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Silicon Valley Billionaire Takes Out $201 Million Life Insurance Policy

samzenpus posted about 4 months ago | from the things-you-want-to-keep-to-yourself dept.

The Almighty Buck 300

Hugh Pickens DOT Com writes "The Mercury News reports that somewhere in Silicon Valley, a 'mystery billionaire' has bought what the Guinness Book of World Records says is the most valuable life insurance policy in history — a policy that will pay his survivors a cool $201 million. Was it Larry Ellison? Eric Schmidt? Elon Musk? Zuck? Nobody knows because the name of the buyer is a closely guarded secret. 'We don't want hit men running around Palo Alto trying to find him — or members of his own estate,' joked Dovi Frances, the Southern California financial services provider who sold the policy. By last count, California boasts 111 billionaires with more than a third of them in tech, while San Francisco has 20 billionaires alone so it could be any of them. But why does a billionaire even need to take out life insurance when he or she has so many other assets. The most likely answer to this question is taxes and estate planning.

Upon death, an estate would be liable to pay off loans on any leveraged properties, plus a lot of money as part of the death taxes owed. This could force the estate to liquidate holdings to raise the money to pay off these liabilities even if it weren't the most opportune time to sell the assets. By taking out the life insurance policy, it would give the estate more flexibility in paying off the taxes and other debts owed, without necessarily having to sell assets to do so. 'In California, there are state death taxes that are exceptionally high (45 percent),' says Frances adding that the policy is actually a combination of more than two dozen policies, underwritten by 19 different insurers because if any single company had to pay out such a lavish benefit, it could be crippling. 'If your properties are leveraged then those loans are called immediately and need to be paid off, you want to hedge yourself against such a risk so [your beneficiary] can receive the proceeds without being exposed to taxes.'"

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But... (1)

Anonymous Coward | about 4 months ago | (#46505551)

We don't want hit men running around Palo Alto trying to find him — or members of his own estate,' joked Dovi Frances, the Southern California financial services provider who sold the policy.

But they do want the publicity from having sold the policy or they wouldn't be disclosing this since it is nobody's damn business.

Re:But... (2, Funny)

Anonymous Coward | about 4 months ago | (#46505647)

it is nobody's damn business.

Actually....

We need to stop big tax dodgers useing loop holes (-1)

Joe_Dragon (2206452) | about 4 months ago | (#46505561)

We need to stop big tax dodgers useing loop holes to pay no taxes.

Re:We need to stop big tax dodgers useing loop hol (5, Insightful)

Mitreya (579078) | about 4 months ago | (#46505623)

We need to stop big tax dodgers useing loop holes to pay no taxes.

No, no, no!
We need to force politicians to eliminate the loopholes, which are all legal and often intentional

To create legal loopholes and then to expect people to voluntarily pay more (than they have to) taxes is a losing and pointless battle.

Re:We need to stop big tax dodgers useing loop hol (3, Insightful)

pdangel (812046) | about 4 months ago | (#46505675)

You and the OP are still seeing the wrong side of this.... Why is there an estate tax of 45% upon anyone's death!!! That income has been taxed already. Bequeathment is not a fucking INCOME issue.

Re:We need to stop big tax dodgers useing loop hol (1)

I'm New Around Here (1154723) | about 4 months ago | (#46505777)

If money (or any object) is passed from one person to another, some people want their "fair share" of it. Even if, as you say, those people already had their fair share of it.

Re:We need to stop big tax dodgers useing loop hol (1)

Calinous (985536) | about 4 months ago | (#46505813)

Why do the government imprisons pickpockets?
      They hate competition

Re:We need to stop big tax dodgers useing loop hol (4, Insightful)

KingOfBLASH (620432) | about 4 months ago | (#46506107)

Quite a few billionaires (Buffet, Trump) would disagree with you.

If I am a brilliant man and create a company (and create value), I deserve to keep that. But why should my descendants, who are by virtue of their birth part of a "lucky sperm club," entitled to all that wealth?

True capitalism should require a level playing field when you start, and to really do that, when the final score is tallied, the slate should be wiped clean.

That's why such super high estate taxes exist. And typically they're not for you and me, it's for people over a certain threshold (say $1 mio + in assets)

Re:We need to stop big tax dodgers useing loop hol (3, Insightful)

Anonymous Psychopath (18031) | about 4 months ago | (#46506385)

Quite a few billionaires (Buffet, Trump) would disagree with you.

If I am a brilliant man and create a company (and create value), I deserve to keep that. But why should my descendants, who are by virtue of their birth part of a "lucky sperm club," entitled to all that wealth?

True capitalism should require a level playing field when you start, and to really do that, when the final score is tallied, the slate should be wiped clean.

That's why such super high estate taxes exist. And typically they're not for you and me, it's for people over a certain threshold (say $1 mio + in assets)

Because building for my family's future is one of my primary motivators. I'm not just in it for myself. If I die I want my kids to receive the same education they would if I were still alive. The government already takes half of what I earn, and I will do everything legally possible to give them nothing more when I die.

