Can we talk about legal ways to avoid estate taxes?

[StinkyToes]

The current estate tax exclusion is $11.58 million per individual. Let's just say for the sake of argument that the exclusion will eventually be lowered and the estate tax rate will eventually be raised. What are the best, low-cost ways to legally minimize exposure to this tax? One simple thing people can do: give money to their kids. My wife and I can both give $15,000 to each of our two children, reducing our estate by $60,000 per year. Over 20-30 years, this will add up.

What else?

[Mark Leavy]

Well, your requirement that it be legal sure eliminates a lot of the fun ideas!
Since my son lives in Portland, I wondered if I could just marry him. Then he could have my estate when I die.

[Mark Leavy]

You can give your kids $15K per year apiece, but pay it in $50 face value US currency. 300 1oz eagles will go a long ways towards transferring wealth.

Note, I'm not sure on the legality of this idea, but they are US currency and they do say $50 on them. Tech might have a better understanding of the law on this.

[Mark Leavy]

Okay, these ideas may or may not be legal. And I expect any attorney would counsel against them.

1 - Just move it all to gold and tell your kids where it is stored. Or lose it in the river and tell your kids where to go fishing.
2 - Move all of your assets into a holding company. Make the kids shareholders.
3 - Have the kids start a consulting company. Pay 10's of thousands of dollars for their advice on draperies, etc.
4 - Purchase your kids' artwork from them. They might be the next Picassso, best to buy early and frequently at any price.
5 - Buy a farm. Aren't family farms exempt?
6 - No doubt the kids are great writers. Offer them a book deal with a huge advance.
7 - Leave the passwords to all of your accounts lying around on a piece of paper that they can find after you die.
8 - Buy up a bunch of 1000 CHF Swiss franc notes. Tell the kids where to find them.

Okay, you get the idea. These are things I would never do. Never.

[Xan]

You can give money to your kids, but it doesn't have to be spread over 30 years, and shouldn't be if you're worried about that $10+MM exemption going away.

The IRS has ruled that if you give away money during a time of a high exemption that later goes down, then they won't retroactively go after it. That the rules in place at the time of the gift apply.

So that argues for giving away everything now while the exemption is high, if you believe (as I do) that estate taxes will be going up and the exemption will be going down.

There's a big "but" on that, though: when you die, your heirs get an automatic step-up in cost basis. When you give away an asset, the recipient receives your original cost basis. So waiting until you die for an asset to pass to your heirs eliminates capital gains taxes, while giving it away does not. I see that as the big downside of the giveaway plan.

Now, there's also talk of removing that automatic step-up. If that happens, or looks like it's going to, then Katy bar the door on pre-death giveaways, especially if the exemption is still high.

[Maddy]

Well, your requirement that it be legal sure eliminates a lot of the fun ideas!
Since my son lives in Portland, I wondered if I could just marry him. Then he could have my estate when I die.

Your post made me snort coffee up the nose!

Stinky, I notice this is the second time in the last few days that you've asked permission to venture into a topic. FYI, just about anything goes here, including all the politically incorrect stuff (especially those topics) and even a fair bit of rancor. That's the great thing about the PP forum: It's a group of free thinkers who enjoy vigorous debate and novel ideas, and the maturity level of the group is such that bad behavior generally takes care of itself. Welcome, by the way.

[StinkyToes]

You can give money to your kids, but it doesn't have to be spread over 30 years, and shouldn't be if you're worried about that $10+MM exemption going away.

The IRS has ruled that if you give away money during a time of a high exemption that later goes down, then they won't retroactively go after it. That the rules in place at the time of the gift apply.

So that argues for giving away everything now while the exemption is high, if you believe (as I do) that estate taxes will be going up and the exemption will be going down.

Wow, that is a great point.

[StinkyToes]

Well, your requirement that it be legal sure eliminates a lot of the fun ideas!
Since my son lives in Portland, I wondered if I could just marry him. Then he could have my estate when I die.

Your post made me snort coffee up the nose!

Stinky, I notice this is the second time in the last few days that you've asked permission to venture into a topic. FYI, just about anything goes here, including all the politically incorrect stuff (especially those topics) and even a fair bit of rancor. That's the great thing about the PP forum: It's a group of free thinkers who enjoy vigorous debate and novel ideas, and the maturity level of the group is such that bad behavior generally takes care of itself. Welcome, by the way.

