As most of you know, the estate tax rates for 2010 remain at 0%. At the beginning of 2011 those rates jump up to 55% with a $1,000,000 exemption. Those are basically the rates in effect before the 2001 changes began phasing out the estate tax altogether only to be reinstated in 2011. In effect, if you died in 2010 with a substantial estate, as George Steinbrenner, Dan Duncan and Walter Shorenstein did, the potential savings could be in the 100’s of millions.
Wall Street Journal estimates are as high as $600 million on Steinbrenner alone. Of course this assumes no elaborate trust work or tax free foundations etc. were used. Additionally, taxes on assets left to a spouse are at least postponed. You would hope that the wills of these men were changed during 2010 to allow substantial transfers to heirs other than the spouse for 2010 alone. It will be interesting to see.
So is it fair that the heirs of one person benefit in such a disparate way over others simply by virtue of the date of the death? Should the tax be imposed retroactively? Some have made calls for congress to impose the tax on a retroactive basis. I believe this would be unconstitutional and cause so many lawsuits that congress will likely avoid it. I also believe that they will not act before the 2011 rates take effect.
Basically, if 2010 was a great year to die, 2011 will be a horrible year to die. By 2012 I expect a more balanced congress will impose a $3.5 million exemption with a 45% rate. This more sensible approach will protect family farms and small business from heavy debt burdens and or liquidation. By avoiding liquidation of small business you avoid additional job losses. Just makes more sense.
Posted by David Sheives
