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Estate & Inheritance Tax Federal & State

Finishing Well / Hans Scheil
The Truth Network Radio
February 17, 2024 8:30 am

Estate & Inheritance Tax Federal & State

Finishing Well / Hans Scheil

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February 17, 2024 8:30 am

Hans and Robby are back again this week with a brand new episode! This week's discussion is about federal and state tax for both estate and inheritance. 

Don’t forget to get your copy of “The Complete Cardinal Guide to Planning for and Living in Retirement” on Amazon or on for free!

You can contact Hans and Cardinal by emailing or calling 919-535-8261. Learn more at Find us on YouTube: Cardinal Advisors.

Finishing Well
Hans Scheil
Finishing Well
Hans Scheil
Rob West and Steve Moore
Finishing Well
Hans Scheil
Rob West and Steve Moore

Hello, this is Will Hardy with ManTalk Radio.

We are all about breaking down the walls of race and denomination. Your chosen Truth Network Podcast is starting in just a few minutes. Enjoy it.

Share it. But most of all, thank you for listening to the Truth Network Podcast. Welcome to Finishing Well with Certified Financial Planner, Hans Scheil, and today's show, is in state and inheritance tax, federal and state, as we are discovering through some different examples, that sometimes the states have their own idea of what this should be. And so, I've been talking to Hans a lot about this in a particular example we're going to go into depth in, that it reminded me of a situation where I worked for this dealership chain one time that one of the positions I got was to take over a store that was losing money hand over fist, and my boss told me one day, boy, I wish for the day that I could pay taxes again, because of the losses.

He wasn't in a position to pay the taxes. And I've thought about that statement ever since, that in its own way, that God gives us the income or gives us the financial means in order to pay taxes itself as a blessing, but also those taxes provide for a lot of things that, again, in my ministries, I talk to single moms and widows all the time that are so dependent on the government for things that I don't know if you thought about your tax money going to the wonderful things it does, including supporting our military and supporting our road systems and all these things. So when you think about Luke 638, you could choose to feel good about what you pay for your taxes. That's not to say be a good steward, but Luke 638 says, give and it will be given to you.

Good measure, pressed down, shaken together, running over will be put into your lap, for with a measure that you use, it will be measured back to you. And so to be stingy, even given to the government, you know, may not be the best plan, right, Hans? Yeah, I mean, I mean, just taxes are there for the reason the taxes are us. And any individual person that if there's some ways to lower the taxes, I mean, all four, it's my profession to help people do that, because they're the benefactors of that are your heirs, and your estate.

So it's on both sides of the issue is I don't belong taxes. I mean, it's just, it just is, I'm going to do in my personal situation, as well as for my clients, providing they tell me they want to do this, I'm going to do all the right moves is to make this tax bill as low as it possibly can be. So what we're talking about today is, first of all, federal estate taxes, okay, which are 40%, by the way, of the estate. So once you're beyond the exemptions, the federal estate tax is going to confiscate 40% of your estate.

I mean, let's just try that on for size. And the exemption during my career is just nothing to go up and up and up and up. You know, 25 years ago, the exemption was like a million, a million and a half, which is a huge amount of money to a lot of people.

To people that are millionaires, yes, or maybe are going to become millionaires before they before the time they pass. It's a pretty low number. And so we run into a lot of clients that are in their 80s now that did all this planning, a state tax plan 25 years ago, and they did it in assuming of, you know, exemption of about a million. And so you have people of trust and all kinds of things, when the exemption now, per person in 2024, is 13,610,000. And before you turn off the radio, and you say, Well, this doesn't apply to me, I'm going to say to you is, most people in America, it certainly doesn't apply to me personally. And that doesn't stop me from studying it.

And let's talk a little bit about how we got here. The 13 million is per person. So when you have a couple, it's 26 million. And so what a lot of well to do people have done over the 20 or 25 years, you know, in this decade, they have just kind of dismissed it as such a high threshold. I'm never going to pay a state taxes, they just dismiss the whole subject.

And just fill a little newsflash here. This thing is cutting in half, or it's going back to what it was before the Tax Cuts and Jobs Act in 2026. So for anybody that's going to die 2026 and after, you don't have a $13 million exemption, you've got a six point something exemption. And it's still a lot. You put it together with a couple, it's over 12 million. And so again, people say, I'm not anywhere near that.

