We’ve all been told that the only things that we are assured of in life are death and taxes. There are a myriad of tax laws effected by the ‘fiscal cliff’ negotiations. One of them is the expiration of the estate tax exemption.
Currently, there is a tax exemption for all estates under $5 million dollars. When we go over the cliff in January, the exemption drops to $1 million dollars, and the tax will be set at 55%.
This change has a lot of elderly people in their last days on earth (and their kin) doing a lot of soul searching and reflection, not to mention multiplication and division.
There are conversations, not rising above a whisper, between loved ones faced with moral dilemma as Grandma or Grandpa is fading away (maybe on life support) in life’s homestretch.
The question they are all asking themselves is “is it better to bring on death before the estate tax rate goes up, or do we do all that we can do to prolong life”?
To put this into perspective, as far as the money goes, if your estate is worth $1,000,000 and you had hoped to pass that along to your relatives as an inheritance, you will now only have $450,000 to bequeath, and the rest goes to Uncle Sam. I don’t know about you, but my considerable gut tells me that my family would spend this hard earned money better than the government. Who knows what the government will do with it? Will it help pay for a study on why turtles are green? Will I be paying for a ‘Mr. Condom’ costume that some teacher will wear to teach 7 year old kids how to put on a condom? Whether you lean left or lean right (as I do), most of us can agree that the gov’t doesn’t do as good a job handling money as you or I.
This brings up an interesting ideological conundrum, too.
If you are Mr. Conservative and value the sanctity of life, but also hate paying more taxes… how do you reconcile the decision? The decision being, of course, whether to allow your elderly relative to pass away before ‘cliff’ day.
If you are Mr. Liberal and believe in euthanasia, but also believe that it is our duty to pay taxes and if we can pay higher taxes, we should! How do those conflicting viewpoints affect your decision?
Ultimately, this is a very personal decision. Maybe the toughest decision any family would ever make. It seems so unfair to consider taking this money that one has earned and would seemingly have every right to give to their family at the time of their passing. That’s life. We know that life is unfair. With this estate tax law soon to be implemented, now we know how unfair death is, too.
If it all boils down to nothing more thant dollars and cents, then it would make sense to simply end Grandma's life, regardless of the estate tax. It's far cheaper to bury Grandma than it is to prolong her life, and therefore fatten your wallet. If it were my Grandma and my inheritance, I'd keep her alive as long as possible and try to enjoy our limited time together. Whatever is left of the inheritance after the estate tax, I'd still have 45% of something I did absolutely nothing to earn except for being born. There are sound planning strategies that can be done to keep more of the inheritance from the government without resorting to pulling the plug on Grandma.