If you are the first person in the family to accumulate significant wealth you probably had to work hard in one way or another to put together these foundational resources. You also have to work hard to make sure that they stay in the family for generations to come.
It is logical to assume that “money makes money.” According to experts a lot of people who inherit large sums of money do embrace this mantra, but they ultimately sit around waiting for this money to multiply without taking very pointed and informed steps.
There is an enlightening article on the Wall Street Journal website on the topic of lost inheritances. The article states that 70% of inherited wealth is gone by the time the second-generation passes away. This figure rises to 90% at the conclusion of the third-generation.
One of the primary contributing factors to this steady and profound erosion of wealth is the estate tax. On the federal level the death levy carries a 40% maximum rate, and the exclusion is just $5.25 million this year.
Some people argue against the fairness of the estate tax at any rate because of the fact that the assets that comprise your estate are a remainder that you have left after paying taxes throughout your life. They say that the estate tax is an instance of double taxation.
It really doesn’t stop at the double point because the resources would be taxed again when the second-generation passes them onto the third, and this can go on and on until virtually nothing is left.
Fortunately there are steps that can be taken to slow this erosion of wealth. To gain an understanding of how you may be able to preserve your wealth for future generations contact our firm at (317) 684-1100.
Mr. Kraft assists clients primarily in the areas of estate planning and administration, Medicaid planning, federal and state taxation, real estate and corporate law, bringing the added perspective of an accounting background to his work.