Why he supports the Estate Tax -
“You may not have heard of the Berkshire Hathaway company, but you’ve probably heard of its owner. Warren Buffet, the CEO of Berkshire Hathaway, is the world’s second-richest man and one of the most famous philanthropists of our time. . .
“. . . Berkshire Hathaway’s insurance group specializes in life insurance and annuities — retirement investments that return payments over time. Berkshire Hathaway also offers specialty insurance for commercial property, construction, and workers’ compensation.
“Berkshire Hathaway owns two other large insurance companies: GEICO and General Re. GEICO is one of the leading providers of auto insurance in the United States. General Re is a “reinsurance” company — it sells insurance to other insurance companies.”
Hat tip: Berkshire Hathaway
Example of personal gain -
“Life insurance for inheritance tax planning”
“It has to be said that life insurance as a solution for inheritance tax planning is the place of last resort.
“A lot of advisers fail to point that out owing to the fact that they get commission for selling life insurance and the fact that a lot of financial advisers lack the experience in the IHT market to actually solve the problem without re4esorting to life cover.
“That said there is still a place for life cover but only, as I have said, as a last resort.
“This site and all our advisers will aim to mitigate the majority of IHT liability but when all that can be done has been done there is still the option of just covering the liability left and that will then pay of the tax when due, ensuring that the estate remains intact for your beneficiaries.
“There are essentially two types of life insurance policies associated with inheritance tax planning.
“Policy type one – Gift inter Vivos – This policy is designed to cover the tax liability associated with PETs potentially exempt transfers (The 7 year rule). This policy is designed to reduce at exactly the same rate as the tax reduces after the PET has been made. So there is a 100% cover years 0 to 3, 80% year 3 to 4, 60% year 4 to 5, 40% year 5 to 6, and then 20% cover year 6 to 7.
“The second and far more common type is standard life cover. Standard life insurance is ideally written on a whole of life basis but if cost is an issue you can take out a long term, term insurance plan. The only problem with the latter is the plan will finish at some point in the future and if that is before death you will not have any life insurance and no cover to repay the IHT bill on death. So you can see that the whole of life insurance plan is by far the best option.
“When arranging any life insurance for IHT coverage you need to establish the level of the IHT liability and aim to have cover at that level. It is always worth considering indexing the sum assured to ensure the value of the cover rises with inflation as the likelihood in most cases the estate itself will also rise with inflation and in turn the IHT bill itself.”
Hat tip: Inheritance Tax
Is he the philanthropist the media makes him out to be?
“. . . All of this leaves me perplexed by the way Buffett is contributing the bulk of his assets to the Bill and Melinda Gates Foundation. Buffett has received excellent legal advice to guarantee that his contributions will not generate federal tax. This provokes the question: Why?
“Buffett could give his fortune to the Gates Foundation in a manner which generates federal tax. This would leave less for the foundation but more for the federal fisc. Indeed, Bill Gates, like Warren Buffett, advocates retaining the federal estate tax. He too could leave his assets to his foundation in a fashion which would share part of those assets with Uncle Sam.
“It seems strange for prominent and outspoken advocates of the federal estate tax to dispose of their assets in a manner meticulously designed to avoid the federal estate tax. . .”
Hat tip: Warren Buffett Estate Tax
And he boasted:
“Last year my federal tax bill — the income tax I paid, as well as payroll taxes paid by me and on my behalf — was $6,938,744. That sounds like a lot of money. But what I paid was only 17.4 percent of my taxable income — and that’s actually a lower percentage than was paid by any of the other 20 people in our office. Their tax burdens ranged from 33 percent to 41 percent and averaged 36 percent.”