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PaperclipPerfector  1yr ago (text post)   29605 thread views

Culture War Roundup for the week of October 2, 2023

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How would that work? Mid six-figures is $500,000. Assuming a real growth rate of 4% (it could be higher, but I think this is reasonable given how low real interest rates have been lately), and assuming 45 years of growth, that gives you $2.9 million.

Each generation, you'll pay capital gains tax, which in Canada (I don't know how it works in the US) would be about 25%. In the US and many other countries, you also have inheritance tax. That's equivalent to about 1% a year. Is there a way to avoid this with a trust?

Then you have to pay half in income tax, which leaves you with 1.5% to live off of each year. That's just $44,000 year to be split between you and your siblings, spouse, and children.

but even conservatives have got to recognize there is a problem.

I don't see why it's a problem.

it could last forever depending on how many kids, inflation, returns,. living expenses, etc. it depends on the inputs . A small, tight-knit family and minimal expenses and high returns can keep it from being diluted.

You'd need to either only have one kid or you could have two if you made sure they married into equally rich families. To have more, you'd have to spend even less. It's not enough to not work and have a comfortable life, unless you assume higher returns.

Historically, returns have been higher, but they've fallen significantly, and there is always some risk of losing it.

Family wealth tends not to last more than a few generations.

Currently U.S. exempts the first $13 million ($26 million for a married couple) of wealth transferred that way from any taxation.

Even capital gains tax?

Except capital gains from tax-deferred accounts. If you inherit an IRA you pay taxes on the distributions, but if you inherit appreciated stock the basis is reset on death.

Plus $30,000 a year tax free, and you can transfer the $26 million before you die so that it can compound nicely. You gradually give the money to your grandchildren before you die. By the time you die and have to pay inheritance tax, they already have a gigantic nest egg built up from the tax free $26 million + $30k/year you left them.

This is just stuff off the top of my head. Better strategies no doubt exist.

The problem is that the wealthy are great at skirting inheritance taxes, but anything we do to stop them will catch the not-truly-wealthy farmers and small business owners in its snare.

There are some real zany strategies for maximizing the tax-free value of assets transferred during your life for eventually distribution to your descendants.

I think the grand mack daddy of all tax 'cheats' has to be Peter Thiel managing to slide 5 billion into a Roth IRA which means it has no tax whenever he chooses to withdraw it later in life.

That's insane. Saving people a click...

He got sweetheart deals on private company stock and bought small amounts which turned into huge amounts.

Sometimes I marvel at how shortsighted and uncreative lawmakers can be when they write laws. For the love of God, put a cap on every law. Doesn't matter how high, just add a cap. I'm sure if someone said "maybe we should cap Roths at $100 million" people would have laughed. But here we are.

Like, for example, if the original Social Security law said "under no circumstances shall Social Security spending be more than 1% of GDP", people in 1934 would have laughed. "Lol, that will never happen". And here are again.

Thiel did not get a “sweetheart deals on private company stock and bought small amounts”. He created this stock by founding a company, and made it a lot more valuable through his efforts.

Even worse. Thank you for the clarification.

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