Pass­ing down a large for­tune gets eas­ier

Star-Telegram (Sunday) - - Business - BY JEFF STEIN Wash­ing­ton Post

The teams had to be big, be­cause the work was so com­pli­cated. A sin­gle ag­ing rich per­son would of­ten hire more than a dozen peo­ple – ac­coun­tants, es­tate ad­min­is­tra­tors, in­sur­ance agents, bank at­tor­neys, fi­nan­cial plan­ners, stock­bro­kers – to make sure they paid as lit­tle as pos­si­ble in taxes when they died.

But David Klas­ing, an es­tate tax at­tor­ney in Or­ange County, Cal­i­for­nia, said he’s seen a sharp drop in these kinds of cases. The steady ero­sion of the fed­eral es­tate tax, shrunk again by the Repub­li­can tax law last fall, has dra­mat­i­cally re­duced the num­ber of Amer­i­cans who have to worry about the es­tate tax – as well as work for those who get paid to worry about it for them, Klas­ing said.

In 2002, about 100,000 Amer­i­cans filed es­tate tax re­turns to the In­ter­nal Rev­enue Ser­vice, ac­cord­ing to the IRS. In 2018, only 5,000 tax­pay­ers are ex­pected to file these re­turns, ac­cord­ing to pro­jec­tions by the Amer­i­can Col­lege of Trust and Es­tate Coun­sel, an or­ga­ni­za­tion of es­tate at­tor­neys, based on IRS data.

“You had al­most every sin­gle tax pro­fes­sional try­ing to grab as much of that pot as they could,” Klas­ing said. “Now al­most ev­ery­body has had to find other work.”

A se­ries of changes to fed­eral law over two decades means that Amer­i­cans need to be richer than ever to be hit by the es­tate tax, and there­fore need fewer gim­micks than ever to avoid it, tax ex­perts and at­tor­neys say. That also means the gov­ern­ment is bring­ing in less money from the rich when they die.

Be­fore last year’s GOP tax law, an in­di­vid­ual could pass on up to $5.45 mil­lion with­out pay­ing the es­tate tax, which would then take a cut of up to 40 per­cent from wealth above that thresh­old. The law dou­bled that min­i­mum, ex­empt­ing all es­tates worth less than $11.2 mil­lion. Cou­ples fil­ing jointly can now pass on more than $22.4 mil­lion be­fore the tax sets in.

To con­ser­va­tives, this was a needed roll­back of a “death tax” that takes a sec­ond fed­eral bite out of wealth that was typ­i­cally al­ready taxed at the time it was ac­quired. To lib­er­als, it will ex­ac­er­bate in­equal­ity by al­low­ing wealthy in­di­vid­u­als to pass on vast for­tunes to de­scen­dants.

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