Death Tax: Is it fair to tax people at death?

Posted on Mar 29, 2016 in Estate Planning, San Diego Lawyer | Comments Off on Death Tax: Is it fair to tax people at death?

Death Tax: Is it fair to tax people at death?

On Tuesday’s Word On Wealth radio show,, I answered the following questions:

Why do I need a Will or a Trust?

A man ready to retire owns a modest home but has no estate plan – no trust – no Will – nothing. He figures it is not a big deal because he will just let his children have the house.  Assuming he dies first, his children would most likely end up with the house as joint owners. They would be partners in owning the house whether or not the chose to be.

The children would take title to the house after it passes through the California probate process which could take one to two years. Yes, even in a situation as simple as this, probate could take one to two years. In the meantime, if money was needed to maintain the property, to pay the taxes, or to get it ready for sale, the beneficiaries would have to come up with the money from outside sources because until the Probate processes, there is no money available from the estate.

In California, real property (house, land, etc.) needs to go through probate if it is worth over $50,000. If there is no real property in the estate but the estate exceeds $150,000 in total gross value, it must pass through probate.

Can a living trust avoid probate? Yes if it is prepared properly.

Is it fair to tax people at death? About the death tax.

death tax

What do you think about the death tax? Is it fair to tax people at death based on the fact that their property is valuable? Not really. Statistics show that most people with large estates are “first-generation rich” – meaning they earned every penny- and I believe it is unfair to tax them upon death just because they died. The money or property has probably been taxed at least once with income tax or capital gains tax. But, as Marty said on today’s show, there is not much sympathy for people who die with a lot of money. I look at it from the perspective that most people work for a “rich” person. Not many work for another employee or someone who is essentially on their same level financially. Most work, directly or indirectly, for the person who is more “rich” but is also the one taking all the risk and making the sacrifice to fund and run the company. I think we should let them pass the estate on to their heirs without the government “helping themselves” to it and hopefully the heirs will know how to run the company so the workers can keep their jobs. If the government levies a death tax, where does it come from? If there is not cash available, the business would need to borrow or be sold. What happens then? The jobs are gone or the margins are too thin to stay in operation and the workers lose out.

How to avoid the terrible “death tax”- an idea to consider.

How do we avoid the terrible “death tax”? One way to avoid the death tax is to set up an Irrevocable Life Insurance Trust (“ILIT”) to cover the anticipated tax. Marty Schneider has a great explanation of how they work on his website – – It is sometimes surprising how much money can be saved in taxes with life insurance planning.

Another use for life insurance

For many families, life insurance can instantly create an estate. Think about it. Have life insurance pay directly to the Family Trust and the trust can distribute the funds as needed to care for children and family.

Keep listening to the show!

KPRZ 1210AM Tuesdays @ 5:00pm

Remember, none of this is legal advice. If you want that, we’ll have to talk.


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