Yahoo Finance Vanilla Ice issues stone cold takedown of US death taxes, ‘vulture’ lawyers — shares estate planning advice
Rapper Vanilla Ice, a.k.a Robert Van Winkle, has given a stone-cold review of U.S. death taxes and the legal help available to rich Americans looking to prolong their generational wealth.
In a video shared to his official YouTube page, the “Ice Ice Baby” artist slammed estate tax, also known as inheritance or death tax, as a generational wealth killer. This is the tax imposed by the federal and some state governments on a deceased person’s estate.
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He questioned why any parent would want to “leave the Earth one day” without having a plan in place that would leave “whatever [assets] they worked hard for” to their children, as opposed to the government or a lawyer.
Here’s how Van Winkle suggests you avoid death taxes and other fees through efficient estate planning.
Avoid the ‘vultures’
Van Winkle shared the story of his friend Mark, whose parents were “loaded” and owned a huge property on 1,500 acres in Palm Beach, Florida. When the parents passed away, they left their estate to Mark and his two siblings, who then sold the property thinking the profit would set them up for life.
What they did not anticipate was the death tax imposed on their parents’ estate.
“They’d never heard of it before, never saw it coming [and it] took over 80% of their profit,” said Van Winkle. “They were set, it was all done and the parents had it all paid for. How can that be?”
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Getting a lawyer won’t necessarily help you in that situation, according to the rapper, who called lawyers of wealthy families “vultures” ready for a financial feast.
“If you ask a lawyer: ‘How do I save all [my] money and give it to my kids without the IRS taking it, without … lawyers and probate court taking over? A lawyer’s … going to tell you a hundred different things that are going to confuse you,” he said, warning that lawyers will be ready to pounce on any vulnerability and any lack of education around how to protect your assets.
“Instead of giving my kids cash in a big bank account that the lawyers are going to take half of [and] a death tax is going to take another half,” the 56-year-old rapper recommended these two estate planning solutions instead.
Life insurance
Van Winkle believes the “simplest way to … pass on as much money as you want to your kids” is to “max out your life insurance.”
Life insurance is sometimes overlooked as an estate planning tool, but it can offer some unique benefits, especially when it comes to reducing the taxes due on your assets after you die.
The death benefit from a life insurance policy is not subject to income tax, which means your heirs should receive every dollar. However, any interest generated on the proceeds is taxable. This payout can be used to pay the capital gains taxes due on other assets they inherit, like property.
It’s important to remember there’s no one-size-fits-all solution when it comes to picking the right life insurance plan for estate preservation.
A term life insurance policy — which pays a death benefit if you die within a specific period, typically 10, 20 or 30 years — may help more with short-term estate needs (like paying off a mortgage). Meanwhile, a permanent life insurance policy — which lasts for the policyholder’s whole life — could be a better option for estate planning with insurance.
If you’re keen — like Van Winkle — to use life insurance in this way, you’ll want to ensure you have enough coverage to offset major costs like the income tax, probate fees and any outstanding debts payable by your estate.
Irrevocable trusts
Van Winkle isn’t a huge fan of trusts — in fact, he says lawyers will try and “scam” you into them — but the rapper does admit they have some useful qualities when it comes to maintaining your family’s generational wealth.
Specifically, he mentions irrevocable trusts. This type of trust is typically created to protect assets and reduce federal estate taxes (the formal term for death taxes).
The creator of the trust (the grantor) can select the assets they want to transfer over to a recipient (the beneficiary) via the trust — and in doing so, those assets are removed from the grantor’s personal taxable estate. It also relieves the grantor of the tax liability on the income generated by the assets.
Once established, irrevocable trusts are extremely difficult to change or dissolve. The grantor has no right to make changes to the assets or the trust without permission from the beneficiary or a court order. The assets are safe from legal judgments and creditors since the trust will not be a party to any lawsuit.
Van Winkle joked about sheltering his classic car collection in a trust where he could set the rules so that his kids “can lease it out … but can’t sell” the cars.
Putting tangible assets into an irrevocable trust is a reasonable estate planning move, according to the rapper, because “that way, you can never squander it.”
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This article provides information only and should not be construed as advice. It is provided without warranty of any kind.