Re:We need to stop big tax dodgers useing loop hol (1, Troll)

ganjadude (952775) | about 4 months ago | (#46506421)

if you write up a proper will, you can give that money to anyone

The point is that it is YOUR money, and you paid the taxes on it. As such why the fuck should the government get to double tax you?? just because you are no longer alive to defend yourself? its robbery end of story

Re:We need to stop big tax dodgers useing loop hol (0)

Anonymous Coward | about 4 months ago | (#46505797)

You and the OP are still seeing the wrong side of this....

Why is there an estate tax of 45% upon anyone's death!!! That income has been taxed already. Bequeathment is not a fucking INCOME issue.

Capital gains are NOT taxed before death if the property is held and not traded.

Re:We need to stop big tax dodgers useing loop hol (1)

alen (225700) | about 4 months ago | (#46505891)

well the way it works out the heirs would have to pay the taxes to get the property and then pay the capital gains taxes again if they sell it a few years later

Re:We need to stop big tax dodgers useing loop hol (3, Insightful)

Actually, I do RTFA (1058596) | about 4 months ago | (#46506213)

then pay the capital gains taxes again if they sell it a few years later

They pay capital gains based on appreciation from the fair market value when they inherited the asset, not when the purchase price their ancestor paid.

Re:We need to stop big tax dodgers useing loop hol (0)

Anonymous Coward | about 4 months ago | (#46506269)

Upon sale, they'd pay capital gains only on the increase in value relative to the valuation at the time the estate taxes were paid. So, no "again".

Re:We need to stop big tax dodgers useing loop hol (0)

Anonymous Coward | about 4 months ago | (#46505799)

AND, this isn't avoiding paying taxes, it's paying for death insurance to pay for those taxes.

Re:We need to stop big tax dodgers useing loop hol (1)

alen (225700) | about 4 months ago | (#46505901)

not really, chances are the property of the estate is put up as collateral for a huge loan to live off of. person dies and the debts must be paid, so everything is sold off to pay the debts.

but wait, there was an insurance policy. policy pays off the debts or just pays the heirs and the estate is sold off saving lots of money in taxes

Re:We need to stop big tax dodgers useing loop hol (5, Insightful)

bentcd (690786) | about 4 months ago | (#46505835)

Why is there an estate tax of 45% upon anyone's death!!!

Because if you don't heavily tax (effectively) inheritance then that's your new aristocracy right there.

Re:We need to stop big tax dodgers useing loop hol (0)

Anonymous Coward | about 4 months ago | (#46506047)

Yeah, it was really hard to get my mother to understand this. Somehow SHE is offended that a lot of HER wealth will be taken in taxes when she's dead. I don't care (I presume some of it would go to me, but it's not like I'm poor) but she's outraged about it. She's going to be dead! She's got no use for it, but she's offended that it'll be spent on useful stuff for society rather than handed to her heirs.

I live in the UK, we used to have old rich families where nobody had done anything of much use for centuries, but they inherited the wealth, the land, the titles, and so despite that they stayed rich. But estate taxes sorted that out. They have to work like everybody else, or else soon enough the money is all gone. Suddenly the big old manor house that had three people living in it was a LIABILITY and they had to find a way to MAKE IT GENERATE REVENUE or sell it before the estate tax bankrupted them. So now it's a hotel, or it's a conference centre, or serves some other useful purpose instead of sitting there mostly empty.

Re:We need to stop big tax dodgers useing loop hol (2)

alen (225700) | about 4 months ago | (#46506113)

in NYC the rich people buy up municipal bonds that are used to build infrastructure. actually its done like this all around the USA

rich people with lots of money like say $10,000,000 want a safe low risk place to park it and live off the interest. cities and counties want people to lend them money at low interest because there is no other way to build large infrastructure projects. NYC for instance they are building a huge new water pipe and there is almost $20 billion of transportation construction going on now.

it's not like this money is not doing anything useful

Re:We need to stop big tax dodgers useing loop hol (5, Insightful)

RabidReindeer (2625839) | about 4 months ago | (#46505841)

You and the OP are still seeing the wrong side of this....

Why is there an estate tax of 45% upon anyone's death!!! That income has been taxed already. Bequeathment is not a fucking INCOME issue.

It may have been taxed as income for the principal - although anyone that rich probably managed to find a way not to pay it to begin with - but when the estate is passed to heirs, it becomes their income, and just like any other system where cash flows from point to point, it becomes fair game for the taxman again.

I will get a lot of grief for saying this, but I wouldn't cry if the whole Death Tax thing were 100% less what it takes to support minor heirs until they're grown up enough to be able to make their own fortunes. That's because the best legacy that a successful person can leave his/her heirs isn't a large chunk of money, it's the skills and mentoring that will make them successful on their own without simply breeding up a generation of useless drones living off other people's hard work. And after all, isn't that what we revile welfare recipients for?

We don't (so far) allow you to be handed political power simply because of who your parents are a la monarchy in the USA. But we do support handing wealth to people simply because of who your parents are.

Re:We need to stop big tax dodgers useing loop hol (1)

Nidi62 (1525137) | about 4 months ago | (#46506157)

We don't (so far) allow you to be handed political power simply because of who your parents are a la monarchy in the USA. But we do support handing wealth to people simply because of who your parents are.

These days they are pretty much the same thing.

