A good year to die

All those of you who have large accumulations of wealth can die this year.  Well, what I mean is if you do happen to die, there won’t be any federal estate tax liability.  That is right, no “death tax” at all.

As part of the 2001 tax act, Congress increased the amount persons were permitted to give away tax-free at death (the “Exemption Amount”), with the increases phased in over a ten year period. The Exemption Amount increased over the years, reaching $3,500,000 in 2009 and ultimately became unlimited this year. However, because the votes of 60 Senators could not be obtained back in 2001, the tax law changes were limited to a duration of 10 years, meaning that in 2011, the estate tax will be reinstated with an Exemption Amount of only $1,000,000 and a rate of tax equal to 55%, the exemption and rate of tax that were in effect before the 2001 tax act was passed. Certain larger estates will be subject to an extra 5% surtax that was repealed altogether in 2001, but which will also be reinstated in 2011.

As an estate planning attorney, this is wreaking havoc on how I advise clients about how to plan for passing wealth to their heirs.  For those individuals with sufficient wealth, it makes planning extremely complex.

Other major changes this year apply to capital gains and gift taxes.  Property passed on death no longer receives a step up in basis to the value at the date of death.  This could result in significant additional capital gains taxes upon the sale of inherited property. Gift taxes, on the other hand have been reduced from 45% to 35% over the exemption amount.

Some oppose any “death tax” at all.  They argue that it penalizes hard work and ambition. Some argue against a tax on estates of small busineses or family farms becuase often a tax on those estates requires that the business or farm be sold to pay them.

The House has passed and sent to the Senate a bill that would remedy most of these problems and continue the estate tax largely as it was last year.  That means an exemption for estates of less than $3.5 million.  The House bill also would exempt many small businesses and family farms. The Sentate has failed to act on this or its own legislative proposals, leaving the law muddled and uncertain.

The argument against any estate tax seems to me to be bogus. It is harmful to society for wealth to accumulate and pass from generation to generation.  It creates an elitist class that tends to dominate the culture, not always for the better. I can somewhat agree with an exemption for small business and family farms. It would be disruptive for them to be sold upon the death of the principal owner.

Yet every estate attorney recommends to such people that they purchase relatively inexpensive insurance to pay for any taxes, so it seems to me this argument is not based upon reality but rather a political bias toward wealth.

As for other wealthy individuals, there are a number of ways to minimize the impact of the tax, not the least of which is to give some portion to a charity, thereby enriching the entire community. But at basis this is a controversy about how you think wealth is generated. Those who argue that individual effort is the foundation for wealth create live in an illusion.

The top income earners in America are largely now those who produce nothing but entries in a ledger and then move them around, or actually, have others do that upon their command.  These are the very people who have caused so much damage and heartache for those of us below their lofty status. There is no advantage to society to reward this phenomenon. It is rather a cancer in our midst.

This subject is yet another part of our culture wars, and I am quite sure that the Congress will get around to passing yet another “reform” bill this year. The House bill has some good points, but in my view fails to address the real harm resulting from genrational wealth accumulation.


  1. Doug Thompson


    Don’t made debates personal. Phil’s column is an opinion. Disagree with the opinion if you want but I don’t like personal attacks on this web site. You know that.

  2. griff

    “It is harmful to society for wealth to accumulate and pass from generation to generation.”

    Spoken like a good little [edited] Hoskins. How dare some people accumulate wealth through hard work and determination, and then have the audacity to want to bequeath said wealth to their offspring, instead of donating more than half of it to the government?

    And I’m sure you believe that the government uses all those taxes to assist the needy.

    “Back in the thirties we were told we must collectivize the nation because the people were so poor. Now we are told we must collectivize the nation because the people are so rich.” – William F. Buckley

  3. Doug Thompson


    Everyone is entitled to their opinion on what we write here at CHB. I’ve asked Griff not to make it personal. I’m asking you not to do the same.

  4. Phil Hoskins

    Griff, if you have nothing better to do than slander me or anyone else stop posting here. It is not welcome.

  5. griff

    Slander Phil?

    Maybe in your next column you could explain how leaving an inheritance ultimately destroys society. I’m real curious to know.

  6. griff

    Sorry Doug, I didn’t really consider my comment to be out of line or personal in nature, much less an all-out attack. Forced wealth redistribution and class warfare is a tried-and-true [edited] undertaking. It’s bad enough when it happens to the living, much less the dearly deceased.

  7. Doug Thompson


    My policy on comments is clear and stated:

    Please remember, however, that we believe in civility on this web site and comments may be reviewed, moderated or removed if we feel they contain obscenities, racism, bigotry, anti-Semitic remarks or attack other posters. Our goal is reasoned discussion on issues facing this nation and we do not feel that goal is served by personal attacks and by seeing how many cute adjectives you can attach to an elected official or politician’s name.


