ramblin on / insurance/ card values

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Posted By: warshawlaw

Regardless of the term you use, "death tax", "estate tax" and "inheritance tax" ARE THE SAME THING. Your estate is valued after you die (depending on changes in asset value it may be on date of death or 6 months later) and if it reaches a threshold of value it is taxed. The current threshold is a net value of $2 million (if your house is worth $2 million and you owe $1.9 million on it, the net value is $100K). Your heirs do NOT pay taxes on what they inherit; your estate pays taxes on the net value of what you owned, if it exceeds the $2 million net value floor, with a final tax return. Your heirs inherit whatever is passed on to them, taking a basis in the item at fair market value (called a stepped up basis) because the estate paid taxes on it at fair market value. They are not taxed again. If they elect to sell the items they would pay taxes only on the net appreciation between the date it was valued for your estate (the stepped up basis) and the sale price.

I hardly think that a collection worth even $200,000 is worth not insuring simply to avoid reporting it for estate tax purposes, as it amounts to only 10% of your exemption (5% if you do even bare bones estate planning with your spouse). And, of course, you do realize that counseling your family not to report assets you actually own is conspiracy to commit tax evasion and depending on the amount involved might amount to a felony. Certainly it would be grounds for disbarment.