Re:We need to stop big tax dodgers useing loop hol (2)

Wycliffe (116160) | about 4 months ago | (#46505845)

You and the OP are still seeing the wrong side of this....

Why is there an estate tax of 45% upon anyone's death!!! That income has been taxed already. Bequeathment is not a fucking INCOME issue.

I think YOU are seeing the wrong side of it. Why is taxing income the best way to tax people? Income is wealth generation,
we shouldn't tax it. Taxing consumption would be much better. Originally in the USA estate tax was the only form of taxes.
This also makes sense to me as you're only taxing people after they are dead. Especially today as people generally live long
enough to see their grandchildren established, I think this is a great idea. Taxing people after they are dead with maybe an
exception for people who die while still having young dependents seems like the least painful way of collecting revenue for
the government. And as far as the "that income has been taxed already", all money has been taxed already, most forms of
taxes including income tax, sales tax, estate tax, etc... are a tax on the transfer of money from one person or company to another.

Re:We need to stop big tax dodgers useing loop hol (0)

Anonymous Coward | about 4 months ago | (#46505947)

California has no estate tax.

Re:We need to stop big tax dodgers useing loop hol (1)

Gavagai80 (1275204) | about 4 months ago | (#46506005)

Why isn't estate tax 100%? Why should countless future generations of a family who've done nothing to earn it never have to do a day of work while the rest of society suffers? Inherited wealth is as unfair as it gets.

Re:We need to stop big tax dodgers useing loop hol (1)

Actually, I do RTFA (1058596) | about 4 months ago | (#46506139)

Why is there an estate tax of 45% upon anyone's death!!!

There is not a tax on anyone's death. There is a tax on receiving an inheritance. There is more than a semantic difference. Given X dollars, dividing them among Y heirs leads to no taxes, regardless of how large X is (although the higher X is, the higher Y needs to be).

That income has been taxed already.

Oft times not. Death obviates long-term capital gains taxes. So that's, in the most advantageous case 20%. It also obviates other cases of asset appreciation being taxes, which can be 28% or higher.

Bequeathment is not a fucking INCOME issue.

What is bequeathment if not income?

Re:We need to stop big tax dodgers useing loop hol (1)

NatasRevol (731260) | about 4 months ago | (#46506223)

Interesting that the 45% rate isn't really California's tax.

http://www.marketwatch.com/sto... [marketwatch.com]

Federal death tax is 40%.

Re:We need to stop big tax dodgers useing loop hol (0)

Anonymous Coward | about 4 months ago | (#46506245)

Because the founders of our country didn't want a nobility system in place. Because the foundation of the country was that inherited wealth wasn't supposed to be a ticket to never having to work.

Re:We need to stop big tax dodgers useing loop hol (0)

Anonymous Coward | about 4 months ago | (#46506423)

You don't become a billionaire by writing lots of checks to the IRS. All those fuckers are huge tax dodgers, so fuck them and their heirs. We should take 90% if your total worth is over $10million...

Re:We need to stop big tax dodgers useing loop hol (0)

Anonymous Coward | about 4 months ago | (#46506491)

Most movements of money get taxed at each movement. It's not like each dollar has a marker on it saying it only has to be taxed once.

Really, the worst thing that can happen to a society is the creation of an aristocracy.

Re:We need to stop big tax dodgers useing loop hol (1)

Sockatume (732728) | about 4 months ago | (#46505875)

You've got to balance having a tax system that's got loopholes, and having a tax system that's tied in intractable knots. You can at least fix the former by patching in exceptions and exclusions.

Re:We need to stop big tax dodgers useing loop hol (0)

Anonymous Coward | about 4 months ago | (#46506229)

What do you say to the following?

1. Primary tax revenue comes from VAT, Import Duty, and leasing rights to natural resources.
2. Some property and usage taxes like the gasoline tax, etc.
3. Strip 90% of the welfare system by simply giving everyone who signs up an equal a tax refund of around 50% of the money coming in from the VAT. AKA 50 % percentage of VAT revenue / number of people signed up for refund is the amount someone would get.
4. For those deemed unable to manage their own life and money the state would assign and monitor custodians to find and fund the services those people need. AKA Those who need group housing or institutionalization.

Re:We need to stop big tax dodgers useing loop hol (0)

Anonymous Coward | about 4 months ago | (#46506431)

Damn it, I forgot about 5 which is possibly the most important.

5. All payments on Government debt are to coming out of the VAT refund. People should feel the effects of allowing the government to over spend. Think of the wars the US might not have gotten into.... Of course we might not have gone to the moon ether.

Re:We need to stop big tax dodgers useing loop hol (0)

Anonymous Coward | about 4 months ago | (#46506043)

One of my favorites is the so-called "Saratoga" loop hole. Collect two weeks of rent on your property tax-free.
So named because it is believe that the loop whole was created around the Saratoga horse race which attracts a huge following of the rich who are willing to pay absurd rents for houses in the area during those two weeks of the year. Why should rich house owners have to pay tax when their collecting big fat rent checks for two weeks a year....

Re:We need to stop big tax dodgers useing loop hol (5, Insightful)

Anonymous Coward | about 4 months ago | (#46505663)

We need to stop big tax dodgers useing loop holes to pay no taxes.

