{"id":8849,"date":"2017-01-19T09:00:27","date_gmt":"2017-01-19T14:00:27","guid":{"rendered":"http:\/\/www.escapeartist.com\/?p=8849"},"modified":"2021-06-04T05:21:52","modified_gmt":"2021-06-04T10:21:52","slug":"trumps-estate-tax-plan-americans-running-private-placement-life-insurance","status":"publish","type":"post","link":"https:\/\/www.escapeartist.com\/blog\/trumps-estate-tax-plan-americans-running-private-placement-life-insurance\/","title":{"rendered":"Trump\u2019s estate tax plan has Americans running to private placement life insurance"},"content":{"rendered":"

Trump says he\u2019ll do away with the estate tax, which has high net worth American\u2019s converting traditional policies into private placement life insurance policies. These private placement life insurance policies will be the focus of both onshore and offshore tax planning in 2017.<\/span><\/p>\n

First, let\u2019s look at the estate and gift tax. There are two components of the tax – the estate tax and the step-up in basis rules. <\/span><\/p>\n

The federal estate and gift tax exemption is $5.49 million per individual in 2017. This allows a married couple exclude about $11 million from estate tax\u2026 transferring this amount tax free to their heirs. If you\u2019re worth more than $5.49 to $11 million, about 40% of your remaining estate will go to the government. <\/span><\/p>\n

When your kids receive their inheritance, they get a step-up in basis. They receive the assets with an increase in basis from what you paid to what they are worth at the time of your death. <\/span><\/p>\n

For example, you bought 1,000 shares of Microsoft stock in 1994 at $4 (well done). You sell MSFT in 2017 at $62. Your basis in the 1,000 shares is $4,000 and your gain is $62,000 less this $4,000 basis, or $58,000. You\u2019ll pay Federal long term capital gains tax on this $58,000 gain. <\/span><\/p>\n

Let\u2019s say you don\u2019t sell the shares, but pass away in 2017. On the date of your death, the shares are worth $62,000. <\/span><\/p>\n

These shares will be transferred to your heirs with a step-up in basis to $62,000. If your children were to sell the stock while it\u2019s worth $62, they will pay zero in capital gains tax. If they hold it for a while, and it increases to $70, they have a taxable gain of $8 per share. <\/span><\/p>\n

Now for <\/span>Trump\u2019s estate tax plan<\/span><\/a>.<\/span><\/p>\n

Trump says he\u2019ll eliminate the death tax entirely\u2026 so, if your net worth is $5 to $11 million, don\u2019t die until Trump works his magic!<\/span><\/p>\n