10 ms·

Can you elaborate, why exactly is it bad? I am not an expert, but if I was to set up trust, perpetual would be exactly what I'd look for.

by kova12 5y ago

NovemberWhiskey 5y ago
The basic idea that is that the public interest is poorly served by allowing people who are long dead to exercise control over property based on ideas they held while alive. For example, imagine I'm a successful tobacco plantation owner in 17th century Virginia, and I define my identity and my legacy as such. I create a perpetual trust and transfer ownership of my land to it; and I place restrictions on that land that it can only be used for growing tobacco. What if tobacco is no longer a profitable crop in the future, because smoking tobacco is made illegal? What if tobacco is wiped out by a pest, or can no longer be grown due to changes in climate?
- dantheman 5y ago
  So, it sounds more like you have a problem with the trusts and not estate taxes. If we got rid of estate taxes then we could just pass the money on directly.
  - NovemberWhiskey 5y ago
    I don't really know where you get that idea. I think the two issues are separable, and probably orthogonal. In fact, I'm fairly sure the rule against perpetuities predates the existence of any substantive probate or estate taxes.
wpietri 5y ago
The article is pretty clear. They allow "families to pass wealth from generation to generation, indefinitely, without estate taxes at each death". Significant estate taxes are important to a democracy to prevent the rise of a noble class. Even Britain, whose system of inherited wealth and power America's founders were desperate to avoid emulating, now has a significant estate tax: https://taxfoundation.org/downton-abbey-and-death-taxes/ https://taxfoundation.org/downton-abbey-and-death-taxes/
- dantheman 5y ago
  Estate taxes are immoral, that money has already been taxed.
  - onlyrealcuzzo 5y ago
    You're taxed on income. You save buy a house, and you're taxed on the property you bought. You're also taxed on dividends from any remaining savings. You're also taxed on any spending you do (in most states).
  - tzs 5y ago
    Almost every dollar that comes into almost anyone's possession has already been taxed, so you could make the same argument about income taxes and sales taxes. I doubt that I have ever owned a dollar that had not been taxed before I got it. Same also goes for taxes on real property. My land had already been taxed long before I bought it. Do you think that all of those taxes are also immoral?
  - andrewljohnson 5y ago
    Why is double taxation a moral issue?
  - foo_barrio 5y ago
    What about sales tax? My income has already been taxed.
    - refurb 5y ago
      That’s a separate transaction. When I die and give my home to my kid that’s not a transaction that a family home going to family. Or are you arguing that when a husband dies the wealth should be taxed before going to the surviving spouse? Or if you pay for your kids education (say college - they’re an adult) should that money be taxed?
      - foo_barrio 5y ago
        My mom already "owns" whatever money my dad makes and vice versa. They file jointly and have partnership+joint accounts. This has been the case for 40+ years. The money won't go to her when he dies. It's already hers. I see what you're getting at but that's a bad example.
pjc50 5y ago
Yes obviously that's what you want, but the public interest is not served by having an economy of which increasingly large parts are held by dead persons and their unaccountable proxies.
- protomyth 5y ago
  Well, some of us who didn't have rich, white relatives in the era of the robber barons would like to leave our children our businesses and wealth intact so they can build up the family. Changing the rules when minorities are trying to build wealth is a bit problematic.
  - clarkevans 5y ago
    These things aren't black and white. There is an enormous difference between a 7 digit (millions) estate, and one measured in 10+ digits (billions). While income/wealth inequality does encourage work and innovation, it is entirely different when inequality becomes an entrenched oligarchy.
    - kova12 5y ago
      There should not be a difference here. If person who earned 10+ digits produced 10+ digits worth wealth, how can you justify taking it from him? Lets take Elon Musk - did he not earn his 10+ digits? Would you rather live in the world without electric cars and affordable space travel? And now that he already delivered something that greatly benefits everybody you want to steal what he rightfully earned. Why is it that you think you even deserve equality - I know what Musk did for humanity, what was your contribution again?
  - extra88 5y ago
    The estate tax does not apply to the first $11.7 million, the children will be fine. If you're wealthy enough for the estate tax to be relevant to you, you're wealthy enough to do estate planning that factors in the taxes due. The robber barons you're thinking of lived a long time ago and very few of the wealthy today inherited their wealth from them. We should be more concerned about the robber barons walking around today and how our policies benefit so few winners and fosters income inequality.
mcherm 5y ago
