Clinton’s estate tax plan is the wrong approach

I really get wound up reading Sen. Hillary Clinton's proposed idea of using estate taxes to provide a new matching, refundable tax credit for retirement savings as reported in the April 14 issue story "With candidates behind estate tax, chance of repeal seen as unlikely."

I really get wound up reading Sen. Hillary Clinton’s proposed idea of using estate taxes to provide a new matching, refundable tax credit for retirement savings as reported in the April 14 issue story “With candidates behind estate tax, chance of repeal seen as unlikely.”

While not necessarily agreeing that the estate tax should be re-pealed completely, I am one of the many financial advisers who think that the estate tax represents double taxation.

I have in the past been very much in favor of incentives to encourage folks to invest for their own futures (i.e., the Taxpayer Relief Act of 1997). On the surface, Ms. Clinton’s suggested new “match” may seem similar to these past tax incentives.

But I can only rail against a plan that virtually gifts money to taxpayers for their retirement plans. Here, again, is another example of expecting the government to do things for us instead of taking responsibility for our own need to save and invest.

I prefer to put the responsibility for retirement planning on the only accountable entities: ourselves. And I am very frustrated with a society that thinks that it is the government’s job to compel us to action by gifting the money paid by taxpayers like me.

Shouldn’t our tax dollars be going to support the infrastructure of the country and communities in which we live, instead of funding individuals’ retirements?

Who knows? Should this be put in place and become entrenched for a few generations we may end up with yet another government plan that was never intended to wholly support us but that we have come to rely on to the extent that we expect it to take care of us completely — like, say, Social Security?

Kim T. Koloen
Financial adviser, registered representative/investment adviser representative
Willamette Financial Group LLC
Salem, Ore.

Estate-planning column needs clarification

In the Investment Strategies column “Errors can lead to unnecessary taxes” by David T. Phillips in the April 14 issue, regarding estate-planning errors, I found it ironic that the writer committed several of his own.

It may appear inconsequential, but the terminology regarding the marital deduction is quite important. It isn’t a “100% marital exclusion” but rather a deduction.

In many cases, the result is merely a postponement of the federal estate tax.

Moreover, Mr. Phillips claimed, without immediate clarification, that retirement funds payable to non-spousal beneficiaries “are subject to income tax in the year following the year of death” as if no opportunity exists to stretch the payout.

In another paragraph, he asserted that the client “stood to forfeit the marital exclusion and the estate tax exclusion” because he named his children as the primary beneficiaries.

First, the correct terminology is the applicable exclusion amount. And that isn’t forfeited but merely used in this case to a maximum of $2 million in 2008 for assets that pass to non-spousal, non-charitable beneficiaries.

To assert that just $400,000 remains from a $2 million distribution of an individual retirement account to a daughter after estate and income tax is a gross distortion.

James M. Knaus
Certified financial planner
Global Wealth Advisors LLC
Troy, Mich.