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Author: JAFO31 Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 74759  
Subject: Re: Estate / death taxes: was my grandfather foo Date: 4/14/2008 5:55 PM
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not007: "My grandfather recently passed away. He worked hard, lived frugally and wound up dying with an estate we're figuring was about $4 million. He left it to us grandkids. It seems that between state and federal taxes, his estate will be owing $2 million?! (first 2 million is exempt from federal tax, then, what, almost 1/2 to the gov't, and the state doesn't have the higher exemption and because we aren't kids or spouse there's a higher tax rate winding up to add up to something just a little shy of another million?

IS that the way things are? or was he foolish? he didn't like lawyers and their hourly rate / wind up to higher bills so that may be why he never went to one about estate planning. and his accountant may or may not have said anything.

. . .

is the person paying millions in estate taxes the norm or exception?"


First, my condolences on your loss.

Second, you do not mention when you grandmother died, but before she died, your grandparents probably/possibly could have used an A-B trust structure to avoid "losing/not using" her lifetime exemption.

Third, neither you nor anyone else has mentioned GST (Generation Skipping Tax) but bequests from grandfather to grandkids does skip a generation and will trigger questions about potential GST.

Fourth, as to your last question, a person paying millions in estate tax is definitely not the norm. IIRC, only about 2-3% of estates pay estate tax (and not all of those pay millions in estate tax).

Furthermore, most people never have estates sizeable enought to worry about estate tax; of those who do, many(most?) seek advice and plan to minimize or avoid it.

Fifth, IIRC, charitable bequests still pass free of estate tax. One alternative to paying estate taxes would have been to leave the exempt equivalent amount to be divided among the grandkids with the balance/remainder of the estate going to your grandfather's favorite charity or charities.

Sixth, probably not much he could have done about it, but if your grandfather had made it to 2009, the exemption equilavent amount would have been $3.5M (assuming no changes in current law).

Regards, JAFO

Disclaimer

Yes, I am a lawyer (but I have no estate or probate practice), AND THIS IS NOT LEGAL ADVICE; it is only general information. NO CLIENT RELATIONSHIP IS INTENDED TO BE CREATED, NOR IS ANY SUCH RELATIONSHIP SO CREATED. FOR SPECIFIC LEGAL ADVICE YOU SHOULD TALK TO A LAWYER IN YOUR AREA.
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