Over a period of a few centuries we have figured out that allowing significant amounts of wealth to be controlled by the wishes of people who died 100 years ago. Imagine, for instance, how perfectly mainstream beliefs in the US would have led someone setting up an educational trust to specify that it was only to support white men. Just a couple generations passed we would look upon that policy with anathema. The rule against perpetuities is what our legal system evolved to address this problem. It says that you can direct how property is used during your lifetime, and beyond that through the lifetime of someone who was living at the time you died. But that you cannot control how money and property is to be used beyond that point.
tzs 5y ago
First, a little background on estates in land. The simplest is what is called a "fee simple". When you have a fee simple interest in some land it is what we traditionally think of as owning the land. That land is yours to do anything you want with (that's legal) from when you acquired the interest until the end of time or until you convey your interest to someone else. Another common estate in land is the leasehold estate. If I own some land in fee simple I can sell you a leasehold estate that runs for a specific time period. During that time period it is essentially your land. When the leasehold ends my fee simple ownership resumes. Another common estate is the life estate. This is a lot like a leasehold except that rather than being for some fixed time period it is for the life of someone. They were common in wills (I have no idea if they still are common), typically with someone leaving their estate to the widow for life with the remainder (the term for what comes after any finite estates like life estates end) to the eldest son or split among their children or some such. Note that in the above example of creating a life estate, the dead person is able to control both what happens to their land immediately (their widow gets it) and what happens in the future when their widow dies. It didn't end there. Let's say you were an army veteran and very religious. You could in your will give your widow a life estate, then your oldest direct male descendant an estate that lasts until he dies or until one of your direct descendants reaches the rank of Captain in the army or becomes a priest or nun in which case the first such direct descendant gets a life estate, with the remainder to their oldest child if they have one else to be sold at auction with the proceeds split equally among your living direct descendants. Lord Montague could stick conditions in the estates he left in his will so that anyone who came into possession of the Montague lands after he died, no matter how long after, would lose their estate if they married a Capulet or descended from a Capulet. In short if you owned a fee simple estate you could impose nearly arbitrary conditions on who could possess the land after you and what they could do with that could in theory restrict the land forever afterwards. This makes it hard to put land to its economically best use. A seller cannot sell more than they have. I'm not going buy or lease your land to build my factory on, or build a housing development, or do anything that requires a significant investment if I have to worry that some third cousin of yours will marry a doctor and trigger some condition in the will of some ancestor of yours that died 200 years ago that gives them the land. Maybe my lawyers and genealogists can identify all people that might be beneficiaries of such un-triggered conditions and get them all to sell or lease me the land--but often even that won't be enough because some such people might have yet to be born. Governments recognized that it is good for land to generally be freely sellable and buyable, and that the living should be able to fully use the land. And thus we got rules to limit the ability of dead people to place far reaching long lasting limits on what happened to their land after they died. The rule against perpetuities strikes a quite reasonable balance between keeping land reasonably buyable and sellable with minimal restrictions on what the living can do with the land and giving people some say in how their land is inherited. The classic statement of the rule is: > No interest in land is good unless it must vest, if at all, not later than 21 years after some life in being at the time the interest was created. This basically gives you the current generation plus 21 years of control over what happens to your land. It is enough that you can specify conditions involving grandchildren that do not yet exist, or even conditions on adult grandchildren that do not yet exist because if any such come into existence it will be within 21 years of the life of one of your existing children. But no more keeping your family forever Capulet free. Details vary from jurisdiction to jurisdiction. Some places use longer than 21 years for example. Some state take a "wait and see" approach on vesting--if the interest has vested by the end of the measuring life it is valid even if there was a possibility it would not vest in time. Some places have a two pronged rule where an interest is valid if it satisfies that classic rule (or its "wait and see" variation if they use that) or it will either vest or terminate within N years of its creation. N is commonly 90, although Florida does N = 360.

