Wealth Planning News
Vol. II, No. 8
A Voluntary Tax?
Our last issue pointed out that a tax you can avoid by planning is a voluntary tax if you fail to avoid it.
For many families death taxes are "voluntary" because parents can take actions to avoid the taxes for their descendants.
This issue discusses reasons we fail to plan, with a view to getting you off of your assets and into the office of a competent planner.
Why People Fail To Plan
There is something wrong or unpatriotic in avoiding taxes for my heirs.
You don’t get it. Your politicians thrive on tax dollars they can spend to buy re-election. The growth of government is like a cancer. The best way to stop the cancer is to cut off some of the blood supply. Death taxes serve no social purpose that cannot be better served by your descendants or by other means. Your patriotic duty is to slow the growth of government in order to preserve individual liberties. And saving taxes legally is never wrong.
"Over and over again, the courts have said there is nothing sinister in so arranging one's affairs as to keep taxes as low as possible. Everybody does so, rich and poor, and all do right, for nobody owes any duty to pay more tax than the law demands. Taxes are enforced extractions."
Judge Learned Hand
I will spend my estate down,
or it will fail to grow.
Our experience with clients is the exact opposite. If you have enough to have a taxed estate now, you are very unlikely to spend it down. In fact, it will likely grow. People who save enough to create a taxed estate do not change their saving habits as they age. “A tiger doesn’t change its stripes.” If the chance your estate will grow is better than even, you should plan now to avoid the later taxes. Many techniques cannot be done at the last minute.
I plan to start making larger gifts that
will reduce my estate.
We seldom see your gifting work for many reasons: Failure to make sufficient gifts; not enough gift beneficiaries; beneficiaries too young to receive outright gifts; estate growth that wipes out any reduction from gifts; hesitancy to give up cash from the estate in any meaningful amounts; delays in making gifts.
We have software that compares outright gifting with other planning techniques. Annual outright gifts rarely come close to the savings from other techniques. And planning can also avoid the risks of loss of gifted assets to the folly, creditors, and predators (divorcing spouses) of your loved ones.
In This Issue
A Voluntary Tax?
Why People Fail to Plan
It is Wrong or Unpatriotic
I Will Spend More, No Growth
I Will Make Larger Gifts
Taxes Will Go Down
I Don't Care
Taxes will go down or the
exemption will increase.
In the future the exemption amount that grew to over $5 million may well be worth less than that amount when the current law passed, because of natural inflation. A government spending like a drunken sailor may well increase tax collections by reducing the current exemption.
I don't care enough to go to the trouble
and expense of planning to save
the taxes for any kids and grandkids.
No one admits this statement very often, but it is an acceptable reason for not planning. As a matter of fact you don’t have to care. Nothing short of love requires you to care enough to spend some of your time and hard earned money on planning that will only benefit your kids and grandkids. That is why planning for them is a gift of love.
If the planning decision turns into a cost versus benefit analysis use the following form. Insert the estimated cost of planning, and the estimated savings from the planning. Get these figures from your planning professional. Then check the applicable box that follows.
I choose to:
Save the $_________ cost of planning and let my kids pay an estimated extra $__________ to the IRS.
Pay the $_________ cost of planning and let my kids keep an estimated extra $__________ saved by planning.
Call us for a free consultation on this issue.