Need help for LTTE re "death tax." DU tax experts, please help!

[CTyankee]

I do understand that the death tax is suspended for 2010, but due to be reinstated for 2011 and going forward (unless Congress takes some action).

I do understand that at present, if it goes back into effect, it will have a $3.5 million exemption for the deceased and his/her spouse, so an estate is only subject to a tax if the estate is worth MORE than $3.5 million.

What is the percentage of people in the US that would be subject to the "death tax" if it is re-imposed?

Is it true that an estate tax has been imposed (or maintained) every time our country has gone to war, until GW Bush's administration?

What are ways that the rich "get around" an estate tax?

The reason I ask is that Linda McMahon has a full page ad in the New Haven REgister today and, among other things, vows to prevent a "death tax" being imposed. It's appalling that the pukes are still using the term (but the repukes ARE appalling, so what else is new?).

[Toots]

1. Something has to pay for all those "Death Panels"

:shrug:

[pinboy3niner]

2. There's some good info on this at factcheck...

Excerpt from a factcheck article (one of several on the subject):

‘Death Tax’: Only on Multimillion-Dollar Estates

The message is also misleading in what it says about the temporary repeal of the federal estate tax — which Republicans like to call the "death tax." Under terms in the Bush tax cuts, the estate tax was phased down over several years and eliminated entirely for those who die in 2010, but it’s set to return in 2011 at levels that prevailed before 2001. So just as the message says, for those dying after Jan. 1 next year, estates of more that $1 million would be subject to taxation at rates as high as 55 percent on amounts over that threshold. But that will happen only if Congress fails to act, and there’s little sentiment in Congress, even among Democrats, for allowing that to happen.

In fact, last December the House passed a bill that would have permanently exempted estates of up to $3.5 million from taxation (effectively, $7 million for couples). The top rate would have been 45 percent. All 225 House members who voted for that were Democrats; Republicans opposed the measure because it would have frozen the estate tax at the 2009 level called for in Bush’s phase-down, and would have canceled Bush’s one-year repeal in 2010.
<snip>

So Congress has yet to agree on whether to bring back the estate tax only for estates worth more than $3.5 million, or only for those over $5 million. Few if any voice support for bringing it back for estates of more than $1 million. That could happen if the deadlock on this issue continues (again, always a possibility). But majorities in the House and Senate have voted to impose the so-called "death tax" only on multimillionaires.

http://www.factcheck.org/2010/09/2011-tax-increases/

[rfranklin]

3. Using the term "death tax" is a propaganda technique...

One reason why an estate tax is necessary is to prevent the hereditary royalty that plagued societies through the ages. Ridding themselves of such hereditary governments was the reason that George Washington declined to become "king" of the new United States of America.

The only reason people like McMahon harp on this is because their estates will be taxed.

The simplest thing would be to tax estates as income to the heirs which it is.

[Statistical]

4. The exemption (unless changed by Congress) is $1 mil not $3.5 mil.

"Is it true that an estate tax has been imposed (or maintained) every time our country has gone to war, until GW Bush's administration? "
The estate tax has been in existence for every year since 1942 (w/ the single exemption of 2010). It's enactment or collection has nothing to do w/ wars.

"What is the percentage of people in the US that would be subject to the "death tax" if it is re-imposed?"
Not sure the % but remember first $1 mil is exempt. So if you die and your estate is worth $200K = $0 in taxes. $800K = $0 in taxes. $1.1 million = only the "last" $100K is taxed.

Also the tax rate is graduated.

