problem, even assuming no growth. Think another 20 years of growth, though, and the 2nd to die could owe substantial estate taxes (starting at 40% and with an additional amount in some states).

This is why the concept of “portability” (which became permanent in 2013) is so very significant. The SS can file an estate tax return to claim portability, which passes the 1st to die’s unused exemption to him/her. In our above example, that would give our SS $11.7 + $6.7 = $18.4M of exemption at death, which will be indexed for inflation.

An important point to remember, though, is that the SS MUST file a Form 706, Estate Tax Return, in order to claim portability. In the past, the estate was required to file only if over the limit and it would owe tax. It is an expensive and unwieldy return to complete and there used to be no reason to do so unless the estate had a potential liability, extremely rare today. I’m afraid many SS’s continue to skip filing and neglecting this very important benefit. As a result, I always recommend that clients include language in their LW&T’s to the effect that the estate is required to file a final tax return in order to claim portability if it will apply (even if it pi$$e$ off the E&T attorney😆).

I will be filing one for my late spouse’s estate. The last one I filed was when my grandfather passed in 2004 and the exemption was $600k. And I did it by hand - was a great learning experience. This one will be interesting - we have counted 37 pieces of real estate to date, in addition to partnerships, corporations, and SMLLC’s. It is due 9 mos after DOD and I’m sure we’ll need an extension.

[SLC OB]

It is 1/2 allotted to each person. The surviving spouse (SS) receives an unlimited exemption (no tax on the amount inherited, regardless how much). However, at the 2nd spouse’s death, a trap awaits. If $5M was in the 1st to die’s name and $15M in the 2nd to die’s name, that leaves the surviving spouse with an estate tax problem, even assuming no growth. Think another 20 years of growth, though, and the 2nd to die could owe substantial estate taxes (starting at 40% and with an additional amount in some states).

This is why the concept of “portability” (which became permanent in 2013) is so very significant. The SS can file an estate tax return to claim portability, which passes the 1st to die’s unused exemption to him/her. In our above example, that would give our SS $11.7 + $6.7 = $18.4M of exemption at death, which will be indexed for inflation.

An important point to remember, though, is that the SS MUST file a Form 706, Estate Tax Return, in order to claim portability. In the past, the estate was required to file only if over the limit and it would owe tax. It is an expensive and unwieldy return to complete and there used to be no reason to do so unless the estate had a potential liability, extremely rare today. I’m afraid many SS’s continue to skip filing and neglecting this very important benefit. As a result, I always recommend that clients include language in their LW&T’s to the effect that the estate is required to file a final tax return in order to claim portability if it will apply (even if it pi$$e$ off the E&T attorney😆).

I will be filing one for my late spouse’s estate. The last one I filed was when my grandfather passed in 2004 and the exemption was $600k. And I did it by hand - was a great learning experience. This one will be interesting - we have counted 37 pieces of real estate to date, in addition to partnerships, corporations, and SMLLC’s. It is due 9 mos after DOD and I’m sure we’ll need an extension.

Wow, thank you. So I am assuming from your personal examples that you file this 706 only once. If you miss the window, can you go back and file? (Thinking of a family I grew up with, Dad died a few years back and he was an orthopedic surgeon, wondering if the SS filed this form... I remember her being stunned, shocked, uninformed, in the dark about all of their finances, finding out about Almond orchard they owned after he died of cancer.... so they had about a year to talk about this stuff.)

Appreciate the thorough information here... so good to know! My hubbie turns 50 this year and I am not that far behind him... if one of us dies soon, the total estate is getting close to the $11M mark (especially with the $1M life insurance). Would be horrible to have the SS live another 30 years and not have that exemption as the estate would likely grow so much more by then! Appreciate you jfoxcpacfp

[jfoxcpacfp]

Wow, thank you. So I am assuming from your personal examples that you file this 706 only once. If you miss the window, can you go back and file? (Thinking of a family I grew up with, Dad died a few years back and he was an orthopedic surgeon, wondering if the SS filed this form... I remember her being stunned, shocked, uninformed, in the dark about all of their finances, finding out about Almond orchard they owned after he died of cancer.... so they had about a year to talk about this stuff.)

Appreciate the thorough information here... so good to know! My hubbie turns 50 this year and I am not that far behind him... if one of us dies soon, the total estate is getting close to the $11M mark (especially with the $1M life insurance). Would be horrible to have the SS live another 30 years and not have that exemption as the estate would likely grow so much more by then! Appreciate you jfoxcpacfp

Awww, thank you for the kind words!

Yes, you file 706 only once. Don’t know enough about that family’s situation but that’s horrible she was unprepared to handle the finances. Estate tax returns can be filed late and there is a 5%/mo penalty on tax owed for each month filed late. You can show reasonable cause and have the penalty forgiven, though. And I don’t know if any penalty applies if there is no tax due and the return is filed merely to claim portability, certainly wouldn’t hurt to check, though.

spiritrider may be of more help...

[Auric goldfinger]

I’ve learned never to bet on predicted tax policy changes. You will be wrong 100% of the time. The closer the Dems were about to achieve a “blue wave,” the more queries I got concerning estate modifications and irrevocable trust options to lock in the $11m /pp. Certainly changes in the estate tax will happen, even sundown the $11+ in 2025. It’s a bit like a video game.
As a previous poster alluded to, too much inheritance is an evil