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Ball point pen on todays newsprint

This is a story that's been on my radar for some time. My wife being in the fiduciary accounting biz has been waiting to see what congress will do about their oversight in the 2010 tax code, allowing estate tax to lapse for one year.

In 2009 heirs were subject to a 45 percent tax on estates exceeding 3.5 million. In 2011 the rate will rise to 55 percent, but for 2010 the tax on estates is zero. My first thought was that there are going to be a lot of plugs pulled in December of 2010. But in todays NYT the real life ramifications of congress's oversight.

Dan Duncan is the first American Billionaire allowed to pass his substantial fortune to his heirs tax free. Forbes magazine estimated his worth at $9 billion, ranking him as the 74th richest man in the world. If he died in December of 09 the estate would have paid over 4 billion in tax, If he survived until Jan 2011 the tax would have been nearly 5 billion. I'm no fan of double and triple taxation, but it seems unfair for some to pay huge sums while others to pay nothing.

9 Comments
  1. June 9, 2010 -

    The quiet, knowing smile on your portrait about says it all.

  2. Donna
    June 9, 2010 -

    No one gets away paying nothing. They won't get away totally tax free. Because there is no Federal Estate Tax, his assets, ie. stock, bonds, real estate, won't get a "stepped-up" tax cost basis (date of death value) so either his estate or his heirs will be subject to large capital gains when they sell the assets. And as far as pulling the plug, I would think more plugs would be pulled during 2010!!! Heirs get very greedy.....

  3. June 9, 2010 -

    Thanks Da for your expertise, you know your stuff. Correct me if I'm wrong, but a long term capitol gain on the growth of assets, will only be a small percentage of what the estate tax would have been on the whole estate (assets and growth)? BTW, thanks for catching that typo, I meant to say 2010.

  4. June 9, 2010 -

    Goes to show you how cynical I am that instead of thinking about the loss of revenue to the treasury or the windfall to the families, my mind immediately goes to how many plugs will be pulled to save on tax.

  5. June 9, 2010 -

    While I don't think the estate tax should be repealed 55 percent sounds extremely harsh.

  6. June 9, 2010 -

    I'm with you VEe! I think it's ridiculous, but I think knowing that taxes are being imposed fairly helps to ease the blow. If I had a parent die on December 31st of 2009 and paid 4 billion in tax I think I would be a little bitter knowing that on the following day others are paying zero.

  7. Donna
    June 9, 2010 -

    Yes, you're right Larry, the capital gains rates are much lower than FET. For 2010 it remains at 15%, but is increasing to 20% in 2011. And, yes VEe, 55% is an extremely high rate of tax on assets you've worked hard for your whole life. The rate was 55% back in 2001 but most people don't realize there are such high death taxes, federal and state, until they lose a loved one. Bottom line, SPEND YOUR MONEY AND ENJOY YOUR LIFE. Don't leave it to the government.

  8. June 9, 2010 -

    Donna said: Bottom line, SPEND YOUR MONEY AND ENJOY YOUR LIFE. More European vacations?

  9. Donna
    June 9, 2010 -

    Absolutely, let's start planning the next one. :)