I'm just not going to listen. But hang in there with me because what I want to point out is this was raised and raised and raised and raised, really over family farms, and family small businesses. You know, 25 years ago, you had the family farm that maybe used to be worth $300,000 was worth $3 million and $4 million, or the small business, again, that kind of passed from generation to generation without state taxes. And so there was an attempt to get the threshold out where they were talking about really rich people. I mean, if they really had to be straight about it, they were trying to exempt the kind of semi-rich with a family-owned business from the thing. And it's gotten up to such a high threshold, it's multi, multi 10 millionaires that it applies to. It's reverting back to the 6 million. And what's really going to go on here, I think, is the government's going to start looking for revenue because we're in such deficits and deficit spending and we've got Social Security to pay out and Medicare and problems like that. We have all this wealth transferring from the baby boomers to the next generation going on.

And the tax revenue, tax people or just the Congress is going to look for ways to raise revenue. So don't get too dismissive about these thresholds. This could, in the future, apply to you if you've got anything significant put together. So respond to me a little bit, Robert. Yeah. Well, I was just going to say that I love, I watched the video on the subject, which is it's Cardinal Advisors, right? It's the YouTube channel?

It's is the website and then the YouTube channel is Cardinal Advisors, ORS. Right. So I watched that and, of course, I'm nowhere close to those thresholds. However, I think it's wonderful information to help you with whatever estate you have to consider, wow, you know, what a cool thing it is to have an estate to hand over to your church or to your kids or whatever combination of beneficiaries you want to have.

But definitely good to think about and think about, you know, what kind of planning would be involved in this, whatever levels you got, because, you know, as we've talked about many, many times, just the word estate would indicate that money is going to, you know, pass through probate and these kinds of things all require planning, whatever level of estate you got, right? Well, that's exactly right. And so I'm not celebrating the changes in the threshold, anything. It isn't a matter of right, wrong, good and bad.

It just is. And when you look at the bigger thing is that when you've got the next generation inheriting money, like my kids, most likely are going to hear some substantial money from us. And I won't be anywhere near these exclusions, what they are now. But I'm just thinking that the government's going to figure out a way to get their hands on that when they're looking for revenue. So I think everybody ought to pay attention to these exemptions. And they are within our every financial plan that we do, we do an estate tax plan or a state plan of which tax is part of it. Now let's talk about the 18 states for government entities that have either an estate tax or an inheritance tax. And just before the break, they're on the channel, but Connecticut, DC, Hawaii, Illinois, Iowa, Kentucky, Maine, Maryland, Massachusetts, Minnesota, Nebraska, New Jersey, New York, Oregon, Pennsylvania, Rhode Island, Vermont, and Washington all have state inheritance taxes, either inheritance or an estate tax. An estate tax taxes the estate itself. An inheritance tax charges the heir the tax for receiving the money. So an inheritance taxes are going to have much lower thresholds. But many of these states have like a million, million and a half, two million. So there's people that want to come to sleep on the $13 million federal expenses exemption, and then they pass away. And then their kids, they live in New York or New Jersey or Connecticut, and their kids are dealing with a pretty hefty estate tax bill paying to the state. So you got all kinds of stuff messing around here. And I really don't want to give a lot of detail on this show.

I just want to kind of lay it out. And we're going to talk about a story where a client who of fairly moderate means, very moderate means, inherited a large sum of money from, this is an example that we're going to go over in a case study, inherited a large amount of money from his sister. And he came to me because it happens to be in the state of Washington. And he's going to pay a significant amount to the Washington estate tax. Darrell Bock Oh, yeah. I mean, and there is the deal that like you're talking about, if you fall asleep on the one on the federal number, you know, your state may be one of those that clearly did that.

And it caught him totally by surprise, right? Honza Oh, sure. Darrell Bock Well, we are at a point where we're about to go to a break. So we want to remind you, as always, that this show is brought to you by If you go to, there you're going to find Honza's website, which includes, of course, the seven worries tabs. And of course, the worry tab we're talking about today is simply the estate worry tab. And so, you know, if you want more information, of course, the show notes on this show will include, of course, the YouTube video, and these boards where you can see all sorts of the things we're talking about, these brackets, etc, highlighted, really a good way to absorb more of the material is all there at Again, under the seven worries tab, where you can also find Honza's book, The Complete Cardinal Guide to Planning for and Living in Retirement. And of course, my favorite, the contact page because, you know, obviously, this isn't anything I want to try at home. So and pretty easy to get, you know, from my stamp and extremely easy to get really, really wonderful help from Tom, from Hans, you just go to the contact page there at

So we'll be right back with a whole lot more on estate and inheritance tax, both federal and state. Tom Scott investment advisory services offered through Brookstone Capital Management LLC, abbreviated BCM, a registered investment advisor. BCM and Cardinal Advisors are independent of each other. Insurance products and services are not offered through BCM but are offered and sold through individually licensed and appointed agents. Cardinal Advisors is not affiliated with or endorsed by the Social Security Administration or any other government agency. Oh, welcome back to Finishing Well with certified financial planner, Hans Schall.

