POWIP Piece of Work In Progress

Death Taxes and Life Insurance

This is a post somewhat against interest. I work in the life insurance industry [as an actuary.... yup, I count dead people.] There may be something you don't know about life insurance benefits in the U.S.: namely, they aren't taxed [federally - not sure about on the state level. I am not a tax expert.]

Doesn't matter how much the amount is. Can be $300K, could be $300MM -- it escapes tax.

Perhaps you may now see why the life insurance industry has an interest in keeping estate taxes alive?

Life insurance is still a very good risk-mitigation tool for individuals out there, but due to the tax laws, it has morphed into a variety of uses, and you'd better believe it is a lucrative business for those of us who help others legitimately avoid taxes.

That said, I don't see why death should be a taxable event. Taxman, you got your chance to whack while the person was alive. It's not your money! Go away!

No, the life insurance industry is not eeeeeeeeeeeeevil just because it hires lobbyists to promote its interest, but I do hope this is one fight they lose. The very rich don't need this method of tax avoidance (there are lots of ways), but it is one of the most affordable methods for someone who has built up wealth in a small business.

I'm tired of the "class warfare" aspects of the death tax, but more to the point, it's a futile argument -- the really and truly rich have all sorts of methods to avoid tax. Ask Teresa Heinz Kerry how much tax she currently pays on her wealth and how much her estate is likely to pay. I assure you, it will be minimal. There is no way for Congress to make a law that would steal away all of Paris Hilton's inheritances. The very rich are mobile in a way that the moderately wealthy are not. Even if the entire world were to hike up the taxes, they'd figure out a way to get off the earth [why do you think Richard Branson has his Virgin Galactic project?]

I have no expectations for this lame duck Congress to take care of the issue - they couldn't figure out how to properly pass an FDA bill, and are just now getting around to dealing with hiking the tax rates when the recovery in the economy is illusory. I assume the Republican House will put something out there nest year, but I definitely have no expectations of the Senate, a body of rich old tax-dodgers if ever there was one. [Also, rich people supposedly being happy with tax hikes on themselves? You are so full of shit. ]

NEWS THAT YOU CAN USE: From the WSJ, some advice on avoiding death taxes.

Meep

Meep is a member of the Irish Catholic mafia, having a suspiciously high number of green-eyed, red-haired friends. While she doesn’t have red hair herself [except when she goes into the sun (rare for any vampire)], she does have green eyes. She’s a raving Papist and is a life actuary on the side [i.e., she counts dead people]. An amateur pain-in-the-ass [willing to go pro!], she likes covering retirement, mortality, math, and education issues.