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Congress has not passed new estate tax legislation, which has caused havoc on many people’s estate plans. For one family, the lack of Congressional activity has resulted in a financial boon.
2010 is free of the estate tax
Because Congress has not passed new estate tax legislation, 2010 is free of the estate tax—which amounts to an enormous free pass. Dan Duncan was an oil tycoon, and ranked as the 74th wealthiest person in the world. His estimated worth was $9 billion.
If Mr. Duncan had passed away in 2009, his estate would have been subject to an estate tax of at 45%. If he had lived into 2011, his estate would been subject to at least a 55% estate tax. But because he passed away during the tax-free year, the estate will pass tax free to his heirs.
The estate tax only affects a small number of estates
The article suggests that only 5,500 estates each year are actually subject to the estate tax. But in Mr. Duncan’s case, it resulted in billions not going to the federal government. According to one critic of Congress’s inaction, because of the lack of an estate tax this year “[t]he ultrawealthy in this country will still be able to pass on enormous wealth to the next generation . . . ”
Will the lack of estate tax alter people’s decisions?
By far, perhaps the most disturbing possibility of the lack of estate tax is that it may alter individual’s life and death decisions. Some estate planning attorneys wondered if relatives would keep sick relatives in life-support solely to prolong their life into 2010, in order to obtain the favorable tax rate. At the same time, it is possible individuals would urge relatives not to go on such life-sustaining treatment this year. While there are no reported incidents to date, with millions, perhaps billions of dollars at stake, it is certainly something worth keeping an eye on.
Randall Ryder practices consumer rights law in Minnesota and is a publisher of Elder Parent Help.