Today we're talking about estate and inheritance taxes, both federal and state. And certainly in today's example is a tugboat captain. How cool.

In the state of, is it Washington? It is. Yeah. And so he changed me from another tugboat captain that had bought my book six, seven, eight years ago or found in the library and read it. And he's, we've done a lot of things to help him. And he passed my name along and the book along. And this gentleman inherited what he told me originally was about two, three million who was in the estate, which is still a lot of money. And he's talking about the state inheritance tax. And then, you know, I'm just listening to him and not really trying to pull information out of him. But he was saying he definitely wants to hire me. He talked about his attorney that's helping him settle her estate. He talked about the accountant who I later found out is not a CPA, which is okay, but works under a CPA.

And how they were handling the thing and how they had handled it for the sister beforehand. And then he talked about his stockbroker or financial advisor and the advice that he was giving him. And, you know, he doesn't necessarily want to fire all these people, especially when they're in the middle of a mess, but he'd gotten a lot of inaccurate information in them all talking about each other's turf. And so what I did is I just, you know, decided to come in as a consultant.

And he hired me to just kind of look at the whole thing. And what I discovered is, is by beneficiary, he had already been transferred a $7 million IRA. So there's $7 million in the IRA. She was just 70.

So she had not done any minimum distributions. And then her husband had passed away, his brother in law, like four years earlier. And so, you know, now we have him inheriting as a brother. And pretty much, there are a bunch of other beneficiaries of the will, but the lion's share of the money is going to him. And he was the sole beneficiary on the $7 million IRA. And he didn't think that counted in the estate tax.

Because the money went straight, it was already his money, by the time he's looking at this, and I say, well, it is all your money now. But I had to deliver him the bad news. So I read up on the Washington estate tax, and I told him, first of all, as much money as we're talking about here, you need to find somebody, we need to find somebody that knows more about the Washington estate tax than I do.

Okay. And I'm thinking I know a fair amount right now, but I don't know enough to handle a case of this size. And so I had to deliver the bad news is the 7 million bucks that's already in his name counts in the estate. And then as well as the 2 million bucks, that was in a brokerage account, that wasn't in an IRA, but it transferred on death to him.

And so it was already his name. So there was 9 million bucks that came to him. And there was really only another 1.8 million in the whole rest of the estate, which is still a pretty sizable state. And when you plug all that into the Washington estate tax, it was like 1.4 million that he's going to end up owed.

Okay. And, you know, he's got a liquidity problem. I don't want to just go on and on about his situation, because the odds of this happening to anyone and you is probably pretty low. And then, you know, your sister, relative dying in the state of Washington, relative dying in a state with an inheritance tax. But the point I wanted to make is she did a number of deathbed things, she didn't have a will before dying, you know, on her deathbed, she did a will right there in the hospital, and did a number of things that she directed. And one of the simple things that they could have got advice, she could have done a Roth conversion of that whole 7 million bucks. And, you know, sure, it would have been a lot of taxes, but it wouldn't accounted for the estate tax. And he would have just inherited tax free money. Yeah, that it took me a minute when you first said that you said it in the video, for my brain to wrap around that idea.

But perhaps they can help some listeners that suffer from the same, you know, stream of consciousness as I do. But essentially, when you got this money, that's sitting in this RA and you have not paid tax on it, right, that obviously you're going to have to pay tax on it, whether you're going to have to pay tax on it, or your heir is going to have to pay tax on it. If you pay tax on it prior to it passing into your estate, but in other words, before you die, you pay tax on it, then what would have been $7 million going into your estate now, because the taxes coming out of it becomes 5.2 million or whatever it is, you know, after the taxes. So rather than all 7 million adding up into your estate, that was just tax money that was increasing the amount of the estate, right, then you're just paying, you know, by paying the tax out early before you pass, then it's not additional money going into your estate that doesn't need to because it's tax money anyway, right?

Hans, did I say that right? It's something that very wealthy people, a lot of them choose to do, is to go ahead and pay the taxes on the IRA and just do a conversion so their kids still inherit an IRA, a much smaller IRA, but it also reduces the taxable estate. It's a pretty simple move. But if we get back to reality here, this guy is so overwhelmed by all this. And, you know, some of the things we were able to help him do was to give, he's giving the money to the church and to the college that he wanted to give money to. And it just worked out to have him, since he's going to have such a big income from an IRA distribution, we were able to make those donations from him personally so that we at least got a tax deduction for that while we were pulling out, we pulled $4 million out of the IRA.

