And the lesson is you better conform your life and business to the gazillion pages of IRS and government regulations.

Hire attorneys and accountants to wade through the regs for you, to make sure you protect as much as you can from the government.

Or don't hire a team of accountants and attorneys, and risk having the government take your legacy from your kids.

That's how we roll, here in the 'land of the free'.

 

A "living trust" does not eliminate taxes. It will remove probate, which is a state by state level.
Not having to go through probate in your state has 0 impact on federal taxes.

There are a few other types of trusts aside from a "living trust" ( which can mean a few things depending on your state ) that can help in minimizing taxes.

The reduction in federal taxes is when the trust holds the assets, so they are not transferred to another person ( if they do not change ownership, there is no "death tax" ).

The trustee(s) can use the assets, but they never own them.

One common use ( for other than "living trust" ) is 2 married people will have 50% of the holdings in 2 trusts. When one dies, instead of using a will to pass all holdings to your spouse, they are held in the trust and used by the trustee ( the other spouse ). It is a game of either making sure you have the trust designed correctly or it is depleted to below the level for the federal "death taxes".

 

That was changed to the standard vs itemized deductions calculation on federal taxes. It did not "go away" the name of it was just changed.

EDIT :
Keep in mind it is a mortgage INTEREST deduction, not a deduction for the interest and principal amount.
This is taken instead of the standard deduction, so if you do not have a large enough mortgage interest total ( i.e. year 17 and on of a 30 year note ) and/or a high enough interest rate, you might just get the standard deduction anyway.

 

The mortgage deduction has nothing to do with the actual mortgage like the rent deduction. Just the interest, which on a 30 year loan can be much more than the actual mortgage itself. Without mortgage loans, no one would be able to afford a home except for the very rich.

 

IMO, they won't do away with the mortgage interest deduction, for a wide variety of reasons:

1) Changing the rules in the middle of the game is unfair (this one does not really matter, but I thought I'd throw it in anyway)
2) There are arguably some good economic and quality of life reasons for the government to promote home ownership among the citizens.
3) Housing prices will go down dramatically if you eliminate the interest deduction, making people even more upset about the economy and hurting the retirement nest egg of every homeowner.
4) A huge amount of the government's 'wealth' and the banking industries balance sheets are tied up in backing residential mortgages. If you hurt housing prices, the value of this government and bank assets goes way down. Our creditors will want much higher interest rates on the money we borrow, and Fannie Mae, Freddie Mac, FHA, and many banks will go under for sure.

Basically, eliminating the interest deduction could have some HUGE negative consequences on the economy, and would hurt all of us, not just homeowners.

 

Doing things because of negative connotations has never stopped them before.

Edit - Example, Obamacare the so called affordable health care bill, which does everything it can to ensure health care costs go up. Raising the threshold for medical deductions from 7.5% to 10%, taxes on medical devices that can save your life, fees on health insurance companies that are sure to be passed along to the consumer.

 

And what if you live in an area like I do where no one has that kind of money to buy a few hundred acre family farm? There is a few of them that size around here for sale (maybe because of the death tax IDK) and no one can afford to buy them, they have been for sale for probably 10 years. And if I cant sell it where do I come up with the $550,000 to pay the government? To make it short, I cant, I DO NOT have anywhere near that kind of money and if I was given a farm that size I garuntee that I would not be able to sell it in this economy.

 

Actually, IMHO, the mortgage deduction is a very proper use of the government's power to "promote the welfare" of the country. I have bought and sold several houses in my time and the houses I've profited the most from were the ones that were rentals. Normally the landlords don't keep the houses in the best of shape. They are good enough to live in, but if you own it you would improve them. The reason landlords typically don't' keep the houses in the best shape is because the renters don't take care of the houses as well, so maintaining the house like the you own and occupy it is spending money that doesn't need to be spent. In my neighborhood this can be seen very clearly. Generally the houses that are rentals are not maintained as well on the exterior as the ones that are owner occupied. Since the overall condition of houses in my neighborhood have declined during the time I've been here the "quality" of occupants have slowly declined also. There are more police responses to my neighborhood than when we first moved in.

By offering the mortgage interest deduction the government is encouraging home ownership. This theoretically leads to the occupants of houses taking care of those houses and since they have a vested interest in the neighborhood, keep the neighborhood looking nice. Also by taking care of the houses more money can be asked when it comes time to sell. As the value of a house drops the likelihood of people not having the ability nor desire to maintain the house in a manner consistent with the neighborhood increases. This further lowers the value of the surrounding houses. It becomes a "self fulfilling prophecy". Don't underestimate the neighbors in sale of a house. I will normally drive through a neighborhood when most people are home, just to see what they drive and do when home. If it appears many are house rich and money poor I take that into consideration in determining whether I want to buy there.

 

The IRS will simply seize the property and auction it off to pay the taxes. It really is that simple. I've looked for property in several states, and generally speaking most people I've talked with, who have had land for sale for many years, are not really motivated to sell. They want what they want and nothing less. Most seem to be listed as for sale only so people know they will entertain offers if someone wants the land. I looked at a chunk of land on one of the islands near Sioux St Marie (I was thinking of transferring up there) it was 40 acres and the person was asking less than 100k for it. The problem, no major access to the island from the mainland. The only access was a ferry. That meant I would be paying a good chunk of change for property that I had limited access to and from. Since if I transferred I could possibly have a very fluid schedule I needed access at all times. It was all for naught though, since the wife said "HELL NO" when I brought up the idea. It isn't only up there. It seems people hear of land going for huge money and think they can get that living out in the middle of BFE.

 

The estate tax you paid in 1990 was not federal. when my parents died recently there was NO tax here in Utah..

 

I know it was not federal, as I stated it was for Pa. Federal estate taxes do not kick in until a certain amount, I believe it is $200,000, but may be mistaken. In your case it sounds like Utah has no death tax or as with federal, it has a threshold before it kicks in.

 

schrew the gubment!

 

And starting in January, some capital gains on real estate sales will be subject to an additional 3.8% tax for Obamacare.

The new tax is convoluted and it does not effect everyone (it's targeted at the 'rich' and high $ sales). But it could come into play if the familiy has owned real estate a long time and is forced to sell a big chunk to pay death taxes.

http://money.msn.com/health-and-life...-38percent-tax

 

I have been studying law to the tune of about 400 hours. The stuff I find is scary to say the least.

I've been building potential law cases for myself as to not hire attorneys who have sworen an oath into the law society

 

Here is the estimate as to how many family run farms would be in jeopardy. About 25% or over 562,000. That is a lot of families to destroy.

http://washingtonexaminer.com/632281...8#.UMiVlXdxV8F