Estate, Death and Inheritance Taxes

An anonymous Silicon Valley billionaire has purchased the world’s most valuable life insurance policy for $201 million, and I think his reasoning behind it is fascinating. He bought the insurance to help his heirs avoid paying a 45 percent inheritance tax after his death. This life insurance policy will pay out twice as much, and will minimize the worry about paying estate, death or inheritance taxes.

His strategy to distribute wealth is influenced by tax laws, and it ties into the inheritance boom, which I think has implications for all of us.

The top one percent of American households owns around 35 percent of all wealth, which is more than the entire bottom 90 percent, according to The New York Times. The growing inequality hasn’t caused a big boom in inheritances yet, but it will.

A new study by the consulting firm Accenture shows the big wealth shift will start in 2031. Even though that’s far away, it’s interesting to think about because it has to do with actuarial science. How long people are living, how much of their wealth they’re going to use before death, etc. So a lot of that wealth is going to come down and there’s going to be a big transfer.

The study looked at inheritances generation to generation and showed that baby boomers took a “great transfer” of wealth from their parents, but Generations X and Y will receive an even greater wealth transfer from the boomers, over time. They believe when that movement starts, 10 percent of the country’s total wealth will change hands every five years through inheritances, estates and gifts.

And even though right now, most people don’t have assets over $5 million, the estate tax exclusion amount, it’s interesting to think about inheritance tax and planning. You can start to think about how that money will flow down, where you are in that whole sphere and how it will all come together.

WSB Radio’s Ilyce Glink Show – March 16, 2014

Click the audio link below to listen to the full Ilyce Glink Show on WSB Radio, or go to iTunes and download the show to your handheld device.

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Thanks for listening.


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About Ilyce Glink

Author of 13 books, including the bestselling 100 Questions Every First-Time Home Buyer Should Ask. Writer of the nationally syndicated column, “Real Estate Matters.” Top-rated radio host in Atlanta. Writer for CBS MoneyWatch.com. Managing editor of the Equifax Personal Finance Blog.
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