So we don't have to give a lot of details. The learnings here are, you know, if you're passing any amount of money in an IRA to your kids, you're probably better off spending your IRA money during your lifetime or converting it and living off of it and keeping money outside of an IRA that the taxes have already been paid to pass on to your heirs, if that's of concern to you. Watch out for the estate taxes.

I know people listen to Finishing Well all over the country. And so, you know, if you're in one of those 18 states, you need to think about that. If you're 65 years old or 60 or whatever age, and you need to think about the estate taxes that you're in, inheritance taxes that your kids are going to play, you're going to think about whether that's important to you or not. And we can plan for that, and to reduce the overall burden on taxes.

You know, a couple of things that I want to talk, bouncing back to the federal estate tax, I get a lot of questions. How much money can I give to my kids without paying any taxes, okay? Yeah, that number is now $18,000, okay? So you can give to anybody, not just your kids, any one person. If you're wanting to give money to your kids while you're still alive, for them to enjoy, you can give away 18 grand per person. So that means if you're a husband and a wife, and you've got a son who's married, I mean, each you and your wife, or husband can give $18,000 or $36,000 between the two of you to your son, and then you can give $36,000 to your daughter-in-law. So you could really give this couple, your son from the couple of you $72,000.

I mean, that's the annual gift tax exclusion amount in 2024. These estate taxes typically, and even the state inherits the state taxes, have a complete spousal exemption. So for this lady who passed away, that left her brother all this money, her spouse had passed away, her husband had passed away four or five years ago. And so they didn't file an estate tax return, but they didn't need to because he gave everything to her, and so it was a complete exempt deal. So I want you to get with estate inheritance tax or estate tax, there's such a thing as both, and like actually Maryland has both. So an estate tax covers the whole estate right after you die, and an inheritance tax is levied individually on the inheritors.

So I'm just going over some points here. Life insurance, unless it's set up properly to be kept out of the estate, that all counts. So now she didn't have any life insurance, but had she had life insurance and he was the beneficiary, that would count too in the overall estate, unless some things were done to keep him out of the estate.

So that's a good thing. Unless some things were done to keep it out of the estate, we could help that with you separately. Right. So people that have, or certainly that live in those states that have large life insurance policies really need to hit that contact Hans button to make sure that it's set up, not to go into the estate, right? Yeah.

And if there's actually a policy that is right now would be included in the estate, which is most of them, it takes three years and some legal maneuvers to get the policy out of your name and into your kid's name or into a trust name. Okay. And then if you're setting up life insurance policies and you just want to keep them out of the estate right from the beginning, that's pretty easy to do. Let's just, let's put it at that point without walking you through that.

It's much easier to set them up properly in the beginning. Well, we ran out of time before we ran out of the show once again, but we want to thank you so much for listening today. We want to remind you that the show is brought to you by If you go to there, you got the seven worries tabs, and this one would be under the inheritance where you'll find show notes, all sorts of levels and great information, as well as the video that goes along with today's broadcast. And again, of course, if we always talk about that contact page, like if you've got the life insurance issue or somewhere you want to contact Tom or Hans, get some questions answered to see if they might help you.

You just go to Even Hans' book, The Complete Cardinal Guide to Planning Foreign Living and Retirement, which our tugboat cabinet captain had read, which is how this all came about, and we all got to learn from. So great show today, Hans. Thanks.

Thank you, and God bless you. The opinions expressed by Hans Schile and guests on this show are their own and do not reflect the opinions of this radio station. All statements and opinions expressed are based upon information considered reliable, although it should not be relied upon as such.

Any statements or opinions are subject to change without notice. Investments involve risk and unless otherwise stated are not guaranteed. Past performance cannot be used as an indicator to determine future results. Any strategies mentioned may not be suitable for everyone. Information expressed does not take into account your specific situation or objectives and is not intended as recommendations appropriate for you. Before acting on any information mentioned, please consult with a qualified tax or investment advisor to determine if it's suitable for your specific situation.

Finishing Whale is designed to provide accurate and authoritative information with regard to the subject covered. Investment advisory services offered through Brookstone Capital Management, LLC, abbreviated BCM, a registered investment advisor. BCM and cardinal advisors are independent of each other.

Insurance products and services are not offered through BCM but are offered and sold through individually licensed and appointed agents. Cardinal Advisors is not affiliated with or endorsed by the Social Security Administration or any other government agency. Once again, for dozens of free resources, past shows, or to get Han's book, go to If you have a question, comment, or suggestion for future shows, click on the Finishing Whale radio show on the website and send us a word. Once again, that's This is the Truth Network.
Whisper: medium.en / 2024-02-17 10:28:47 / 2024-02-17 10:38:56 / 10

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