What Is Happening With The Federal Estate Tax?

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George Steinbrenner, owner of the New York Yankees, recently died leaving an estate worth $1.15 billion. How much in the way of death taxes is Mr. Steinbrenner’s estate going to pay? In all likelihood, his estate will pass to his heirs free of any death taxes, which otherwise could have approached $500,000,000. This is because during 2010 there is no federal estate tax, and his state of residence, Florida, has no inheritance taxes. 2010 is proving to be a good year to die for very wealthy people who want to minimize their death taxes.

At this point, it is unlikely that Congress is going to impose any federal estate tax during 2010. In part this is because of constitutional issues relating to retroactive application of taxes, but also because Congress seems to be unable to take any action, and with elections approaching, the situation is only likely to get worse. The downside of Congressional inaction is that the federal estate tax returns on January 1, 2011, at the 55% rate, and a $1 million exemption. Thus, it is somewhat premature to be eliminating the unified credit trust planning that many of you have in your estate planning documents.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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