Back in April I reported on how the death of the 74th richest person in the world, Houston businessman Dan Duncan, on March 28 put a serious damper on any plans Congress has to bring back the federal estate tax in 2010 and make it retroactive to January 1: Kissing a Retroactive Estate Tax Goodbye. Last week David Kocieniewski reported for The New York Times the details that have been revealed about Mr. Duncan's estate since his death back in March and how much his children and grandchildren will really benefit from estate tax repeal and how much the federal government will really stand to lose:
- Mr. Duncan left his home, ranch, and stock estimated to be valued in the hundreds of millions of dollars to his wife of more than 20 years, Jan. These properties and stock would have passed estate tax free to Mrs. Duncan regardless of the year in which her husband died due to the unlimited marital deduction.
- Mr. Duncan left personal effects, including boats, jewelry, automobiles, and shotguns, to his descendants (four children and four grandchildren). These items would have been subject to a 45% estate tax had Mr. Duncan died back in 2009 and a 55% or greater estate tax had Mr. Duncan lived until 2011.
- Mr. Duncan left a Texas ranch stocked with wild game to his descendants. As above, this property would have been subject to a 45% estate tax had Mr. Duncan died back in 2009 and a 55% or greater estate tax had Mr. Duncan lived until 2011.
- Mr. Duncan left his holdings in EPCO and Dan Duncan L.L.P., two entities that were a major part of his business empire, to his descendants. As above, this property would have been subject to a 45% estate tax had Mr. Duncan died back in 2009 and a 55% or greater estate tax had Mr. Duncan lived until 2011, and, according to David Kocieniewski, these assets alone have left $2 billion in federal estate taxes off of the table for the IRS.
- Mr. Duncan left a "handful" of nonprofit organizations bequests in his will. These bequests would have passed estate tax free to the named organizations regardless of the year in which Mr. Duncan died due to the charitable deduction.
- Mr. Duncan's will states that any assets not earmarked for specific relatives or charities be left to two family charitable trusts "which can be used to donate to causes deemed worthy by his heirs." Depending on the structure and purpose of these charitable trusts, the remaining assets would have been eligible for some amount of a charitable estate tax deduction regardless of the year in which Mr. Duncan died.
Although the federal estate tax has been in effect in some shape or form since 1916, 2010 is the first year in which the tax has been allowed to completely disappear. According to David Kocieniewski's article, when America's first billionaire, John D. Rockefeller, died in 1937, his estate paid 70% in estate taxes, so in comparison a 45% or even 55% tax rate doesn't sound too bad, does it? Only time will tell what, if anything, Congress will do to bring back the estate tax in 2010. But regardless of what happens in 2010, the estate tax is scheduled to come back on January 1, 2011 with only a $1 million exemption and 55% tax rate, so you need to be prepared for the federal estate tax to come back, very prepared.