Another Billionaire Dies in 2010 - Billions in Lost Estate Taxes Due to Congressional Inaction
The second U.S. billionaire has died this year. First it was Dan L. Duncan , of Texas, with a net worth of approximately $9 billion (ranking as the world's 74th richest person), who died in March. Walter Shorenstein , of San Francisco, died last week. He was only 880th on Forbes' list of the world's billionaires with an estimated net worth of $1.1 billion.
Based on the estate tax law currently in place , neither of these billionaires will pay any estate taxes. Had either of them died before January 1 of this year, 45% of their collective estates would potentially have been paid to the U.S. Treasury in the form of estate taxes. Had both lived til next January 1, the rate would have been 55%. But, Congress has decided that it can't get its act together to decide what to do about the estate tax, having allowed it to be repealed for this year, only to have it come back in 2011 with only a $1 million exemption. Think about it! Dan Duncan's family receives $9 billion with no estate tax. The person who dies January 1, 2011 with a $3 Million estate will pay over $1 million in estate taxes, based on current law.
As discussed in our post last week , there is yet another new estate tax proposal that has been filed in the Senate. That makes at least 4 different estate tax proposals that are being considered by Congress, which almost ensures that no action will be taken this year before the elections, and there probably won't be time for Congressional action between the elections and the end of the year recess. So, very probably, we will begin 2011 with an estate tax that takes 55% of an estate over $1.2 million, and only allows a $1 million exemption for each individual.
The current proposals for the estate tax that have been filed for consideration by Congress provide for exemption amounts (the amount of an estate that can pass free of estate taxes) from $2.5 million to $5 million per individual - with a total of $5 million to $10 million for married couples. The estate tax rates in the various proposals range from 25% to 65%, depending on the size of the estate. Until Congress chooses which, if any, of these proposals becomes law, there are millions of people who may, or may not be, impacted by which proposal becomes law. Until decisive action is taken by Congress, all of those people are left with the uncertainty of not knowing how they should plan their estates to minimize the impact of the ultimate estate tax burden on their loved ones.
It is my opinion that the estate tax is the most pernicious of all taxes, and should be totally and permanently repealed. It is not a significant portion of all federal tax revenues. The estate tax generated approximately $25 billion in revenue in 2008 , the last year for which figures are available from the IRS. That figure does not take into account what many believe to be the negative impact on income tax revenues that is caused by removing private capital out of the economy.
I've seen how the imposition of the estate tax upon the death of a business owner or professional negatively impacts families who are unaware of the tax until it takes a meaningful portion (sometimes 45% - 55%) of their family's estate, often forcing the quick sale of businesses, farms, or other assets to pay the estate tax liability. Estate taxes must be paid, in cash, within nine months of the date of death. I've also seen how those who are aware of the estate tax can plan around it and minimize or eliminate its impact. With proper estate planning, the estate tax can be a voluntary tax.
Notwithstanding that belief, I also know that Congress' inaction on the estate tax has caused incredible costs and uncertainty for a significant proportion of the population (all of those with a net worth between $1 million and $10 million), and now has created the outrageous inequality that someone dying in 2010 with a $9 Billion or a $1.1 Billion estate, will end up paying no estate taxes, while someone dying in 2011 with a $2 Million estate will pay hundreds of thousands of dollars in estate taxes.
If there is going to be an estate tax, as appears almost certain at this point, Congress' failure to act timely has not only created untold expense and uncertainty for a significant number of people, but has now cost the US Treasury billions of dollars in lost estate tax revenue, just from these two very wealthy estates, at a time when deficit spending is wrecking the economy. Shame! Shame! Shame! on Congress!!
Based on the estate tax law currently in place , neither of these billionaires will pay any estate taxes. Had either of them died before January 1 of this year, 45% of their collective estates would potentially have been paid to the U.S. Treasury in the form of estate taxes. Had both lived til next January 1, the rate would have been 55%. But, Congress has decided that it can't get its act together to decide what to do about the estate tax, having allowed it to be repealed for this year, only to have it come back in 2011 with only a $1 million exemption. Think about it! Dan Duncan's family receives $9 billion with no estate tax. The person who dies January 1, 2011 with a $3 Million estate will pay over $1 million in estate taxes, based on current law.
As discussed in our post last week , there is yet another new estate tax proposal that has been filed in the Senate. That makes at least 4 different estate tax proposals that are being considered by Congress, which almost ensures that no action will be taken this year before the elections, and there probably won't be time for Congressional action between the elections and the end of the year recess. So, very probably, we will begin 2011 with an estate tax that takes 55% of an estate over $1.2 million, and only allows a $1 million exemption for each individual.
The current proposals for the estate tax that have been filed for consideration by Congress provide for exemption amounts (the amount of an estate that can pass free of estate taxes) from $2.5 million to $5 million per individual - with a total of $5 million to $10 million for married couples. The estate tax rates in the various proposals range from 25% to 65%, depending on the size of the estate. Until Congress chooses which, if any, of these proposals becomes law, there are millions of people who may, or may not be, impacted by which proposal becomes law. Until decisive action is taken by Congress, all of those people are left with the uncertainty of not knowing how they should plan their estates to minimize the impact of the ultimate estate tax burden on their loved ones.
It is my opinion that the estate tax is the most pernicious of all taxes, and should be totally and permanently repealed. It is not a significant portion of all federal tax revenues. The estate tax generated approximately $25 billion in revenue in 2008 , the last year for which figures are available from the IRS. That figure does not take into account what many believe to be the negative impact on income tax revenues that is caused by removing private capital out of the economy.
I've seen how the imposition of the estate tax upon the death of a business owner or professional negatively impacts families who are unaware of the tax until it takes a meaningful portion (sometimes 45% - 55%) of their family's estate, often forcing the quick sale of businesses, farms, or other assets to pay the estate tax liability. Estate taxes must be paid, in cash, within nine months of the date of death. I've also seen how those who are aware of the estate tax can plan around it and minimize or eliminate its impact. With proper estate planning, the estate tax can be a voluntary tax.
Notwithstanding that belief, I also know that Congress' inaction on the estate tax has caused incredible costs and uncertainty for a significant proportion of the population (all of those with a net worth between $1 million and $10 million), and now has created the outrageous inequality that someone dying in 2010 with a $9 Billion or a $1.1 Billion estate, will end up paying no estate taxes, while someone dying in 2011 with a $2 Million estate will pay hundreds of thousands of dollars in estate taxes.
If there is going to be an estate tax, as appears almost certain at this point, Congress' failure to act timely has not only created untold expense and uncertainty for a significant number of people, but has now cost the US Treasury billions of dollars in lost estate tax revenue, just from these two very wealthy estates, at a time when deficit spending is wrecking the economy. Shame! Shame! Shame! on Congress!!
Posted by Randy Coleman at 6/27/2010 4:23 PM 
Categories: Estate Planning, Estate Taxes, estate tax
Tags: estate tax estate planning
Categories: Estate Planning, Estate Taxes, estate tax
Tags: estate tax estate planning
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