First $2 million of estate inheritance is tax-free
Q: My dad has a will that leaves his estate divided among us four kids. He has a money market account of $80,000, stocks totaling $75,000, and a $375,000 house with no mortgage. Will we have to pay inheritance tax? Is there a better way to arrange his will?
A: There is no federal estate tax, because he can leave up to $2 million free of estate taxes. However, the will must go through the probate process, which is time-consuming and expensive. You might suggest that your father consider talking to an attorney about a revocable living trust, which can help avoid probate. Also, he should stipulate in the will that all the assets are to be sold, with the proceeds to be distributed to the four of you. Otherwise, you will each inherit one-fourth of the house, and if three want to sell but one refuses, there will be a big fight.
Also, depending upon the state in which you live, there may be a state inheritance tax. Check with an estate-planning attorney.
Q: I am very interested in taking a seminar that costs $3,500 and will teach me how to get compound stock profits. However, I cannot locate anyone who has attended this seminar who can give me a recommendation. The following is from their promotional material:
‘Just how significant is a 5 percent monthly return on your investment? It’s $40,000 growing to $5 million in eight years. Learn how to turn your stocks into cash-generating assets regardless of market direction. Lock in a return of 5 percent PER MONTH on your stock investments using techniques so conservative they are approved for your IRA or 401(k).’
Can you recommend or not recommend this course?
A: The only thing I know about this seminar is what you told me. I have never heard of this course or reviewed the materials or content. And I have never heard of the promoter, but I can answer your question anyway. The seminar is a scam.
It is impossible to generate 5 percent monthly returns on a consistent basis. No one in history has ever succeeded in doing this ‘ not even Warren Buffett. Over the past 25 years, his Berkshire Hathaway Inc. stock has gained less than 25 percent per year (or only 2 percent per month). And he’s the world’s richest person!
The pitch itself is nonsensical. Stocks don’t ‘generate cash’ on a monthly basis ‘ most of their profits come from growth in value, not dividends. And dividends (which are paid quarterly, not monthly!) are typically only 1 percent or 2 percent per year.
The line about being ‘so conservative’ it’s ‘approved for your IRA’ is particularly egregious. ‘Conservative’ has nothing to do with IRAs; you can place virtually any investment into an IRA, including extremely risky, speculative investments. The promoters seem to want you to think that the investment is safe because it can be used in an IRA account. That’s highly misleading and deceptive.
If the promoters are able to turn $40,000 into $5 million, why don’t they just do it for themselves? The answer: They can’t. So instead they are trying to trick you into spending thousands of dollars on their seminar. Clearly, they’ll make a lot more money collecting $3,500 from suckers than they’d earn doing whatever it is they tout in the seminar.
Q: My mom died last Christmas, and I am the successor trustee. My mom had $700,000 in stock. I recently sold $25,000 of one stock to get some cash, and when I got the confirmation I realized that they charged over $400 in commissions. I don’t want to experience the same commission rate when I sell the remaining stocks, so is there some way I can move those shares to a discount broker and then pay much less in sales commission?
A: Yes, you can do this. It makes sense, too, because there’s no reason for you to pay the full commission rates that typical brokerage firms charge you.
Just check with an online discount broker, such as TD Ameritrade. Shop around and compare prices. Once you select a firm, they’ll help you with the paperwork so you can transfer your account. Doing this will save you hundreds ‘ possibly thousands ‘ of dollars.
Financial Adviser Ric Edelman can be contacted by e-mail at money@ricedelman.com.