Can you elaborate, why exactly is it bad? I am not an expert, but if I was to set up trust, perpetual would be exactly what I'd look for.

by kova12 5y ago

Can you elaborate, why exactly is it bad? I am not an expert, but if I was to set up trust, perpetual would be exactly what I'd look for.

NovemberWhiskey 5y ago

The basic idea that is that the public interest is poorly served by allowing people who are long dead to exercise control over property based on ideas they held while alive. For example, imagine I'm a successful tobacco plantation owner in 17th century Virginia, and I define my identity and my legacy as such. I create a perpetual trust and transfer ownership of my land to it; and I place restrictions on that land that it can only be used for growing tobacco. What if tobacco is no longer a profitable crop in the future, because smoking tobacco is made illegal? What if tobacco is wiped out by a pest, or can no longer be grown due to changes in climate?

dantheman 5y ago
So, it sounds more like you have a problem with the trusts and not estate taxes. If we got rid of estate taxes then we could just pass the money on directly.
- NovemberWhiskey 5y ago
  I don't really know where you get that idea. I think the two issues are separable, and probably orthogonal. In fact, I'm fairly sure the rule against perpetuities predates the existence of any substantive probate or estate taxes.

wpietri 5y ago

The article is pretty clear. They allow "families to pass wealth from generation to generation, indefinitely, without estate taxes at each death". Significant estate taxes are important to a democracy to prevent the rise of a noble class. Even Britain, whose system of inherited wealth and power America's founders were desperate to avoid emulating, now has a significant estate tax: https://taxfoundation.org/downton-abbey-and-death-taxes/ https://taxfoundation.org/downton-abbey-and-death-taxes/

dantheman 5y ago
Estate taxes are immoral, that money has already been taxed.
- onlyrealcuzzo 5y ago
  You're taxed on income. You save buy a house, and you're taxed on the property you bought. You're also taxed on dividends from any remaining savings. You're also taxed on any spending you do (in most states).
- tzs 5y ago
  Almost every dollar that comes into almost anyone's possession has already been taxed, so you could make the same argument about income taxes and sales taxes. I doubt that I have ever owned a dollar that had not been taxed before I got it. Same also goes for taxes on real property. My land had already been taxed long before I bought it. Do you think that all of those taxes are also immoral?
- andrewljohnson 5y ago
  Why is double taxation a moral issue?
- foo_barrio 5y ago
  What about sales tax? My income has already been taxed.
  - refurb 5y ago
    That’s a separate transaction. When I die and give my home to my kid that’s not a transaction that a family home going to family. Or are you arguing that when a husband dies the wealth should be taxed before going to the surviving spouse? Or if you pay for your kids education (say college - they’re an adult) should that money be taxed?
    - foo_barrio 5y ago
      My mom already "owns" whatever money my dad makes and vice versa. They file jointly and have partnership+joint accounts. This has been the case for 40+ years. The money won't go to her when he dies. It's already hers. I see what you're getting at but that's a bad example.

pjc50 5y ago

Yes obviously that's what you want, but the public interest is not served by having an economy of which increasingly large parts are held by dead persons and their unaccountable proxies.

protomyth 5y ago
Well, some of us who didn't have rich, white relatives in the era of the robber barons would like to leave our children our businesses and wealth intact so they can build up the family. Changing the rules when minorities are trying to build wealth is a bit problematic.
- clarkevans 5y ago
  These things aren't black and white. There is an enormous difference between a 7 digit (millions) estate, and one measured in 10+ digits (billions). While income/wealth inequality does encourage work and innovation, it is entirely different when inequality becomes an entrenched oligarchy.
  - kova12 5y ago
    There should not be a difference here. If person who earned 10+ digits produced 10+ digits worth wealth, how can you justify taking it from him? Lets take Elon Musk - did he not earn his 10+ digits? Would you rather live in the world without electric cars and affordable space travel? And now that he already delivered something that greatly benefits everybody you want to steal what he rightfully earned. Why is it that you think you even deserve equality - I know what Musk did for humanity, what was your contribution again?
- extra88 5y ago
  The estate tax does not apply to the first $11.7 million, the children will be fine. If you're wealthy enough for the estate tax to be relevant to you, you're wealthy enough to do estate planning that factors in the taxes due. The robber barons you're thinking of lived a long time ago and very few of the wealthy today inherited their wealth from them. We should be more concerned about the robber barons walking around today and how our policies benefit so few winners and fosters income inequality.