  8. Carl Nemo

    Hi Phil Hoskins,

    I feel your article is like a “red-haired stepchild” having no response.

    Thanks for the heads up to our readers concerning estate issues.  It’s tax time again and surely can’t hurt.

    With the path our country has taken in recent memory it seems like a “good year to die” for both young and old since seemingly America has no future with the knaves we have at the helm of the USS America, tax consequences be damned. : |

    Carl Nemo **==

  9. pondering_it_all

    It IS a wonderful thing when people accumulate wealth through hard work and determination, and why should their offspring be denied that life experience?  The worst thing you can do to your children is to leave them trust funds so large they never have to work a day in their lives!

    (Unless, of course, a child is mentally or physically disabled so they can’t do any useful job.)

    But the main effect I have seen from large multi-generation fortunes is not just to render children into useless wastes of skin, but rather for those in control of the money to keep their children absolutely in their thrall until they die (or even longer).

  10. Carl Nemo

    Most people don’t realize the fact that the great fortunes are kept under the veil of the “foundation”.  Even lesser heeled millionaires do so and not simply billionaires. 

    Recently Bill Gates and Warren Buffet squirreled a huge amount of wealth into a foundation. 

    They only have to donate/grant as little as 5% per annum to various causes, but are still allowed to keep the greater portion of their transgenerational wealth sheltered from taxes.  Also operating expenses are allowed which includes the largesse needed to maintain the lifestyles of the wealthy one’s who own the foundations.  Foundations have become the “in thing” for fairly small fortunes in the the sub 100 million class.  As Martha Steward might say…”It’s a good thing”… : )

    Lowly, ignorant (taxwise) American citizens are slaving away and being taxed in excess of 50 percent when you figure Federal, State, Local, City, income and sales taxes along with many other taxes imbedded in our goods and services while our “betters” are living the good life; ie., a worry free sybaritic lifestyle. 

    Yep, maybe great grandpa, grandpa or dad earned the fortune, but they don’t have a clue other than subsisting off the cash stream from their foundations or trust funds. 

    Ain’t AmeriKa and so-called ‘free enterprise’ great…?! / : |

    Carl Nemo **==

  11. griff

    So I guess the government should determine who is worthy of inheritance and who is not? Why not just forcibly sterilize all wealthy people and take every thing when they die? That way we can be sure we won’t have any snot-nosed rich kids running around ruining it for every one else.

  12. Carl Nemo

    I have no dog in this fight, but I must compliment Doug Thompson for your balanced policy enforcement.  : )

    Carl Nemo **==

  13. pondering_it_all

    So Phil:

    I wonder if many people will fake their or an elderly relative’s death this year, just to avoid paying millions in estate taxes.  Would it really be so difficult to do, for a wealthy family?  They just send Gramps off to an exclusive nursing home in Switzerland, and then arrange a secret transfer to a different facility along with an “official” death certificate.

  14. Phil Hoskins

    Griff, only you know what you said that I edited.  Had you chosen to address this issue, it would have been completely fair and I would have no problem. But to slander me is not within the boundaries of polite discussion.  I would rather not write a column here if that is going to continue.

  15. Doug Thompson


    I came into this fight late and only learned this morning the term you used that was edited from your comment. Phil was kinder than I would have been if I had seen it first. I would not have edited the comment, I would have deleted it. Don’t ever use such a term like that again on this web site and don’t ever attack someone here with such language. It will not be tolerated.

  16. griff

    By all means Doug, feel free to delete the comment. You’d think I called him a baby killer or mass murderer.

    Socialism is a well-established political ideology, not unlike conservatism, liberalism, communism, and a host of other -isms. In fact we have a socialist in the House, if I’m not mistaken. And we certainly have one in the White House.

    Furthermore, I didn’t call Mr. Hoskins a socialist, I simply pointed out that his statements sounds like socialism.

    Later in the conversation, Mr. Hoskins used biblical references and implied that I’m conservative. Should I be equally as indignant that it should be wrongly suggested that I’m of a christian-conservative bent?

  17. griff

    I would hardly call 3.5 million in the same league with Warren Buffet and Bill Gates. I don’t even think it’s considered a fortune these days.

    This is about estate taxes, not income taxes. I’m all for ending loopholes and havens for the rich, to include corporations and foundations.

    Of course I don’t ever see any thing like that happening. That would be too radical. It’s best to sniff around the periphery so the masses think they’re doing something significant and relevant.

    An estate tax is nothing more than the State confiscating personal property because you happen to expire and have accumulated wealth.

  18. Carl Nemo

    The uninformed pay estate taxes, the smart one’s shelter their money within the small foundation. I have several friends that have started their own charitable foundations and they don’t have 3.5 million. Possibly once their home and acreage is sold it would top out at that level, but those assets too will go into the foundation upon their deaths with the foundation being under the control of their children for future generations. It also prevent the frittering away of their small fortune due to irresponsible spending etc.


