I’ve previously written about the state of the estate tax and the set increase between years 2009 and 2011, but due to an interesting turn of events (the death of a very wealthy Houston man), all bets are off.
Essentially, there was a gap in coverage of the estate tax. The most current estate tax (45%) expired at the end of 2009, and the estate tax that’s on the books (55%) doesn’t actually take effect until January 1, 2011, leaving 2010 as a large estate-tax-free gap. Congress had pledged to do something with 2010, but couldn’t come to an agreement in December 2009, meaning that as of right now, those who die in 2010, are lucky.
In March 2010, Dan Duncan, a natural gas mogul, passed away leaving an estimated $9 billion estate behind. Immediately, accountants, the government, and the public at large began to wonder: how would this estate be taxed? As it turns out, the Duncan estate, as it stands right now, will retain all $9 billion and won’t be subject to an estimated $4.05 to $4.95 billion in estate taxes.
A good number of people are thrilled about the lapse of coverage because the estate tax is viewed by some as double taxation. However, others are concerned about the loss of potential income to the government in 2010. With record deficits across states and the federal government, Duncan’s $4 billion contribution would certainly be utilized by the government.
Anyone who has read any of the tax code knows that one of the reasons it’s so complicated is due to retroactive taxes. The Senate Finance Committee may be discussing the possibility of a retroactive 2010 estate tax, though no one is sure whether it will actually come to pass. A real possibility, and perhaps even a fear of the government, is that Mr. Duncan’s estate could sue the government citing unconstitutionality and/or double taxation. The $4+ billion that might have gone to pay an estate tax could go a long way toward legal fees on behalf of the Duncan estate, and the government may not be willing to spend the funds to fight.
What comes next is anyone’s guess, but it is sure to be interesting. In the meantime, regardless of your level of wealth, don’t hesitate to do some of your own estate planning. You’ll save yourself and your family a lot of time and grief if plans and documents are kept up-to-date.
The State of the Estate Tax