mcherm 5y ago

Over a period of a few centuries we have figured out that allowing significant amounts of wealth to be controlled by the wishes of people who died 100 years ago. Imagine, for instance, how perfectly mainstream beliefs in the US would have led someone setting up an educational trust to specify that it was only to support white men. Just a couple generations passed we would look upon that policy with anathema. The rule against perpetuities is what our legal system evolved to address this problem. It says that you can direct how property is used during your lifetime, and beyond that through the lifetime of someone who was living at the time you died. But that you cannot control how money and property is to be used beyond that point.

tzs 5y ago

First, a little background on estates in land. The simplest is what is called a "fee simple". When you have a fee simple interest in some land it is what we traditionally think of as owning the land. That land is yours to do anything you want with (that's legal) from when you acquired the interest until the end of time or until you convey your interest to someone else. Another common estate in land is the leasehold estate. If I own some land in fee simple I can sell you a leasehold estate that runs for a specific time period. During that time period it is essentially your land. When the leasehold ends my fee simple ownership resumes. Another common estate is the life estate. This is a lot like a leasehold except that rather than being for some fixed time period it is for the life of someone. They were common in wills (I have no idea if they still are common), typically with someone leaving their estate to the widow for life with the remainder (the term for what comes after any finite estates like life estates end) to the eldest son or split among their children or some such. Note that in the above example of creating a life estate, the dead person is able to control both what happens to their land immediately (their widow gets it) and what happens in the future when their widow dies. It didn't end there. Let's say you were an army veteran and very religious. You could in your will give your widow a life estate, then your oldest direct male descendant an estate that lasts until he dies or until one of your direct descendants reaches the rank of Captain in the army or becomes a priest or nun in which case the first such direct descendant gets a life estate, with the remainder to their oldest child if they have one else to be sold at auction with the proceeds split equally among your living direct descendants. Lord Montague could stick conditions in the estates he left in his will so that anyone who came into possession of the Montague lands after he died, no matter how long after, would lose their estate if they married a Capulet or descended from a Capulet. In short if you owned a fee simple estate you could impose nearly arbitrary conditions on who could possess the land after you and what they could do with that could in theory restrict the land forever afterwards. This makes it hard to put land to its economically best use. A seller cannot sell more than they have. I'm not going buy or lease your land to build my factory on, or build a housing development, or do anything that requires a significant investment if I have to worry that some third cousin of yours will marry a doctor and trigger some condition in the will of some ancestor of yours that died 200 years ago that gives them the land. Maybe my lawyers and genealogists can identify all people that might be beneficiaries of such un-triggered conditions and get them all to sell or lease me the land--but often even that won't be enough because some such people might have yet to be born. Governments recognized that it is good for land to generally be freely sellable and buyable, and that the living should be able to fully use the land. And thus we got rules to limit the ability of dead people to place far reaching long lasting limits on what happened to their land after they died. The rule against perpetuities strikes a quite reasonable balance between keeping land reasonably buyable and sellable with minimal restrictions on what the living can do with the land and giving people some say in how their land is inherited. The classic statement of the rule is: > No interest in land is good unless it must vest, if at all, not later than 21 years after some life in being at the time the interest was created. This basically gives you the current generation plus 21 years of control over what happens to your land. It is enough that you can specify conditions involving grandchildren that do not yet exist, or even conditions on adult grandchildren that do not yet exist because if any such come into existence it will be within 21 years of the life of one of your existing children. But no more keeping your family forever Capulet free. Details vary from jurisdiction to jurisdiction. Some places use longer than 21 years for example. Some state take a "wait and see" approach on vesting--if the interest has vested by the end of the measuring life it is valid even if there was a possibility it would not vest in time. Some places have a two pronged rule where an interest is valid if it satisfies that classic rule (or its "wait and see" variation if they use that) or it will either vest or terminate within N years of its creation. N is commonly 90, although Florida does N = 360.