Well-to-Do Call Estate Tax Richly Undeserved
The gleaming cars sat shoulder to shoulder in the parking lot of the Pelican Hill Golf Club at Newport Coast like perfect children at an elite prep school--a Jaguar next to a Mercedes next to a Ferrari next to a Rolls.
In the clubhouse restaurant, seven women gathered for a birthday lunch. All were Realtors, all had the Cobb salad and all agreed that eliminating the federal estate tax was a good idea.
“I’ve never understood the estate tax,” said Brenda Peterson. “It’s a goofy tax, don’t you think?”
As Congress considers phasing out estate taxes by 2011--the House has approved the proposal, but an uphill fight is expected in the Senate--it’s hardly surprising that well-to-do people are largely in favor of the plan.
The rich, it turns out, aren’t different than anyone else in one respect: They hate taxes too.
“When people find out about the tax--people at the upper end--they get very angry,” said Paul Stam, an investment advisor for Bank of America’s private bank, where the price of admission is $1.5 million in assets. “They feel it’s a confiscatory tax, which it is.”
Nationwide, the estates of only 2% of people who die each year are affected by the tax, which applies only to estates larger than $675,000. In 1997, the most recent year for which figures are available, 7,599 estates in Southern California were taxed nearly $1.8 billion. About $206 million of that came from Orange County.
This year, Linda Marston found herself on the hook for 55% of her late father’s considerable estate. The 61-year-old won’t say exactly how much that is, but it’s a lot, as she told her friends over salad.
“I planned on leaving something to my children too,” Marston said as she climbed into her black Lexus after lunch. “I didn’t plan on it changing my life.”
“Let’s be honest--really, Linda!” Peterson said, laughing. “When you pay taxes all your life . . . it just seems unfair to have to pay them again once you’re gone, don’t you think?”
That certainly was the sentiment among the group of men on the patio who had just finished a $175 round of golf.
“I’m hoping they do get rid of that tax,” one said. “My father-in-law has a lot of money.”
“I refer to it as the Robin Hood act,” said Skip Adams, 55, an executive for a major communications equipment maker. “Take from the rich and give to the poor.”
“If you trusted the people who took your money, it wouldn’t be so bad,” said Duane Potter, 60. “But there’s so much waste in government. . . . If you’re going to give to someone, give to the church.”
“I feel sorry for my kids,” added Adams, who owns a motor home with a sticker on the back that reads “This Is My Kids’ Inheritance.” “They’re going to have an outrageous auto insurance bill when they get my vehicles.”
Even though Congress appears poised to repeal--or at least reduce--the tax, it has not been a big topic of conversation, the golfers agreed.
“We’re talking about stocks dropping,” Adams said.
Around the table came a collective moan.
“Oh, geez, don’t start. . . .”
Stam, the financial advisor, agreed that the prospect of an estate tax phaseout has generated little buzz among his wealthy clients.
“I’m surprised how many of my clients are unaware this is happening,” said Stam, who doesn’t believe a full repeal will pass. “The people I deal with are people who run their own businesses, and they’re too busy to worry about this stuff.”
Besides, he said, even under the current structure there are so many ways to escape estate taxes that they become moot for many people of means.
Stam rattled off the options: lifetime-gifting techniques, family limited partnerships, grantor trusts, defective grantor trusts, pooled income funds and shelters known as GRATs, QPRTs and CRUTs.
Death may be certain, but for rich folks, estate taxes are not.
“In 10 years of practice, I’ve had one client--a single client--who didn’t care that his estate would be taxed,” Stam said. “He said [of the government getting its share], ‘That’s OK. I think they do a pretty good job.’
“That’s a direct quote. I couldn’t believe it.”