No tax dodging. They are going to pay taxes with the life insurance money instead of having to sell off assets. That's the point.

Re:We need to stop big tax dodgers useing loop hol (2, Informative)

ArcherB (796902) | about 4 months ago | (#46505673)

We need to stop big tax dodgers useing loop holes to pay no taxes.

We can assume they paid their taxes when they received their paychecks. Why should their heirs pay them again?

In this case, this life insurance policy isn't to stop anyone from paying taxes. The purpose is to pay the taxes rather than having all the assets sold off to pay them. For example, if I were to leave a taco hut family business to my kids, if they can't scrape up the cash to pay the taxes on what the state guesses the hut is worth, they would be forced to sell it to pay 45% tax, thus losing the business me and my family spent a lifetime building. A life insurance policy would allow them to pay the taxes in cash and keep the business. Unfortunately, this may not be an option for those who do not have "extra" income to afford an life insurance policy.

Re:We need to stop big tax dodgers useing loop hol (1)

operagost (62405) | about 4 months ago | (#46505783)

Ah, you helped me to understand what I first thought was just an off-topic post. It's not enough for statists to make the rich and successful pay their "fair share"-- they want their heirs to be punished. Why else would someone begrudge a person taking out an insurance policy to make sure their descendants could keep their family property?

Winning the genetic lottery (3, Insightful)

sjbe (173966) | about 4 months ago | (#46505869)

We can assume they paid their taxes when they received their paychecks. Why should their heirs pay them again?

Because their heirs did nothing to earn the money unless we consider kissing ass a valuable skill. They essentially won the (genetic) lottery and they should be taxed the same as someone who won the Mega-Millions lottery. The source of the funds is irrelevant. If I gave you $1 billion today then you would owe taxes on it. Why should it be any different if we happen to be related?

Re:Winning the genetic lottery (2)

ArcherB (796902) | about 4 months ago | (#46505945)

We can assume they paid their taxes when they received their paychecks. Why should their heirs pay them again?

Because their heirs did nothing to earn the money unless we consider kissing ass a valuable skill. They essentially won the (genetic) lottery and they should be taxed the same as someone who won the Mega-Millions lottery. The source of the funds is irrelevant. If I gave you $1 billion today then you would owe taxes on it. Why should it be any different if we happen to be related?

So you are saying if someone should happen to get lucky that the state should take it away from them because it's not you?

It's not only the super rich that inherit things. Farms that have been in families for generations are being sold off to pay the taxes when the farmer tries to pass it to his children. These farms may have millions of dollars in the equipment alone so the state sees these kids as inheriting millions of dollars. These are not "lottery" winners. These are people that have worked a farm their entire lives only to have it ripped from their hands because of class-envy assholes like you think they are getting away with something. How 'bout trying to mind your own damn business for a change.

If you didn't built it it should be taxed (5, Insightful)

sjbe (173966) | about 4 months ago | (#46506323)

So you are saying if someone should happen to get lucky that the state should take it away from them because it's not you?

Has nothing to do with whether it is me or someone else. If I won the lottery today I would be taxed on the income. Getting an inheritance on an asset you didn't help create is functionally identical to winning a lottery and should be taxed the same way. There are a few exceptions I would make for exceptional cases of bad luck (like underage children whose parents died unexpectedly) but those corner cases are fairly easy to deal with.

It's not only the super rich that inherit things.

True but irrelevant. The only difference is the amount they inherit, not the principle of how it should be handled. You unexpectedly come into some money you should be taxed on it the same as anyone else. No better, no worse.

Farms that have been in families for generations are being sold off to pay the taxes when the farmer tries to pass it to his children

The question is whether the children were involved in the farm prior to the farmer dying. If they were involved then they helped earn the income and we can handled that as we would any other business that changes owners. If they were not substantially involved in the work of building the company then they can pay their lottery winnings the same as anyone else. If that requires selling off assets to pay the tax man then so be it.

If the farmer has a brain in their skull they will have the farm held in a corporation and have named the heirs as shareholders. Hell they can hold this stuff in a trust if they want to. But just because your parents had an asset that they worked hard for doesn't mean you should be entitled to it unless you worked hard for it too. If the kids helped build the farm and worked hard at doing so then they have earned the income and there is no problem. It's a working business that will require continued work to make money, not a cash award. If they are just handed the keys then it is nothing more than an asset that should be taxed like lottery winnings.

These farms may have millions of dollars in the equipment alone so the state sees these kids as inheriting millions of dollars.

If they were suddenly gifted the farm upon the death of the former owner and were not working the farm themselves then they WERE inheriting millions of dollars. If the kids were working the farm and appropriate business arrangements were made then it's hardly a lottery ticket. Working a farm is hard work. We can make some sane exceptions for productive business assets utilized appropriately but let's not confuse a working business with a cash bequeathment. If all the kids did was inherit the farm then it isn't a family asset.

These are people that have worked a farm their entire lives only to have it ripped from their hands because of class-envy assholes like you think they are getting away with something.

