Return To Programs Page      eClub One - Archive Articles List
 

We hope you enjoy the programs at eClub One

Column 10

Enid Ablowitz

Making Money Matter

The Death of Death Taxes

“I don’t want to think about estate planning.  Besides, the tax laws are going to change and there won’t be any estate taxes.  Then I can leave all my wealth to my family.”

Sound familiar?  Three things are going on here.  One is the natural tendency to avoid thinking about death.  The second is procrastination around planning, finding yet another reason not to make any decisions. The third is the reality of the national conversation about inheritance.

President Bush’s tax plan includes provisions to significantly change the way Americans are taxed at death.  There is passionate discussion about the levels, mechanisms and wisdom of the changes being considered.

Whatever ultimately becomes law, the concept of inheritance reveals historical and social complexity.  Inheritance has determined the aristocratic class, has favored first-born sons, has disenfranchised women and has anointed kings. Consider the following:

• Primogeniture, the practice of passing land to the first-born son, was a key factor in the emigration of the second-born, non-landed sons to the original American colonies.

• In many countries, a dowry still determines the fate of a woman. 

• Children have become rulers because of their birthright.

It is anyone’s guess whether the death tax will be repealed, and if it is, how it would be done and over what period of time.  How will it affect you?  Is your financial planning solely based on the tax law?  Do you give just because you may get tax relief? 

More people are deciding that charitable giving isn’t just about avoiding taxes.  There’s another approach.  Imagine a triangle.  At the base of the triangle is your personal financial independence.  The next layer up is your legacy to your heirs. The third portion is what is left… your social capital, defined as the combination of taxes and charitable gifts.  What happens if the tax portion is significantly reduced?    

There is a natural tendency for people to want to pass on as much as possible to heirs. The question is whether that’s a reactive statement based on avoidance of taxes, or whether it reflects a well thought out plan that includes the framework to pass on values as well as assets.  When families contemplate legacies to their heirs, most think of education, health and security.  For a reality check, some advisors I’ve worked with suggest that people imagine not how they would spend the money, but how their heirs will. (And as a result, trusts are often used!)  Some planners even suggest identifying the maximum actual amount of money you want to leave in today’s dollars, and index the inheritance accordingly, to assure it is “enough,” but not “too much.” Of course, those definitions are very personal. Warren Buffet has been quoted as saying that he wanted to leave his children “enough so that they could do anything they wanted, but not so much that they could do nothing at all.”

There is growing awareness that creating large inheritances can be problematic. Many heirs are unprepared for inherited wealth.  They neither know how to manage their windfall, nor how to spend it wisely. No matter how much heirs are to receive, the question should be asked, “are they or will they be ready for it?”  Is there an understanding of the concept of wealth with responsibility?

With the decline or disappearance of death taxes, taxpayers will have more social capital to distribute, and as taxes are returned to the taxpayer, the importance of thoughtful giving is heightened.  Non-profit organizations will rely more on private investment to achieve their missions.  In this environment, it is even more critical to consider your personal responsibility to give.

If the death taxes die, how will you redistribute your social capital?

Send your questions about making charitable gifts to Enid Ablowitz, Features, Daily Camera, 1048 Pearl St., Boulder, 80302 or e-mail???/Fax????

Ablowitz, the Asst. Dean for Advancement at CU’s College of Engineering is a Certified Fund Raising Executive and has been working with donors for over a decade.  She is writing a book called Making Money Matter: 8 Steps to Thoughtful Giving.

Now that you have completed this program, you have these options

To do BOTH use the Critique E-mail first, then return and click on the Make-Up Request Form

The content of programs appearing on the eClub One Make-Up website are the opinions of the authors and may or may not be shared by members of Rotary eClub One. These programs are presented by Rotary eClub One for use by site visitors, just as any program that might be presented at a Rotary meeting anywhere in the world.

© 2007 eClub One District 5450
Solution Services Inc