If he left you $2 million, you’d have to pay $ 550,000 in taxes, leaving you $ 1.4 million dollars richer than you were yesterday.
You might remember that Clinton left this country in a budget surplus. SURPLUS. When Newt Gingrich rose to power in the mid '90s, in order to gain popular support among voters, Republicans began calling the estate tax the “Death Tax.” And when George Bush began a roll back on taxes for the top 1% wealthiest Americans, the estate tax began to erode. In 2004, you were taxed only on inheritance above $1.5 million, in 2006 you were taxed above $2 million; this year you can inherit up to $ 3.5 million tax-free. Next year the tax will be gone altogether.
So if your billionaire Uncle Madoff were to leave you his $65 billion, you could receive it tax-free. Obama and congressional leaders plan to block the estate tax from disappearing in 2010. But even if he keeps the tax at the level it is now, it's more than double the benefit that it was during the Clinton Administration.
There are several deductions from the estate tax: mortgages and debt, administrative costs of an estate, losses during estate administration, marital deductions and charitable donations. (Spouses and charities can receive 100% of an estate tax-free.) Which leads me back to Annie Leibovitz inheriting Susan Sontag’s property and the inaccuracy of Julie Miranda’s story.
Forget that we have no idea whether or not their relationship was one in which they would have gotten married if it were legal. (It's well-known that both women had many lovers throughout their lives and they were on-again off-again themselves, nor did they ever live together!) We have no idea if Leibovitz owed anything in inheritance tax.
According to the Times, Leibovitz inherited property with a mortgage. The mortgage would have brought the taxable value of the property below its market value. In truth, we will never know the details of her inheritance because there is no public record, which means Sontag’s estate passed through a private trust. If Sontag only had a will, Leibovitz might not have received diddly squat. A will is open to public record, probate and can be contested by anyone married or related to the deceased or not. And THIS is the point of my entire story!
No matter how much wealth you have, whether it's $500 or $500 million, if you would like your wealth to pass to those you love — your partner, your on-again off-again ex, your parents, your kids, your pets, a charity — not only do you need to draw up a will, but you need to create a living trust.
In Suze Orman’s first best-selling book, The 9 Steps to Financial Freedom, she describes clearly and emphatically the need to create a living trust no matter if you are married, single or living together. A living trust is a legal and binding document which allows you to avoid “probate” (where the government comes in and distributes the assets of your estate while charging a hefty fee) and to avoid the legalities of having a will contested.
I’m no estate planner, but if you want any more info on estate planning, go to a professional or look for online resources. I love Suze Orman for her desire to clue us in and her unapologetic attitude about her own wealth, but in her rant about the financial benefits gay partners miss out on that married people have, I want to point out that both she had her partner have millions of dollars between them and have protected themselves in a living trust!
There are a lot of other marriage benefits that gay people should be fighting for like health care. I just don’t believe the estate tax should be one of them. Nor should we make the erroneous charge of calling it a “Gay Tax.” In fact, I believe married couples should have to pay it, too, but the hell if that’ll happen. If Leibovitz and KT have to pay taxes on millions of dollars of inheritance, I say thank you gays for helping to pay for Medicare, Medicaid, unemployment and public schools because, apparently, rich married straights won’t be.