Previous blog posts have discussed the fact that in 2010 there is no federal estate tax imposed on a person’s estate, no matter how large the estate. In 2009, the federal estate tax was levied on estates over $3.5 million. In 2010 there is no estate tax because Congress failed to approve the bill to keep the estate tax at the 2009 level with a maximum 45% tax rate.
No one expected that the 74th richest man in the world would die in 2010. Texas gas pipeline tycoon Dan Duncan suddenly died in March at the age of 77 with an estimated $9 billion estate. No one knows the details of his estate plan but his death has caused many to wonder if Congress would now reinstate the 2009 estate tax and make it retroactive to the begining of the year so that the government could receive much needed revenue from his estate, maybe in the billions. Mr. Duncan was a noted philanthropist, so he may have provided for a number of charitable gifts which pass to the beneficiaries free of estate tax.
If Congress fails to act before the end of the year, the estate tax exemption is set to return to $1 million with a maximum tax rate of 50%. Such inaction by Congress will potentially affect many peope who are not billionaires. In California especially, where real property values are high, many upper middle class individuals would be subject to estate tax with estates over $1 million.
Estate planners are watching all of this with interest as it determines the type of trusts that are drafted and the estate planning advice we give to clients. If we can answer any questions for you or review your estate plan to see if it is flexible enough to deal with changes in the estate tax, please contact us.