# Estate (aka 'Death') tax **URL:** \ **Category:** Great Debates\ **Created:** [July 14, 2000, 11:12pm UTC](https://boards.straightdope.com/t/estate-aka-death-tax/25619 "2000-07-14T23:12:06Z")\ **Posts on this page:** 6\ **Page:** 4
**Author:** ![tracer](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/tracer/32/20578_2.png) [@tracer](https://boards.straightdope.com/u/tracer)\ **Post date:** [July 25, 2000, 9:18pm UTC](https://boards.straightdope.com/t/estate-aka-death-tax/25619/61 "2000-07-25T21:18:23Z")
SouthernStyle wrote: > [@](#): > > If I’ve got a net worth of 4 million, I’d like to think that in the next seven years I’d be able to invest it well enough for it to _earn_ enough to more than offset whan the gift loop-hole will so-called “shield”. You are assuming that the recipients of your gifts will not _also_ invest them just as well as you would’ve if you’d kept them. And besides, most of the tax-reduction achieved by giving gifts instead of leaving an estate is accomplished in that final BIG gift you make to your heirs just before you die, not in the little $10,000 gifts you give to them each year beforehand. But I know what you’re thinkin’. “What if I die unexpectedly, before I had a chance to give my stuff to my kiddies?” Well, one way around this is to put your assets into a revocable living trust, with your kids as beneficiaries, and add a clause in the trust that makes it irrevocable _one minute_ before you die. Then it counts as a gift made during your lifetime, rather than an estate transferred after you die. … Well, okay, this strategy _used to_ work, but the tax courts may have closed this loophole. ---
**Author:** ![RickG](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/rickg/32/5174_2.png) [@RickG](https://boards.straightdope.com/u/RickG)\ **Post date:** [July 25, 2000, 9:22pm UTC](https://boards.straightdope.com/t/estate-aka-death-tax/25619/62 "2000-07-25T21:22:38Z")
> [@](#): > > \*Originally posted by CurtC \* > \*\* > It seems like your reply doesn’t relate to what I was saying. 2sense thought so too. pldennison had the impression that unrealized capital gains could be passed on to the heirs without ever having income tax paid on them, and therefore the estate tax is the only tax that would be ever be collected on Bill Gates’ wealth. > > _If_ the estate tax is the only tax that would be collected, then a couple with a net worth of less than 1.3 M$ could pass on all their appreciated stock to their heirs, without the IRS ever collecting a penny on the appreciation. I find this hard to believe. > \*\* It’s called “stepped up basis”. When an individual dies, the cost basis of capital assets is reset to the value on the date of death. So, only changes in value after death are subject to capital gains (or loss–if a stock you inherit drops in value after the death of the person willed it to you, and you sell it, you could take a loss against other gains or against regular income). Note that this only applies to assets that would normally be subject to capital gains tax, not to tax-deferred retirement plans (like IRAs and 401(k)s). I know about this after long discussions with my mother-in-law (an accountant) about the hassles of dealing with her mother’s estate. On retirement accounts, see this Nolo Press Q&A: [http://www.nolo.com/auntie/question\_645.html](http://www.nolo.com/auntie/question_645.html) The upshot appears to be that the retirement accounts count against the estate _and_ the income is taxed when the beneficiary withdraws the money, but there is some offsetting deduction for the estate taxes that were paid. Rick ---
**Author:** ![tracer](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/tracer/32/20578_2.png) [@tracer](https://boards.straightdope.com/u/tracer)\ **Post date:** [July 25, 2000, 10:00pm UTC](https://boards.straightdope.com/t/estate-aka-death-tax/25619/63 "2000-07-25T22:00:56Z")
What line in form 1040 is this offsetting deduction on? Can I take it against any taxed estate I’ve inherited, or can I only take it against IRAs/401(k)s I’ve inherited? ---
**Author:** ![CurtC](https://avatars.discourse-cdn.com/v4/letter/c/ce73a5/32.png) [@CurtC](https://boards.straightdope.com/u/CurtC)\ **Post date:** [July 26, 2000, 3:37am UTC](https://boards.straightdope.com/t/estate-aka-death-tax/25619/64 "2000-07-26T03:37:52Z")
**Daniel** wrote: > [@](#): > > RIA says that with the kind of estate planning you can “do it yourself”, you can easily exempt up to about 1.3\>1.5 M, and with good planning (read, “pay a CPA and Lawyer a grand + or so each”), exempt up to about 4\>5 M. Then **tracer** clarified: > [@](#): > > You can’t shelter it ompletely, but if you have a lot of heirs, and you’re willing to give up some of your estate to them before you die, you can reduce the tax by making gifts to your heirs. Thanks for the info, tracer. Trouble is, my wife and I are saving our money for _us_. We’ve been married 17 years, and have a three-year-old and another on the way. We’ve been saving every extra cent since we married (when we were 22), forgoing things that others would have splurged on. We’ve managed to save up a nice nest egg, and I prefer to spend it all during our retirement (if we had more than we could spend ourselves, we would retire now). But we’ve already paid taxes on our savings (except some capital gains that have not yet been taxed), and it really bothers me that if we were both to die, Uncle Sam would get a nice little windfall. I would want the money to go to people in our families, including enough to raise our kids. Giving our money away to others is not an option at this point. And the IRS has already claimed a very significant portion of our wealth - it makes me mad to think that they would get more if we died. ---
**Author:** ![Danielinthewolvesden](https://avatars.discourse-cdn.com/v4/letter/d/ce7236/32.png) [@Danielinthewolvesden](https://boards.straightdope.com/u/Danielinthewolvesden)\ **Post date:** [July 26, 2000, 10:12am UTC](https://boards.straightdope.com/t/estate-aka-death-tax/25619/65 "2000-07-26T10:12:04Z")
Curt: Some rough figures, please. I could possibly point you in the right direction. Do you have a taxexpert/CPA? ---
**Author:** ![SouthernStyle](https://avatars.discourse-cdn.com/v4/letter/s/b3f665/32.png) [@SouthernStyle](https://boards.straightdope.com/u/SouthernStyle)\ **Post date:** [July 26, 2000, 12:18pm UTC](https://boards.straightdope.com/t/estate-aka-death-tax/25619/66 "2000-07-26T12:18:08Z")
> [@](#): > > SouthernStyle wrote: > > If I’ve got a net worth of 4 million, I’d like to think that in the next seven years I’d be able to invest it well enough for it to earn enough to more than offset whan the gift loop-hole will so-called “shield”. > > > [@](#): > > > > **tracer** replied: > > You are assuming that the recipients of your gifts will not also invest them just as well as you would’ve if you’d kept them. Not true. [Previous page](https://boards.straightdope.com/t/estate-aka-death-tax/25619.md?page=3)