NCPA - National Center for Policy Analysis

The Growing Complexity Of Inheritance

January 8, 1999

Earlier generations of Americans lived shorter lives and didn't save as much because they expected to die soon after retirement. Today, however, people are amassing stocks, bonds, mutual funds, Individual Retirement Accounts (IRAs), real estate and personal property which eventually will be passed along to inheritors.

Experts warn that taxes and complex rules are making the inheritance process daunting.

  • About $143 billion is expected to change hands in 2000 -- up from $84 billion in 1995.
  • A 1994 Cornell University study estimates that about one- quarter of baby boomers will inherit $50,000 or more -- but an Oppenheimer Funds survey found only 12 percent of baby boomers have ever received a lump sum of $50,000 or more.
  • In 1999, inheritance taxes will be levied on estates of $650,000 or more, which will effect only 1 percent of estates -- but that proportion will soar in the next few years, experts predict.
  • That's largely due to the soaring bull market in stocks and the effects of tax-deferred savings plans.

Aside from the effects of large assets, an estate can be ensnared in family complexities. In addition to the usual heirs, survivors may include stepchildren, ex-spouses, and longtime companions. The danger here, financial planners say, is that families can soon run up large legal bills that cut into the bequest.

Source: Sandra Block, "Inheriting a Nightmare," USA Today, January 8, 1999.


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