estate tax
Steinbrenner’s estate tax feat
Wednesday, July 14th, 2010 | tax | No Comments
Yankees owner George Steinbrenner’s death this week is a sad occasion for his family and friends. But because it happened this year, it resulted in a huge tax savings for his heirs. As explained in this Wall Street Journal article, the 2001 Bush tax cuts left a quirky Federal estate tax repeal for this year only. Congress did nothing to fix this anomaly.
With Mr. Steinbrenner’s estate estimated at $1.1 billion, that means his heirs will inherit as much as $600 million that would have gone into the Federal treasury, based on the rate when the estate tax resumes in 2011 (55% maximum on estates over $1 million). He joins another high-profile billionaire whose passing we wrote about a few weeks ago.
Here’s a morbid thought: Will death become the ultimate tax-planning tool this year? I shudder at the thought.
Death, But No Taxes
Tuesday, June 22nd, 2010 | tax | No Comments
Even though the federal estate tax only affected about 5500 decedents in 2009 before it was repealed for one year, Congress’s inaction in reversing the repeal has cost the government big money, even by their standards. In this New York Times story, we learned that Houston’s richest man died last spring. Dan L. Duncan was a natural gas tycoon (EPCO, Dan Duncan L.L.P., Enterprise GP Holdings) whose fortune was estimated by Forbes at $9 billion, ranking him number 74 among the wealthiest in the world. If he had died in 2009, his estate would have paid up to $4 billion in taxes; in 2011, that amount might have risen to $5 billion. This year, his estate passes tax-free to his wife, children, grandchildren, and various charities.
If and when his heirs were to sell some of the assets, the substantial gains would be taxed at rates ranging from the current 15% capital gains rate to the maximum income tax rate, which is still lower than the estate tax rate. But that could be many years in the future. In the meantime, the federal government has missed out on perhaps as much as $25 billion of revenue (the estate tax take in 2008).
There are strong and valid arguments on both sides of the estate tax issue, from political, economic, and humanitarian points of view. The plain fact is that this is one revenue stream for the federal budget that dried up for this year. Care to guess who they will tap to make that up?
The federal estate tax returns in 2011 for estates valued at $1 million, if Congress leaves current law intact. (The cutoff in Tennessee has been $1 million for several years, and was unaffected by the federal law.)
Savvy estate planning can help your family keep more of its assets and minimize the tax liability. We were part of a team of professionals who reduced a family’s taxable estate through good planning from about $8 million to about $2 million, saving them a $3 million tax hit that would have forced them to sell all of their real estate holdings into a depressed market.