The recent death of two billionaires has thrust back into the spotlight the fact that Congress let the federal estate tax expire .
You may recall that 2010 began with personal finance pages running headlines like “On Your Mark, Get Set, Die!” Because Congress failed to pass a new estate tax law before the sunset of the Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA), 2010 began without a federal estate tax. (Currently, if there’s no Congressional intervention, the estate tax will be re-instituted in 2011 at levels that applied prior to 2001–a $1 million exemption and a top tax rate of 55%. In 2009, the exemption was $3.5 million and the top rate was just 45%.
But let’s return to the families of the billionaires. In March, Texas billionaire Dan Duncan passed away with a fortune estimated by Forbes magazine to be worth $9 billion. Forbes estimates that had he survived until 2011, his estate would have been subject to approximately $4.95 billion in federal estate taxes. Also, last week when sports-business legend George Steinbrenner died of a heart attack, leaving behind a fortune estimated by Forbes worth $1.15 billion, his estate escaped paying an estimated $632 million in federal estate taxes–unless Congress makes whatever tax they settle on retroactive.
How did this happen in a nation where Ben Franklin famously quipped there are two guarantees–death and taxes? The fact Congress has failed to address the estate tax issue is a major breach of fiduciary duty as far as I am concerned. Their inaction has already cost the US government billions in taxes. Furthermore, it places families in the uncomfortable position of having to decide whether to unplug Mom or Dad to save millions in taxes.