"Class envy"? Fuck you. You know nothing about me. I've worked my entire life too, inherited nothing, I'm doing just fine and I don't give a shit about people who think they are entitled to something just because their parents worked hard. I'm talking about applying the same rules to everyone and not giving a pass to people who are lucky enough to come into wealth they didn't earn themselves. You think that people who picked the right parents should be subject to special rules?

How 'bout trying to mind your own damn business

When we have a trillion dollar public debt, tax policy IS my damn business. Yours too.

Re:We need to stop big tax dodgers useing loop hol (3, Insightful)

weave (48069) | about 4 months ago | (#46505909)

We can assume they paid their taxes when they received their paychecks. Why should their heirs pay them again?

For the same reason why when I pay my plumber out of money I have that was already taxed, he has to pay taxes on it as well.

Money is usually taxed when it changes hands. Now I'll admit in case of estates it's not really practical because there are so many ways to get around it, and it also makes stupid situations happen, like if a parent wants to help an adult child pay for an expense they have, they are limited to the ~$14,000 a year gift limit without the kid being taxed as well.

So I admit it's a stupid law, but saying it's already been taxed is not a good argument against it in my opinion.

Re:We need to stop big tax dodgers useing loop hol (1)

ArcherB (796902) | about 4 months ago | (#46505967)

When you pay your plumber, it's income to the plumber and he has to pay taxes on it. Inheritance is not income. See my farm example above.

Personally, I want to see all taxes go and be replaced by a sales tax. Everyone is taxed, but only on what they spend. All money is spent.

Inheritance = income (2)

sjbe (173966) | about 4 months ago | (#46506495)

Inheritance is not income.

Inheritance most certainly IS income. It is functionally equivalent to lottery winnings. People that receive an inheritance by definition did not create it and so they should be taxed on it in the same way they would if they went to Las Vegas and hit a jackpot.

Personally, I want to see all taxes go and be replaced by a sales tax.

I really don't think you've thought that through. Sales taxes are by their very nature regressive [wikipedia.org] so you need to address that problem. Just because people have more money doesn't mean they spend more. Further, while there is nothing wrong with using a sales tax, having it as the only form of taxation is a bad idea which is why few places rely on them solely. Good tax policy depends on multiple revenue streams or else you get budget shortfalls when tax revenue falls from one stream. It's functionally identical to having all your money in one stock. Might work out well but its safer to diversify. For instance lots of local governments in the US get most of their revenue from property taxes but when house prices fell recently they found themselves with difficult to manage short falls. Sales taxes are vulnerable to the same thing when consumer spending falls in an economic downturn.

Everyone is taxed, but only on what they spend. All money is spent.

No it is not. Much money is simply a store of value. The very fact that people die with money they have not spent is clear evidence against your argument. That was money that was not spent but merely handed to another person. All money has the ability to be spent but once you get a certain amount of it there is no reason to spend it. At that point it simply becomes an insurance policy against a rainy day.

Re:We need to stop big tax dodgers useing loop hol (0)

Anonymous Coward | about 4 months ago | (#46505679)

We need to stop big tax dodgers useing loop holes to pay no taxes.

How about instead we stop taxing the hell out of people when they die? and in this case they dont seem to be doing it to not pay taxes anyway- they are doing it because when they die the government is going to tax them so much they would have to sell off property just to pay the death tax on the property. now insurance policy pays for that and the family gets to keep their property- its not tax dodging, its smart.

Re:We need to stop big tax dodgers useing loop hol (1)

operagost (62405) | about 4 months ago | (#46505733)

There's an estate tax in many, if not most states, and the federal government. What tax dodging, relevant to this article, are you talking about?

Re:We need to stop big tax dodgers useing loop hol (0)

Anonymous Coward | about 4 months ago | (#46505951)

So, at year end when filling out your taxes, you don't take any tax deductions to which you're legally entitled? You voluntarily forgo tax deductions and elect to pay your full, 100% tax burden?

You are a special, special man.

Oh. Sorry. What you meant is you want RICH people to be prevented from benefiting from tax deductions while you continue to benefit from yours?

Yeah.

As others have pointed out, the issue isn't people taking advantage of tax deductions - to not do so is stupid. The issue is the specific tax deductions that are available. Regardless, crying in outrage that someone has made use of a tax deduction that's available is moronic because to not make use of that tax deduction, if its available, would be stupid.

Flat tax (1)

slapout (93640) | about 4 months ago | (#46506037)

If we had one tax rate for everyone, it would solve the problem of tax loopholes.

Re:We need to stop big tax dodgers useing loop hol (1)

Charliemopps (1157495) | about 4 months ago | (#46506295)

We need to stop big tax dodgers useing loop holes to pay no taxes.

Loopholes are not there to benefit the person that uses them. They are used by the government to manipulate you into using your money in such a way that it benefits the government. For example, Obama was giving tax breaks to companies to hire new employees. The government did not care that the business saved money or even if the employees got new jobs. What they did care about was that for a few tens of thousands in tax breaks to the company, they in-turn took dozens of people off of unemployment,maybe food stamps, etc... and they were then able to collect income tax from these new employees totaling more than the break they gave the business for hiring them. They manipulated the company into providing even more in tax revenue.

In almost every case, if you look at a loophole or tax break... then end net result is that the government collects more taxes because of it.