    With most Americans dying flat-assed broke or worse, in debt, leaving their family members with the cost of burial etc., I’d say 3.5 million is a tidy sum. To me taxes in the 50 percent zone is rapacious, but all Americans either wealthy, simply rich, middle class or poor should pay a fair share of taxes to maintain their freedom and way of life. It’s simply the cost of maintaining our way of life.

    The advantage of the foundation approach is that immunizes one’s assets from the whimsy of Congress. Foundations are here to stay until the death of the Republic. In fact they were created at the tail end of the 19th and early 20th century as great fortunes were due to be passed on; ie, the Carnegie, Mellon, Rockefeller, Gulbenkian and other fortunes in order to shelter them from the ravages of death taxes and again the whimsy of Congress concerning inheritance taxes etc.

    Carl Nemo **==


  19. griff

    Yeah I understand all of that. People with money know how to take advantage of the tax code. Is it their fault, or the fault of lawmakers? When I get a bad piece of software, I don’t blame the guy that checked me out at the store, I blame the people that wrote it. Do you voluntarily pay more taxes than you’re required? I can assure you that I don’t.

    As you rightly point out, evadence of estate taxes is one reason for setting up a foundation. Doing away with the estate tax removes one of those incentives, I would think. Cleaning up the tax code and ending tax-exempt status for foundations would remove another, and would mean tax income throughout the life of the foundation, the individual, or both – not just once, as in death.

    I whole-heartedly agree that at the very least, the wealthy should pay their taxes like every one else. The whole idea for taxation is to fund the government. Once you’re dead, you no longer have a need for the government services that taxes provide. Why should you still pay them?  

  20. Phil Hoskins

    But Griff, once your dead, you no longer need your money.


    Remember that old “eye of a needle” thingy?

  21. griff

    Ha. Touche’.

    Personally I don’t see the connection. This isn’t about taking it with you but about government taking a fat percentage.

    Are you referring to the biblical ‘camel through the eye of the needle’ parable? I’m rather surprised that you would use that as an argument for estate taxes.

    Not only is the government responsible for punishing the wealthy for their success and for having offspring, now they’re in the business of ensuring their eternal salvation?


  22. Phil Hoskins

    Griff, just riffing on your “don’t need government” comment.

    Actually, behind all the politics, I think there is a serious issue about government preventing dynasties to be established. While some with enormous wealth have left theirs to foundations and other means of public benefit, Europeans learned that keeping it in the family resulted in badly skewed political systems.

    Family dynasties are undemocratic when they impact politics. Given how dominated by big money our political system is now, that is a serious concern.

    I am surprised more conservatives have not seen the danger to our system from the dominance of wealth, largely hidden behind corporitism today.

  23. griff

    But isn’t that what we already have? Just look at the players of today. Look at the Bushes. Prescott Bush funded Hitler for crying out loud. It’s always the same players.

    And I’m not saying I necessarily disagree with your assessment of these issues, I just happened to disagree with the role estate taxes play in it. Like I said, estate taxes are a minor symptom of the bigger problem, but it makes some feel good about “taking it to the rich.” It smacks of collectivism and class-envy – time-tested tools of tyrants and despots.

    Which is why adherence to the Constitution and its underlying philosophy is important, in my mind. It’s quite clear that the farther we stray from the ideals of personal liberty and respect for life, the worse things get.

    And when subjects like this come up, I just feel that our politicians are simply appeasing the masses with minor tinkering to make it look like they’re doing something useful. Making it look as if they’re really watching out for the little guy, when in fact they’re helping out the big guys.




  24. Carl Nemo

    Gentlemen, may I interject my thoughts on this issue? : )

    Concerning estate taxes, income taxes etc. …” It smacks of collectivism and class-envy – time-tested tools of tyrants and despots.” …extract from griff’s post

    Precisely griff and that’s why I’m a proponent for ending the income tax, estate taxes, foundational shelters and any other scheme that allows the wealthy, landed class immunization from paying their fair share of the national freight to maintain our way of life. It will also curtail the use of a  system; ie,. the income tax system from being utilized as a virtual surveillance tool for monitoring our most intimate business affairs.

    I’m for a national sales tax with a dissolution of the IRS and “revenoorers” of any kind except those necessary to keep the sales tax functional.  Britain as a VAT (Value added tax), but the neat thing about such taxation is that everyone pays.  It even spills over into the gray and black markets too as products and services are exchanged, traded etc.  Travelers and tourists passing through countries will also pay into this tax system.  No schemes, no scams etc.  It will also require alot of tax lawyers to redirect their legal skills to some other area of the law. ; )

    Carl Nemo **==