ES­TATE TAX

Palm Beach Daily News - - TO­DAY -

Few Amer­i­cans pay the es­tate tax — im­posed at a rate of 40 per­cent — be­cause few man­age to ac­cu­mu­late mil­lions. Those who are wealthy enough to worry about the es­tate tax of­ten hire teams of ac­coun­tants and es­tate-plan­ning at­tor­neys to cre­ate trusts, buy life in­sur­ance poli­cies and em­ploy other strate­gies to min­i­mize the bill.

“It’s an op­tional tax,” said Ti­mothy Speiss, a tax part­ner at Eis­nerAm­per, a firm with of­fices in Mi­ami and Fort Laud­erdale. “If you’re re­ally hy­per-fo­cused on this, there are lots of tech­niques — per­fectly le­gal — that you can use to move as­sets to the next gen­er­a­tion dur­ing your life­time.”

Richard Ram­pell, a CPA in Palm Beach, said one of his clients has a $150 mil­lion for­tune. With no tax plan­ning, the client’s heirs would lose 40 per­cent — or $60 mil­lion — to the es­tate tax. By em­ploy­ing a va­ri­ety of tax tac­tics, Ram­pell whit­tled the tax bill down to $20 mil­lion.

Ram­pell said his client has is­sued a stand­ing or­der to re­duce the es­tate tax bill to zero — an an­tipa­thy to­ward the death tax that’s com­mon among wealthy tax­pay­ers.

“They don’t like it,” Ram­pell said. “They feel like they’ve worked re­ally hard, and they want to keep it in the fam­ily.”

Ram­pell ac­knowl­edges mixed feel­ings about the es­tate tax.

“It’s a hard ques­tion whether you think this is good for so­ci­ety,” Ram­pell said. “As a rev­enue raiser, it does not raise a lot of rev­enue. But should there be aris­to­cratic fam­i­lies that are able to hand down their wealth from gen­er­a­tion to gen­er­a­tion?”

War­ren Buf­fett, one of the world’s rich­est men, calls Trump’s pro­posal to end the es­tate tax a “ter­ri­ble mis­take,” and he has seized on the aris­toc­racy ar­gu­ment.

“I sure don’t think it’s good for so­ci­ety, where there’s a ton of in­equal­ity to start with,” Buf­fett said dur­ing an in­ter­view with CNBC on Tues­day. “The wealthy are so much wealth­ier now than they were 25 years ago. We’re talk­ing about the 400 (rich­est) now hav­ing $2.4 tril­lion against $90 bil­lion — 25 times as much money.”

The es­tate tax last came un­der at­tack when Ge­orge W. Bush was pres­i­dent. In 2001, the amount of es­tates sub­ject to tax was just $650,000. How­ever, that limit rose sharply un­der Bush’s tax cuts. In 2010, dur­ing a one-year hia­tus, the es­tate tax didn’t ex­ist at all.

The es­tate tax gen­er­ates an es­ti­mated $20 bil­lion a year, and op­po­nents say it serves as a dis­in­cen­tive to ac­cu­mu­lat­ing wealth. How­ever, in­de­pen­dent ob­servers dis­pute that no­tion.

“It’s pos­si­ble some peo­ple work a lit­tle less hard,” said Rober­ton Wil­liams, an an­a­lyst at the Tax Policy In­sti­tute. “But there’s no strong ev­i­dence that hav­ing the es­tate tax re­tards eco­nomic ac­tiv­ity.”

Democrats al­ready have seized on end­ing the es­tate tax as a boon to Trump’s chil­dren. If the pres­i­dent were to leave an es­tate worth $1 bil­lion to his heirs, they’d owe $400 mil­lion in es­tate taxes un­der cur­rent tax policy.

Even be­fore Congress votes on Trump’s tax pro­posal, the pres­i­dent has moved to take the bite out of the es­tate tax. Trea­sury Sec­re­tary Steven Mnuchin said Wed­nes­day that he was re­vers­ing Obama-era rules that would have boosted es­tate taxes on fam­ily-owned busi­nesses.

Char­i­ties fret that the end of the es­tate tax would re­move a pow­er­ful in­cen­tive for wealthy donors. Phi­lan­thropists of­ten time ma­jor con­tri­bu­tions to co­in­cide with their deaths, a move that eases fears of out­liv­ing their money. As an ad­di­tional in­cen­tive, do­na­tions aren’t sub­ject to the es­tate tax, es­sen­tially cre­at­ing a 40 per­cent dis­count on large gifts.

Palm Beach County fundrais­ers de­clined to com­ment on Trump’s pro­posal, but tax ex­perts say end­ing the es­tate tax could force char­i­ties to work harder for do­na­tions.

“With no tax ben­e­fit,” Speiss said, “you’ll truly have to be re­liant upon benev­o­lence.”

If the pres­i­dent were to leave an es­tate worth $1 bil­lion to his heirs, they’d owe $400 mil­lion in es­tate taxes un­der cur­rent tax policy.

Buf­fett

Ram­pell

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