You know I like talking philosophy and morals, and our lovely government has teed up a great philosophical discussion like a Titleist Pro V1 at St. Andrews.
Assuming the new tax bill passes in its current form, the estate tax is going to raise from 0% this year to 35% on everything over $5 million.
For some historical context, 2010 was a one-year deal for having a 0% estate tax. There was an estate tax of 45% on everything over $3.5 million in 2009, and if no bill is passed before the end of this year, the estate tax will jump to 55% for every dollar above $1 million. It may change, but as of today everyone expects the bill to pass as-is, so let’s work with the 35% after $5 million rate.
Now put yourself in the shoes of a theoretical guy named Tim.
Tim is the only living family member and medical proxy of his 83-year old Uncle Dan. Tim also happens to be in line to get 100% of Uncle Dan’s $105 million estate when he dies. To make matters even more interesting, Uncle Dan is not only elderly, but has been in a coma for a year. The only thing keeping him alive is the medical machines.
His doctors say he will most likely never wake up; however, he is completely healthy aside from the whole “coma” thing. If he does wake up, he could live out the rest of his life as a happy, healthy old man.
If Uncle Dan passes in 2010 (the next 16 days), Tim inherits the full $105 million. If Uncle Dan passes on January 1, 2011 or later, Tim will only get $70 million and our wonderful federal government will gladly take the other $35 million.
Tim received no instructions from Uncle Dan regarding his wishes for any medical decision. It is entirely up to Tim whether he pulls the plug before the end of the year or lets Uncle Dan ride it out and hope for a recovery.
What would you do if you were Tim?
On one hand, you’re going to be “rich” regardless of whether you get $105 million or $70 million. On the other hand, $35 million is enough money to buy just about whatever you want; or start a moderately sized business and employ hundreds of people; or help a worthy non-profit organization do ridiculous amounts of good.
From a medical perspective, Uncle Dan is probably just gonna lie in that bed, unconscious, for the rest of his life. However, he could make it out and live a few more years in good health.
I’ve been on the fence about this all night. I think I know what I would do, but I want to see your comments first, because I bet I get some great comments that change my mind. I’ll post a roundup of the best comments, as well as what I would do, on Thursday.
Kevin McKee is an entrepreneur, IT guru, and personal finance leader. In addition to his writing, Kevin is the head of IT at Buildingstars, Co-Founder of Padmission, and organizer of Laravel STL. He is also the creator of www.contributetoopensource.com. When he’s not working, Kevin enjoys podcasting about movies and spending time with his wife and four children.
No, I wouldn’t pull the plug just to get more money. However, this is a great argument for people to provide an Advance Health Care Directive (no matter their age) and for distributing some of your money while you are alive. Currently you can “gift” someone $13K a year without tax implications. You also need a Revocable Living Trust. If you have that much money talk to a financial advisor or estate lawyer.
Darla
That’s a great point. My thought was “surely someone with that much money would be smart enough to leave his intentions.” But then I realized I’m not smart enough, because I haven’t done it yet. I honestly don’t even know what I would want for myself. Great point though.
Life>Money.
I agree in theory, but in this case, “life” is only life because of a feeding tube or whatever is keeping him alive and asleep. Being alive is one thing. Being asleep forever is quite another.
Kevin –
I’ve got an article like this in the que as well! Funny how this works out eh. I really am not sure what I personally would do, although I don’t really agree with keeping people on life support for that long – I dont think it’s right.
I think that if he had this large of an estate, it would most likely be sorted out before that happened, but you never know.
It’s hard not to think about it when the law is changing so much. I’m looking forward to seeing your post.
I’m sure in real life it would have been worked out, but you never know. Plus that’s not so much fun to write and think about.
If I’d let someone with no hope of waking up languish in a coma for a year, I’m probably the kind of person who values any kind of life at all very highly, so I wouldn’t pull the plug for money.
The real me would not let someone languish like that if they weren’t really alive, so I’d have likely pulled the plug long before the question even arose.
I guess in either case, estate taxes would be a factor.
That’s an interesting take, because I’m the type of person who believes in miracles. If there’s a 0.001% chance, I feel like my family or friend can be the one lucky person.
Nice to see you wouldn’t let the money factor into the decision.
I could never pull the plug for financial gain. I would feel sick with every dollar I spent. I agree with Jackie above. If I was going to do it, I would have done it already assuming it was in-line with what the sick person wanted.
I agree with you Everdaytips. It’s not worth it just to get millions of dollars.
This is a very good question. I honestly don’t know what I’d do. I’m human though, and I tend to be emotional at times and at others I’m an ice-queen. If this were my beau – he’d want the plug pulled so there is no chance of being what he calls, “a living vegetable”. If this were my grandfather or my mother – I’d leave them on the machine for a while to see if there is any improvement. I’d also have to factor in the costs for doing so as they can be quite steep and troubling.
I would look at the rules and the potential changes coming as well. Would it influence my decision? I won’t ever know for sure until this happens to me. I’d like to think that after looking at all the laws and such that I would need to know about regardless of the dollar figure, I’d weigh them, giving my heart the biggest vote. No other family members for Uncle. Was I close with him? Am I prepared to handle all his medical needs when/if he wakes from the coma? What is the actual prognosis of him being in the coma indefinitely?
There’s always the hollywood hope that if I decide to pull the plug because I don’t want the machines working for him anymore, and he take a breathe on his own, then I wasn’t meant to end his life. If after everything I decide to pull the plug for his betterment, and he goes quietly to heaven to be a guardian for me, then I’ve made the right decision. The money won’t feel right either way for a long while – depending how close I was with him in the first place. Favourite Uncle? Barely spent time with the man?
Ultimately emotions would take over and the money thing would be a distant irksome issue to be dealt with sometime after I’ve grieved properly. Regardless of the sum.
Nope, won’t pull the plug.
I can’t believe we’re getting $5million exempt PER PERSON! Pretty sweeet!
I would rest my decision mostly on what my uncle would have wanted. Even being poor, I wouldn’t consider the money because it wasn’t my money anyway.
Although I would still feel bad I would want to “pull the plug” just because I hate the idea of being in that postion myself. Seriously, I even own a copy of “Final Exit.” Being on those machines would be terrible.