US citizenship/GC seekers -do you really love your children?

A

atrayapr1

Registered Users (C)
This is a continuation of my previous thread which got mired in legalities--
My concern was more of ideals. Coming from a close knit family in India, my parents sacrificed and saved such that I could have a better life. I want to do the same for my children, so my wife and I have concentrated on saving and growing wealth rather than splurging on a good life.
Now I find that US is not the country to do this. The country appears bent on taxing any money transfer between parents and their children. After an amount of X million (changes every year), almost 50% of the entire amount has to be donated to the US govt. before your children see any of it. This comes as a rude shock to many Indians who live in close knit families.

That X million BTW is not a large amount. Consider that husband and wife work as S/W engineers for 40 years, each makes 125K avg. and has investment income of 50K per year. That translates to 12M in earnings and assuming savings rate of 40%, there is 4.8M in the estate. Also 401K will be worth about 2 million for the couple by retirement. So the estate is around 6M. By 2011, the estate tax exemption is set to revert back to 1M, so 2M out of 6M is exempt and 4M is subject to tax.
Therefore your kids would have to pay 2M to the US govt.

Really did not expect to have to choose between citizenship and my children. Wonder what other Indians on this board think of this.
 
atrayapr1 said:
Really did not expect to have to choose between citizenship and my children. Wonder what other Indians on this board think of this.
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Other people perhaps are not that rich to be concerned. For most, they love children but children will have to grow up to make their own livings.
 
Working as software engineers for 40 years?? And making at least 125K per year all those years? Where do you get these figures from?
 
nkm-oct23 said:
Working as software engineers for 40 years?? And making at least 125K per year all those years? Where do you get these figures from?
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Just an estimate. Obviously you'll make less than that soon after you graduate, but you definitely can make more after lets say 20 years experience. What do you think?
 
You can love your children without sacrificing having fun during your life. Of course everyone should save money to ensure that they are never put in a position of not being able to afford to survive but, at the end of the day, the entire economy relies on people ultimately spending money. I'm sure this key fact is why many, if not most, western capitalist countries have inheritance taxes that some would consider punitive.
 
nkm-oct23 said:
Working as software engineers for 40 years?? And making at least 125K per year all those years? Where do you get these figures from?
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I think he can forget about the $50K per annum investment income at the moment too.
 
While I don't disagree with the original premise against taxing wealth, anyone with enough money to hit the estate tax should be smart enough to hire professional help so that one can use one of the numerous ways of getting around the estate tax.
 
Suppose they took 100% of the amount over $2M.

Boo hoo hoo, the kids only inherit $2 million. I feel so sorry for them, the poor destitute souls.

You should also be aware that high net worth individuals surrendering their green card or citizenship are potentially subject to the expatriate tax on their wealth. So surrendering US citizenship or permanent residence to escape the estate tax could result in paying even more taxes in other ways.
 
Those of you who hate the estate tax so much ... would you prefer it if they instead obtained that revenue via income taxes while you were alive?
 
Jackolantern said:
Suppose they took 100% of the amount over $2M.

Boo hoo hoo, the kids only inherit $2 million. I feel so sorry for them, the poor destitute souls.
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Here's an interesting snippet from an article in a UK newspaper:

"In fact, the inheritance tax should really be called the Darwin tax. Anyone with enough money to get caught by the IRS is stupid enough to a) believe that they are immortal, or b) think that they are clever enough to dispense with the services of estate planning accountants and lawyers. The gene pool and society are enhanced if their offspring don't get large dollops of free money. With the very real educational and social advantages that wealthy parents give their progeny, windfall inheritances just deprive them of the get up and go urges that free-marketeers always urge on the unemployed.

This is a view clearly shared by some of the more entrepreneurial souls including Conrad Hilton, who obviously thinks that his daughter can provide for herself by using her own distinctive skills. Warren Buffet and Bill Gates likewise have put their fortunes to use for good works, and Buffet gets years lopped off purgatory by giving his to the Gates Foundation rather than by bidding for nominal immortality with his own eponymous foundation."
 
Jackolantern said:
Those of you who hate the estate tax so much ... would you prefer it if they instead obtained that revenue via income taxes while you were alive?
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That is a better alternative. A fair tax on income will require that we save more if we need to pass on wealth. The estate tax goes in the other direction, we spend more and pass on less. Completely against family values. No wonder the family structure in the US is falling apart.
 
atrayapr1 said:
The estate tax goes in the other direction, we spend more and pass on less. Completely against family values. No wonder the family structure in the US is falling apart.
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As I said in an earlier comment, the entire economy of the world relies on people spending money. Whatever bankers may try and tell you, it is the transfer of material goods that ultimately drives the economy and is indeed its foundation. Everything else is just smoke and mirrors when viewed as part of a big enough picture.