Shortest Hugh Pickens DOT Com summary evar (0)

Anonymous Coward | about 4 months ago | (#46505575)

Hugh must have had a good weekend

Key is extra million (1)

SuperKendall (25149) | about 4 months ago | (#46505611)

I'm not sure who bought this policy, but it seems like the key to figuring it out is the odd extra million - I mean, why one million more than a nice round 200 million? That's a pretty odd addition.

What other significance can the number 201 have... hmm.

Re:Key is extra million (1)

Cenan (1892902) | about 4 months ago | (#46505713)

It could be down from 300 or any other arbitrarily chosen number. There are 19 insurers involved, I doubt they landed on the 201 on their first meeting.

Re:Key is extra million (1)

operagost (62405) | about 4 months ago | (#46505805)

Well, in my personal case, I have a policy that's big enough to pay off my funeral expenses and the balance of my mortgage. My wife's on the mortgage, so it wouldn't be called in upon my death, but I wanted to give her the ability to pay it off and move out immediately without the burden of having to stay in the empty house until it was sold.

Re:Key is extra million (1)

Actually, I do RTFA (1058596) | about 4 months ago | (#46506071)

I mean, why one million more than a nice round 200 million?

The old record was probably 200 million.

Re:Key is extra million (1)

SuperKendall (25149) | about 4 months ago | (#46506141)

That ls probably a REALLY good point. The eBay sniper number theory. :-)

Feudalism 2.0 (1)

rdelsambuco (552369) | about 4 months ago | (#46505621)

Why be king if your heirs won't be?

Estate Taxes (5, Insightful)

dcollins (135727) | about 4 months ago | (#46505627)

Don't be a douche by calling them "death taxes".

Re:Estate Taxes (0)

Quila (201335) | about 4 months ago | (#46505753)

They are taxes due when you die. Death taxes. Estate taxes is the euphemism to make it sound like nobody's actually being screwed.

Re:Estate Taxes (5, Insightful)

guises (2423402) | about 4 months ago | (#46505887)

They're not taxes on death, dying is free. They're taxes on inheritance. If you're unable to call them estate taxes then inheritance taxes is also acceptable.

Re:Estate Taxes (1)

Anonymous Coward | about 4 months ago | (#46505899)

They are taxes on money that is left to other people - otherwise known as an estate. Death Taxes is a euphemism to make it sound like someone is actually being screwed. Just give your money to a charity (either in your will or before death) and no taxes, even though you're still dead! Oh, and the dude is lying about it to. California has no estate tax. http://wills.about.com/od/california/qt/californiaestatetax.htm

Re:Estate Taxes (1)

slapout (93640) | about 4 months ago | (#46506013)

Someone is being screwed -- the people the money is being left to.

Re:Estate Taxes (5, Insightful)

asylumx (881307) | about 4 months ago | (#46506205)

Someone is being screwed -- the people the money is being left to.

How so? They aren't losing anything out of their own pockets, and they certainly aren't losing anything they earned.

Re:Estate Taxes (1)

operagost (62405) | about 4 months ago | (#46505823)

That may be their official name, but they are paid at the time of death. See also, "sales tax" paid at the time of sale.

Re:Estate Taxes (0)

silas_moeckel (234313) | about 4 months ago | (#46505903)

Because they are just that death taxes, people think they screw over the rich but it's more the middle that can not afford to prep like this.

Re:Estate Taxes (4, Informative)

GerryGilmore (663905) | about 4 months ago | (#46505971)

I call 100% organic, dolphin-free bullshit! First, the estate taxes have a limit of, like, $5 million before they kick in so you're rant about the "middle" is just wrong/a lie. Take your pick.

Re:Estate Taxes (5, Informative)

asylumx (881307) | about 4 months ago | (#46506279)

Just to support the parent's poorly worded claim, filing for estate taxes is only required in 2014 if the estate net value exceeds $5,340,000 in the US [irs.gov] .

By the way, this lower limit has increased dramatically in the last decade, from $1,500,000 in 2004. I have to agree with the parent, though, that if you're inheriting over $5 million you probably are not considered "middle class."

Re:Estate Taxes (0)

Anonymous Coward | about 4 months ago | (#46506153)

you ignorant dolt: IF you are 'in the middle' your exposure to 'estate taxes' will be nil or close to it...

Re:Estate Taxes (1)

wisnoskij (1206448) | about 4 months ago | (#46505973)

That is what they are.
You pay property taxes on a yearly basis, and death taxes when you die. And estate taxes as a title is just misleading.

Death tax/death duties have been a legitimate term since these tax's introduction in Britain.

Re:Estate Taxes (2)

AdamHaun (43173) | about 4 months ago | (#46506087)

You pay property taxes on a yearly basis, and death taxes when you die.

Technically, *you* don't pay anything -- you're dead. The people receiving unearned income from your estate pay the taxes.

Re:Estate Taxes (1)

towermac (752159) | about 4 months ago | (#46506039)

"... a death must occur before any tax on the deceased's assets can be realized ... the tax rate is determined by the value of the deceased's assets rather than the amount each inheritor receives. Neither the number of inheritors nor the size of each inheritor's portion factors into the calculations for rate of the Estate Tax..."