Thanks. There are certainly a lot of novel ideas on this thread.

[StinkyToes]

Okay, these ideas may or may not be legal. And I expect any attorney would counsel against them.

1 - Just move it all to gold and tell your kids where it is stored. Or lose it in the river and tell your kids where to go fishing.
2 - Move all of your assets into a holding company. Make the kids shareholders.
3 - Have the kids start a consulting company. Pay 10's of thousands of dollars for their advice on draperies, etc.
4 - Purchase your kids' artwork from them. They might be the next Picassso, best to buy early and frequently at any price.
5 - Buy a farm. Aren't family farms exempt?
6 - No doubt the kids are great writers. Offer them a book deal with a huge advance.
7 - Leave the passwords to all of your accounts lying around on a piece of paper that they can find after you die.
8 - Buy up a bunch of 1000 CHF Swiss franc notes. Tell the kids where to find them.

Okay, you get the idea. These are things I would never do. Never.

My kids wouldn't know what to do with the Swiss franc notes or gold coins. Probably would lose them or give them away.

[Mountaineer]

The current estate tax exclusion is $11.58 million per individual. Let's just say for the sake of argument that the exclusion will eventually be lowered and the estate tax rate will eventually be raised. What are the best, low-cost ways to legally minimize exposure to this tax? One simple thing people can do: give money to their kids. My wife and I can both give $15,000 to each of our two children, reducing our estate by $60,000 per year. Over 20-30 years, this will add up.

What else?

This idea prompted by your saying your kids would not know what to do with Swiss francs or Gold coins:

Stop working for pay right now. Live on your savings/investments. When savings/investmentrs are all gone, call in Dr. Kevorkain. Problem solved - no estate tax to worry about!

[Maddy]

When savings/investmentrs are all gone, call in Dr. Kevorkain. Problem solved - no estate tax to worry about!

Wow, I never thought I'd hear that from you, Mountaineer!
But I can't say I disagree. I envision walking off on a very cold day.

[Mountaineer]

When savings/investmentrs are all gone, call in Dr. Kevorkain. Problem solved - no estate tax to worry about!

Wow, I never thought I'd hear that from you, Mountaineer!
But I can't say I disagree. I envision walking off on a very cold day.

Hey Maddy, I am a Confessional Lutheran - simultaneously 100% saint and 100% sinner. We have the freedom to have fun, poke fun, drink beer and whisky, smoke, chew and not look down our noses at those don’t share our worldview. Since I am baptized and Jesus has my back it’s all good! What’s a Kevorkian joke or three?

[pp4me]

Whole life insurance policies have been used for this purpose for a long time if it's set up right. I've never had enough of an "estate" to even worry about but I have read and understood the strategy for those who do.

That's kind of a moot point though, because if they go tinkering with estate taxes they might very well close that loophole so they can get their grubby hands on more money.

That probably applies to almost any other suggestion made here except maybe for secretly transferring hard assets like gold.

[Ad Orientem]

The unhappy fact is that there are few options for avoiding the Federal estate tax that most would find palatable. (State taxes are easily disposed of.) The first and obvious one is to emigrate and renounce your citizenship. The only other that I can think of is to put your entire estate into a charitable trust and designate your children as directors of the trust. They won't be able to spend the money as they like on themselves, but they could draw a salary as custodians of the trust.

[Mark Leavy]

...
The only other that I can think of is to put your entire estate into a charitable trust and designate your children as directors of the trust. They won't be able to spend the money as they like on themselves, but they could draw a salary as custodians of the trust.

As much as I prefer the outlandish ideas, all of my smart friends have chosen the route that Ad Orientem mentions here.
I haven't paid close attention, as I intend to die with my boots on, but the gist of it seems to be: setup a trust, contribute yearly, pay the lawyers, yada yada yada. And to be fair, if you find a good firm, the lawyers know their shit and will do you right.

[I Shrugged]

And don't let the tax tail wag the dog.
Don't give away money that you might need for aid and comfort in your old age.
If you have a large enough estate to worry about estate taxes, see an estate planning lawyer.

[Ad Orientem]

...If you have a large enough estate to worry about estate taxes, see an estate planning lawyer.

+1