How Much Estate Tax Will You Pay?
Updated to reflect the very bizarre
2001 Tax Bill
- I changed the unified credit to use the newly passed bill. I am not sure how to add in the removed step-up in costs basis. Plus after 2010... well, who knows? As of right now it reverts back to current law, so your unified credit drops from $3.5 million in 2009 to infinite (i.e. no tax) in 2010 back down to $1 million in 2011. It will be open hunting season on multi-millionaire parents in 2009 and 2010. Wealthy parents, watch your children carefully!
Me pay estate tax? No way, you say? Don't be so sure! I'm not talking about now, I'm talking about 20 or 30 years from now when your IRA or 401(k) grows really big and you have that $250,000 life insurance policy to protect the family. And sure the new 1997 Tax Bill raises the limit to $1,000,000 but do you realize how slowly that happens? And do you realize how many people will be "estate millionaires" in 20 or 30 years? It will be a middle class phenomenon. Let's just hope they increase the unified credit by then. Stick in the numbers and see for yourself. And remember, unless you use a trust your life insurance proceeds are added to your estate and may get hit with the estate tax! See for yourself:
Current IRA/401(k) Balance
IRA/401(k) Yield
IRA/401(k) Contributions/Year
from
to
After-Tax Investments
After-Tax Yield
After-Tax Contributions/Year
from
to
Life Insurance Face Value
Home Market Value
Mortgage Balance
Years Remaining of Mortgage
Mortgage Payment (Prin + Int)
Mortgage Interest Rate (%)
House Appreciation (%)
Cash/Checking Balance
Personal Property
Automobile Value
Automobile Loan Balance
Inflation
Annual Gifting
starting
Do you have a credit shelter trust?
No
Yes