The tax was levied because the person died. 'Death tax' seems like a proper description.

Re:Estate Taxes (0)

Anonymous Coward | about 4 months ago | (#46506207)

I'm guessing you're one of those people who believes that inflation is "rising prices" (the effect), rather than "supply of money outpacing demand for money". The first is the official, government-sponsored "definition", which you are supposed to accept like a good little citizen. The second is the objective reality.

"Death tax" is the objective reality, because death is the objective trigger which government uses to justify the tax.

Re:Estate Taxes (2)

fermion (181285) | about 4 months ago | (#46506215)

One modern capitalist innovation is this type of tax. Before, families could build up property with no penalty. One could sit on a property and do nothing with it. With taxes, if one did were not utilizing the property, there was incentive to sell it to someone who could exploit it. You see this problem in developing countries where there is much less productivity than in developed country. Some thinks this is good. That advancements are bad.

Could be short term insurance (1)

NotQuiteReal (608241) | about 4 months ago | (#46505629)

Just need the insurance, as, well, insurance... in case this billionaire dies before they get a chance to retire outside of California, I suspect.

Even Carnegie thought this was stupid (0)

Anonymous Coward | about 4 months ago | (#46505655)

"Indeed, it is difficult to set bounds to the share of a rich man's estate which should go at his death to the public through the agency of the state, and by all means such taxes should be graduated, beginning at nothing upon moderate sums to dependents, and increasing rapidly as the amounts swell, until of the millionaire's hoard, as of Shylock's, at least the other half comes to the privy coffer of the state."

http://www.swarthmore.edu/SocSci/rbannis1/AIH19th/Carnegie.html

Effing Dice (2)

sootman (158191) | about 4 months ago | (#46505691)

"But why does a billionaire even need to take out life insurance when he or she has so many other assets. The most likely answer to this question is taxes and estate planning. Upon death, an estate would be liable..."

Thanks a lot for stifling the need for lots of uninformed commentary, guys. I was looking forward to lots of basement-dwelling idiots spouting off about how stupid this billionaire must be. Now I have to find somewhere else to spend my morning.

To the reddit! /me gone

For the record.. (2)

ThatsDrDangerToYou (3480047) | about 4 months ago | (#46505695)

It wasn't me. Just sayin'.

People so rich who don't act in societal interests (0)

Anonymous Coward | about 4 months ago | (#46505697)

are a measure of inherent instability in the system.

Death+Taxes (0)

Joce640k (829181) | about 4 months ago | (#46505699)

The government will grab it all as "death tax".

This way the heirs won't be left arguing over what to sell to pay off the government.

Re:Death+Taxes (5, Insightful)

Jeff Flanagan (2981883) | about 4 months ago | (#46505747)

Estate tax. Only the wingnuts call it a "Death Tax."

Re:Death+Taxes (0, Insightful)

Anonymous Coward | about 4 months ago | (#46505883)

Only the immoral think it's appropriate to tax an estate that has been earned.

Re:Death+Taxes (0)

Anonymous Coward | about 4 months ago | (#46505983)

Don't be daft. By that standard we should have zero taxes and live in a Marxist^WRandian utopia.

Re:Death+Taxes (1)

GerryGilmore (663905) | about 4 months ago | (#46505987)

Kind of like the Walton family - yeah, they really worked their asses off to get the Walmart fortune.....Uh-huh.

Re:Death+Taxes (1)

dubbayu_d_40 (622643) | about 4 months ago | (#46506203)

Paris Hilton would agree with you.

Re:Death+Taxes (0)

Anonymous Coward | about 4 months ago | (#46505939)

Personifying inanimate objects does not make for a convincing argument.

Inheritence = Lottery Winnings (1)

sjbe (173966) | about 4 months ago | (#46505911)

The government will grab it all as "death tax".

What a BS way to frame the issue. Inheritance taxes should be taxes EXACTLY the same way we tax someone who wins the lottery or wins the jackpot in a Vegas casino. These people did nothing to earn the money. If you won the lottery you would be taxed on your new income. The fact that the parties are related should make no difference whatsoever. If the money is new to you then you should be taxed on it just like everyone else.

This way the heirs won't be left arguing over what to sell to pay off the government.

That is what a will is for.

Re:Inheritence = Lottery Winnings (0)

Anonymous Coward | about 4 months ago | (#46505965)

Even better! Instead of letting the government tax the same dollar 7-8 times, lets just let the government dole out the money in the most "fair" way possible! Earn your money? Hell thats for losers! The government is there to take it from your neighbor and give it to you! Its only fair!

Re:Inheritence = Lottery Winnings (1)

bsolar (1176767) | about 4 months ago | (#46506179)

If you do nothing to earn something you get you don't win the lottery, you receive a gift. By your reasoning inheritance taxes should be taxed exactly the same way a gift is... which is ironic since gift taxation in the USA was introduced to avoid estate tax avoidance...

Insurance Policy (0)

Anonymous Coward | about 4 months ago | (#46505739)

I wonder what Hugh Pickens's life insurance policy is. Because I hope he dies like Roland. (or at least disappears like JonKatz)

They won't pay on time (0)

Anonymous Coward | about 4 months ago | (#46505763)

He'll die, the taxes will come due, and they'll dispute the payouts long past the point where the properties will be liquidated.

