The New Savage Number: How Much Money Do You Really Need to Retire?

Chapter 18. WHAT'S LEFT?

Congratulations! It looks as though your money will outlive you and you'll have some to pass on to family and friends. That's the result of smart planning. And it's the reason for this last chapter—to make sure those extra assets wind up in the hands of your loved ones, instead of in the government's pocket. If you have used up all your money in your lifetime, you still might want to leave something for your heirs, so this chapter also deals with life insurance.

Estate tax law is uncertain and confusing. Estate tax reductions are scheduled to take effect yearly, but the planned repeal of the estate tax in 2010 might not occur. In 2011, under current legislation, we could be back to the laws of a decade ago. Additionally, states searching for revenues are imposing their own estate taxes. The solution is to base your estate plan on existing law, make it as flexible as possible, and review it with your estate planning attorney at least every two years, or when you see headlines about tax changes.

As of right now, it would be best to die in 2010, because that is the year the estate tax is scheduled to go away! However, under current law, the heirs of those who die in 2010 will lose the "step-up" in cost basis for long-held assets. It will be replaced by a complicated system that will, after a certain threshold is reached, tax gains on assets such as stocks and your home, which previously would have been valued as of the date of your death. For those who didn't ...