WASHINGTON — Ira Cohen still doesn't think of himself as a millionaire, but, as he discovered a few months ago, it doesn't take that much these days for your assets to add up--big time.
The two-story tract house he owns in Glendora was worth several hundred thousand dollars. Thanks partly to the stock-market boom, there was a surprising several hundred thousand more in his 401(k) accounts. And he bought a vacation lot in Tucson that has appreciated in value.
His total net worth: $1 million-plus.
That realization spurred Cohen to set up a series of trusts to protect his children and grandchildren from the federal estate tax. Although the first $650,000 of an estate is effectively exempt from the tax, he was not taking any chances with his portfolio.
"The fact that my estate came to more than $1 million was a real shocker," Cohen said.
Cohen's paper fortune--and his anxiety about the estate tax--are part of a trend. Especially in Southern California, where house prices are high, many middle-income families are finding that their net worth has climbed to unexpected heights, making them millionaires on paper.
Partly as a result, some analysts believe, the Republican-led effort to repeal the estate tax--part of the massive tax-relief bill that Congress just passed--may be resonating beyond the narrow segment of rich GOP faithful who traditionally have worried about its effect.
Although statistics do not reflect it yet--Treasury Department figures show that only about 2% of the estates of Americans who die this year are likely to be dunned for estate taxes--planners say that today's good times are making more families vulnerable to estate tax levies.
"We have more and more middle-class people coming in all the time--even machine shop workers--who find that they're approaching millionaire status and they're worried about the estate tax," said Rusty Tweed, the San Marino estate planner who is handling Cohen's trust.
Peter J. Davis Jr., a Washington-based tax policy analyst, agreed. "There's been a huge creation of wealth over the past several years, and people who never used to think of themselves as rich are now being told: 'You've got a big estate tax problem.' "
Estate planners say there are several factors behind the phenomenon:
* In many areas--Southern California, New England and Washington, D.C., among them--home prices have soared, often to $300,000 or more for a conspicuously modest house. In these areas, homes that would sell for $120,000 in the Midwest can easily bring $600,000 or more.