Why is this being made public? (1)

JazzHarper (745403) | about 4 months ago | (#46505843)

There is no good reason for the financial services company that bundled these policies to be allowed to disclose any of this. I certainly would not use a company that can't keep their mouths shut.

How does it make sense for rich people ... (1)

wisnoskij (1206448) | about 4 months ago | (#46505849)

... To buy insurance. Buying insurance is a guaranteed loss of money. A significant loss, because not only does the insurance company have to cover the expense of running an entire company, but they need to make their own owners rich. Insurance can make sense for poor people, but for a rich people, no way.

Instead of giving the insurance company money, which they probably invest in some high interest thing, take 30 percent off of the top and then use the rest to pay off the life insurance at death, just invest it yourself and when you die have a 400 million dollar account for your relatives to use.

Re:How does it make sense for rich people ... (2)

Anonymice (1400397) | about 4 months ago | (#46506059)

Because the insurance payout won't be taxed & the overhead costs of the insurance policy are still likely to be less than the 45% inheritance tax that would otherwise be charged.
It's a loophole to make sure a bigger share of your estate lands in the hands of your heirs, rather than in federal pockets.

Re:How does it make sense for rich people ... (0)

Anonymous Coward | about 4 months ago | (#46506077)

No. It isn't. There are life insurance policies and then there are life insurance policies. After you reach a certain income level, Roth IRAs and similar, low-tax vehicles become unavailable. That's when you move to a form of interest bearing life insurance policies. I'm not quite certain how they work, but the idea is very similar to the Roth -- you pay taxes only on the money you invest, not on the money you make.

This has nothing to do with life insurance and everything to do with a low tax investment.

Re:How does it make sense for rich people ... (0)

Anonymous Coward | about 4 months ago | (#46506103)

Instead of giving the insurance company money, which they probably invest in some high interest thing, take 30 percent off of the top and then use the rest to pay off the life insurance at death, just invest it yourself and when you die have a 400 million dollar account for your relatives to use.

Profitability of insurance companies is less than that, but your point still stands... most rich people and indeed corporations self-insure... waste of money to do otherwise since insurance itself is a scam. Also, if the taxes are 45%, and this is presumably for that, doesn't that mean this person is not quite a billionaire? Maybe he/she would be if they didn't throw money away on stupid things ;)

Re:How does it make sense for rich people ... (0)

Anonymous Coward | about 4 months ago | (#46506315)

Insurance isn't a scam - it's an effective way for someone with little to no assets to manage risk. It's not worthwhile once you have enough funds on hand that the financial risk is negligible.

To someone with billions of dollars - insurance is worthless - because medical treatment or a car accident even if run into the tens of millions of dollars is just not much in terms of their overall wealth. For many people a serious car accident can be worth 5-6 years of wages - that's serious risk and worth protecting yourself from.

Re:How does it make sense for rich people ... (0)

Anonymous Coward | about 4 months ago | (#46506275)

Instead of giving the insurance company money, which they probably invest in some high interest thing, take 30 percent off of the top and then use the rest to pay off the life insurance at death, just invest it yourself and when you die have a 400 million dollar account for your relatives to use.

Why taking out an insurance policy instead of just putting the premiums under their mattress? Is that really a question? It is the same reason why I'd have an insurance on my house (even if it were mortgage free): it is to protect myself against the chance that my house could burn down _tomorrow_, years before I'd have saved up enough of that premium money I wasn't sending to the insurer.

Re:How does it make sense for rich people ... (1)

Actually, I do RTFA (1058596) | about 4 months ago | (#46506359)

It makes sense because you have better uses for your money than investing it in easy to liquid assets. For example, long term positions in privately held companies. However, your death could bring the need for cash. So, you are essentially paying a premium for the ability to make longer term investments, in the form of paying an insurance premium.

Further, there are also questions of debt and leveraged positions. Being forced to liquidate a leveraged position at a specific point in time can be quite devastating.

Then again, using insurance to allow more leveraged/risky investments hasn't caused any issues in at least half-a-decade, so it seems fine to me.

Taxes (1)

Spacr (2664663) | about 4 months ago | (#46505963)

Life Insurance Payouts are not taxed.

HIV Positive (0)

Anonymous Coward | about 4 months ago | (#46505979)

No doubt.

Not the largest (0)

Anonymous Coward | about 4 months ago | (#46506399)

When I worked in insurance, Ralph Lauren had $705M insurance policy in force. I guess they don't make those numbers public.

Valuation (0)

Anonymous Coward | about 4 months ago | (#46506407)

Could also be a protection against devaluation of an estimated >billion fortune.

E.g. having done an IPO or merger and being estimated a large amount, but not being allowed to sell the shares yet.

Good (0)

Anonymous Coward | about 4 months ago | (#46506469)

The Government will tax you as many times as it can. It is not enough that that money have been taxed once at a high rate, but government want to tax it AGAIN after you die. Why not be fair and tax EVERYONE 45% of their estate on death? Or is being "fair" only counts when it helps the less successful?

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