The GOP is mortgaging the nation’s future to benefit the rich

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Sometimes Congress hands out a break that is so generous it seems it must be a mistake.


This one’s a doozy: the ability to receive a tax-free inheritance of $400 million or more.




Thanks to two recent changes in the tax code, investors with huge 401(k) accounts have a way to turn them into tax-free income for their grandchildren’s lifetimes.





http://www.washingtonpost.com/busin...ids-super-rich/2011/06/20/AG2DoskH_story.html






A wealthy family can pass along a fortune of as much as $400 million to an heir without paying any taxes.






This is made possible by two recent changes in the U.S. Tax Code: one lifted a $100,000 income cap on people who convert a 401k to a Roth IRA, and the other raises the generation-skipping transfer tax (or GST) exemption to $5 million from the $1 million originally scheduled for this year.






On their own, the changes are modest. When combined, they can create huge windfalls:





“A wealthy individual converts a large 401(k) account to a Roth IRA and names a grandchild as the beneficiary. The grandchild, at age 1, inherits the Roth, whose assets have grown to $5 million. Because of the new $5 million GST, the Roth assets would not be subject to estate tax or generation-skipping transfer tax.”


Over the child’s lifetime, assuming an annual return of 8% and a life expectancy of about 82 years, the total income could exceed $400 million, completely free of estate, gift, income and capital gains taxes.










http://blogs.wsj.com/wealth/2011/06/28/the-stealth-tax-reduction-for-the-wealthy/
 
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