I absolutely don't see your point about family values either. Why can't you maintain a good family structure by spending and saving your money appropriately to ensure that neither you nor your children ever have to suffer, while at the same time teaching them about real life and preparing them to live it on their own? People who acquire extensive wealth from their parents are frequently not nice people if they haven't also been taught how to survive on their own and experienced such survival first-hand. Just look at Paris Hilton as an example.
 
dms1 said:
As I said in an earlier comment, the entire economy of the world relies on people spending money. Whatever bankers may try and tell you, it is the transfer of material goods that ultimately drives the economy and is indeed its foundation. Everything else is just smoke and mirrors when viewed as part of a big enough picture.

I absolutely don't see your point about family values either. Why can't you maintain a good family structure by spending and saving your money appropriately to ensure that neither you nor your children ever have to suffer, while at the same time teaching them about real life and preparing them to live it on their own? People who acquire extensive wealth from their parents are frequently not nice people if they haven't also been taught how to survive on their own and experienced such survival first-hand. Just look at Paris Hilton as an example.
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On the other hand for every Paris Hilton, we have 10 people like the Fords, Ambani's, Tata's, Birla's etc. who inherit assets and create family owned businesses which are the pride of their country.
You need a serious think about the economy. Its people's spending that has created this current financial mess. Every country which has a high savings rate (India,China,Australia etc.) has escaped or experienced less slowdown. Surprisingly the higher saving countries have experienced spectacular growth rates in the past 10 years.
Maybe spending did create a bubble economy for the past 30 years or so, but it should be clear by now that savings are the way to go.
 
dms1 said:
You can love your children without sacrificing having fun during your life. Of course everyone should save money to ensure that they are never put in a position of not being able to afford to survive but, at the end of the day, the entire economy relies on people ultimately spending money. I'm sure this key fact is why many, if not most, western capitalist countries have inheritance taxes that some would consider punitive.
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Good news is that inheritance tax rates have been silently whittled down. It was almost 80% some decades ago with a small exclusion and currently stands at 46% with almost $7M exclusion for couples. Even European countries have greatly reduced these taxes. Clearly governments are seeing things my way, hope it continues.
 
atrayapr1 said:
On the other hand for every Paris Hilton, we have 10 people like the Fords, Ambani's, Tata's, Birla's etc. who inherit assets and create family owned businesses which are the pride of their country.
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The key point here is that the wealth was passed down in the form of a company, not pure cash, with the descendants working in the company, often initially on the same terms as any other employee.

You need a serious think about the economy. Its people's spending that has created this current financial mess. Every country which has a high savings rate (India,China,Australia etc.) has escaped or experienced less slowdown. Surprisingly the higher saving countries have experienced spectacular growth rates in the past 10 years.
Maybe spending did create a bubble economy for the past 30 years or so, but it should be clear by now that savings are the way to go.
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If everyone adopted a long-term strategy to only spend what they need to survive and save everything else, the world economy would collapse within a generation.
 
atrayapr1 said:
That is a better alternative. A fair tax on income will require that we save more if we need to pass on wealth. The estate tax goes in the other direction, we spend more and pass on less. Completely against family values. No wonder the family structure in the US is falling apart.
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Well, I'd rather have more of the money when I'm alive and have the taxes take away more of it when I'm dead.

And if you want to talk about family values, I wouldn't want my children to just loaf around and live off of millions they didn't work for, and if I had millions I wouldn't give them so much to enable them to be like that.
 
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dms1 said:
The key point here is that the wealth was passed down in the form of a company, not pure cash, with the descendants working in the company, often initially on the same terms as any other employee.
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Argument again does not make sense. So its OK to buy a company with cash, transfer that to my son who can sell the same for cash without inheritance tax but not OK to directly transfer cash to my son. The only people I see profiting from this are lawyers and accountants.
 
atrayapr1 said:
Argument again does not make sense. So its OK to buy a company with cash, transfer that to my son who can sell the same for cash without inheritance tax but not OK to directly transfer cash to my son. The only people I see profiting from this are lawyers and accountants.
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No - you are missing the point completely. In the examples you quote, the parents didn't save all they earned and then hand a wad of cash to their children so that they could lead a dead-beat life without having to lift a finger. Instead, they invested in building a business that they trained their children to be part of so that the business could remain in the family across generations.

If you are that concerned about your children's future why don't you start a business that can guarantee them employment and training and that you can ultimately pass down to them?
 
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