For amounts not greater than $10,000, the tax liability is 18% of the amount.
For amounts over $10,000 but not over $20,000, the tentative tax is $1,800 plus 20% of the excess over $10,000.
For amounts over $20,000 but not over $40,000, the tentative tax is $3,800 plus 22% of the excess over $20,000.
For amounts over $40,000 but not over $60,000, the tentative tax is $8,200 plus 24% of the excess over $40,000.
For amounts over $60,000 but not over $80,000, the tentative tax is $13,000 plus 26% of the excess over $60,000.
For amounts over $80,000 but not over $100,000, the tentative tax is $18,200 plus 28% of the excess over $80,000.
For amounts over $100,000 but not over $150,000, the tentative tax is $23,800 plus 30% of the excess over $100,000.
For amounts over $150,000 but not over $250,000, the tentative tax is $38,800 plus 32% of the excess over $150,000.
For amounts over $250,000 but not over $500,000, the tentative tax is $70,800 plus 34% of the excess over $250,000.
For amounts over $500,000 but not over $750,000, the tentative tax is $155,800 plus 37% of the excess over $500,000.
For amounts over $750,000 but not over $1,000,000, the tentative tax is $248,300 plus 39% of the excess over $750,000.
For amounts over $1,000,000 but not over $1,250,000, the tentative tax is $345,800 plus 41% of the excess over $1,000,000.
For amounts over $1,250,000 but not over $1,500,000, the tentative tax is $448,300 plus 43% of the excess over $1,250,000.
For amounts over $1,500,000 but not over $2,000,000, the tentative tax is $555,800 plus 45% of the excess over $1,500,000.
For amounts over $2,000,000 but not over $2,500,000, the tentative tax is $780,800 plus 49% of the excess over $2,000,000.
For amounts over $2,500,000 but not over $3,000,000, the tentative tax is $1,025,800 plus 53% of the excess over $2,500,000.
For amounts over $3,000,000, the tentative tax is $1,290,800 plus 55% of the excess over $3,000,000.

Remember the "amount" is AFTER the $1 mil exemption.

So someone with an estate of $2 mil would have $1 mil taxed and the taxes owed would be $248,300 for a total tax rate of ~12%.

http://en.wikipedia.org/wiki/Estate_tax_in_the_United_States

"What are ways that the rich "get around" an estate tax?"
Not really which is why the rich hate it. Personally I would prefer a higher rate but offset by a higher exempt amount. Say first $5 million exempt then after that the rate is 25% - 70% (progressively graduated).

Some things aren't taxed. Life insurance for an example isn't part of the estate. It is paid directly to beneficiary thus isn't part of death tax. Pensions w/ survivor benefit are same thing as are 401K/IRA (if beneficiary is named).

[CTyankee]

7. Is it $1 million WITHOUT a spousal exemption? nt

[Statistical]

8. Yes spousal exemption is different and not exactly an exemption but more a deferment.

Say I have $1 bil and I die w/ no spouse = $x in taxes. Instead If die married and have $1bil I can transfer a portion of that to my spouse tax free however my spouse will also eventually die and the money will be taxed then. The goal of inheritence tax was to reduce/retard generational wealth transfer. A transfer to spouse is more a "sideways" transfer.

The only situation where spousal exemption would truly be an exemption (i.e. no taxes ever paid instead of just deferred until spouse's death) would be some creepy marriage chain. Something like: Person a marries person B. Person A dies. Wealth transfered to person B via exemption. Before death Person B marries person C. When B dies wealth transfer to C. Before C dies he/she marries per D, etc.

Given that isn't a realistic risk the spousal exemption is simply a red herring. Unless your spouse lives forever or create a perpetual marriage the spousal "exemption" is merely deferring the taxes for the 10 or 20 years till the spouse also dies.

[ret5hd]

5. How the rich do it:

here is one way: intentionally defective trust
http://www.mmsonline.com/articles/mr-courage-leads-the-way

he writes monthly articles detailing strategies for tax avoidance, mostly applicable to small business.

[BadgerKid]

6. Family limited partnerships?

http://articles.moneycentral.msn.com/Taxes/TaxShelter/ProtectYourFamilyWithPartnership.aspx

EDIT:
"That means that the parents can transfer up to $11.67 million in assets structured as limited partnership interests without paying any federal transfer taxes. (60% of $11.67 million is the $7 million credit exclusion for 2009.) That's $4.67 million more than they could without the limited partnership.

The IRS argues that this is unfair to those who are unaware of the law or who can't afford high-priced attorneys to draft partnership agreements for them. And anyone who's married and has an estate of less than $7 million in 2009 can, if his will is appropriately structured, pay no federal gift or estate taxes. The FLIP is a real tax benefit only if your estate is $7 million or more."