Wednesday, April 13, 2011

DEATH TAX AND DEAD BEATS

THE ESTATE TAX, POINTEDLY RENAMED “THE DEATH TAX”, HAS A FLEET OF OPPONENTS.

THEY ARGUE THAT A SUCCESSFUL PERSON, WHO WORKED, SAVED, INVESTED, AND ACCUMULATED WEALTH, SHOULD NOT HAVE TO SURRENDER, UPON THEIR DEATH, A SHARE OF THAT WEALTH TO THE GOVERNMENT. THE ENTIRE ESTATE SHOULD BE PASSED ON TO THE INHERITORS.

AFTER ALL, IT IS THE FAMILIES MONEY…NOT THE GOVERNMENTS.

BUT HOW MANY OF THOSE OPPONENTS PARTICIPATE IN THE RITUAL OF TRANSFERRING WEALTH AND PROPERTY BEFORE MEDICAL AND NURSING-HOME CARE EXPENSES CONSUME ALL OR PART OF THAT WEALTH?

WE ALL KNOW THE DRILL.

A LAWYER IS CALLED. THE ADVICE IS GIVEN TO TRANSFER THE HOUSE AND THE ASSETS A FEW YEARS IN ADVANCE OF THOSE STEEP END-OF-LIFE EXPENSES. HERE’S THE SWITCH. NOW IT’S THE GOVERNMENT’S BILL…NOT THE FAMILIES.

5 comments:

Tiny Timmy said...

Congress always seems shocked when people parse the code they write and figure out what to do under the law to maximize the benefit to themselves. They don't make it easy to plan.

When the Bush tax cuts first kicked in, a person could exclude the first $600K or so of assets from the estate tax and this amount gradually increased every year until 2010 when the estate tax would be eliminated in it's entirety. So if Bill Gates had died in 2010, there would have been no estate tax paid. None. When the Bush tax cuts expired at the end of that year the law reverted back to where it was at the beginning. The drafters of the law had thought that Congress would act for a long term answer to the "Death tax question," but of course, they did not.

You would think that some sort of reasonable compromise would be easy to arrive at. Unfortunately, both sides are far more interested in using the issue as political fodder. One side says that the estate tax will lead to the government seizing the family farm and Dad's hardware store. The other side thinks the anyone who opposes the estate tax wants to create a permanent underclass on the backs of the poor. Both sides should set aside the rhetoric and do their job and decide on a reasonable estate tax that does not change every year.

You correctly point out that the practice of intentionally impoverishing oneself to qualify for medicaid is a common practice. The most interesting part of your blog is the question raised about whether it is moral to take steps which essentially pass the cost of your nursing home care to the American taxpayer. When Congress passed the Kennedy-Kassenbaum law (the so called "Throw Grandma in Jail act"), Congress began to address this problem by creating a "look period" through which the Government could attach assets transferred to a trust for a period of years. All that did was make sure that the lawyers made sure their clients transferred their assets well in advance of any problem. Once again, the wealthy skirted the issue, the poor didn't care, and the middle class gets wacked.

Are you a deadbeat or a prudent estate planner when you visit your elder care attorney? I would say that BOTH are true, and that these two things are not mutually exclusive. It is unfortunate that most people will not see themselves as deadbeats when they use the various devices that allow them to qualify for benefits designed for the indigent. They will sleep like babies, content in the knowledge that their kids may get their house even if they go into a "home."

The bottom line is, if the Government wants to ultimately provide a benefit for nursing home care, then they need to find a way to finance it other than by printing money. It takes courage that our politicians do not have to either say "we do not pay for that" or to impose a tax and say "everyone gets this." Until that happens (don't hold your breath), this little game gets played.

God bless us....everyone!

quicksand said...

wow once again mr.tiny.

you are out-blogging me, that's fer sure.
i don't know who you are....but i do know that you're very bright.
thanks

Tiny Timmy said...

A little blonde waif with a crutch? You'll figure it out! You taught Tiny Timmy everything he knows, and have told him so on several occasions....

ben's friend said...

I have always felt that in a rich, just and compassionate society health care (including things like nursing care for the elderly) should be a birth right. One shouldn't have to go begging for it (in the case of the poor) or by forfeiting assets (in the case of those more fortunate). Those who "transfer their assets well in advance of any problems" commit no fraud or injustice. They are getting around a system which would unfairly take away before providing what should be theirs from birth.

Of course we now have the prospect of not being a rich country anymore and being unable to provide services once taken for granted. Yet, this national "poverty" may be a faux poverty when we consider that we are spending such exorbitant amounts of money on on our own "empire" and nation building. How can we expect to take care of our own domestic needs when we are engaged in three wars abroad. In addition if we stopped coddling the very wealthy with sweetheart tax structures and stop providing corporate welfare we may very well be rich enough for our rightful domestic programs. But that is another issue and don't get me started.

quicksand said...

dearest ben,

in a perfect, caring country....we would all come with a lifetime warranty...bumper to bumper, so to speak.
our medical and nursing care would be covered by the price of admission to our society....universal health care and universal care care.
i understand that no laws are being broken.
i also understand why families try to salvage the accumulated wealth.

the contradiction i point out are the folks who want it both ways....
shelter the estate from the taxpayers but have the taxpayers pick up the tab when grandma leaves the 'restaurant.'

thanks