Very little can comfort the family upon the death of a family member. However, if you are wealthy, particularly the wealthy who own closely held businesses, 2010 is the best year to go. The 2010 death of Yankee owner George Steinbrenner, a year when there is no estate tax, may save his family half a billion dollars or so in estate taxes and allow his family to retain control of the New York Yankees.
Taxpayers dying in 2010 do not pay estate tax (although there can be an income tax on heirs who sell inherited assets above certain amounts). If Steinbrenner had died in 2009, his assets would have been taxed at 45% to the extent they exceeded $3.5 million. For taxpayers who die in die in 2011, it is becoming more likely they will be subject to tax on assets that exceed $1 million. However, because Steinbrenner died in the one year where there is no estate tax, he avoids tax on his estimated $1 billion estate.
Steinbrenner’s estate consisted of his interest in the Yankees, a closely held business with an estimated fair market value of $1.6 billion, and real estate and other illiquid assets. The family would have been hard pressed to pay the IRS its roughly 50% share and still retain these assets. It is likely the Steinbrenner family would have been in the same position as Joe Robbie’s family, who lost the Miami Dolphins in the early 1990s because they could not pay the $45 million or so owed in estate taxes.
Congress may seek to re-impose the estate tax in 2010 retroactively, however, this is becoming less likely as we approach the fourth quarter of 2010. Thus, millionaires and billionaires like Steinbrenner, and Dan Duncan, another 2010 decedent who died with an estate estimated at $8 or $9 billion, escape estate tax free.
In 2011, the estate tax consequences will become dramatically different. If Congress does not change the law, estates exceeding $1 million will be taxed at rates as high as 55%.
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