Want to Avoid Estate Tax? 2010 Is A Good Year To Die

Mon, Jul 19, 2010

Financial News

The legislative process and compromises often result in laws and policies which can be quite illogical. Take for instance the current status of the estate tax. Several years ago there was a pitched battle between the parties over future rates for the estate tax — which spawned the very effective GOP tactic of referring to it as the “death tax” which gained public support against it. A compromise was reached whereby the estate tax would be reduced over several years, and then it would go back up again. One quirk within the compromise was that if you die during the year of 2010, then you would owe no estate taxes. However, if you pass away in 2011, then your heirs will pay a whopping 55% of what they inherit to the federal government.

Look at the example of Texas energy tycoon Dan Duncan. He was both unlucky and lucky. The unlucky part related to dying from a sudden brain hemorrhage, but he was lucky that it happened before the end of the year. His fortune, estimated at over $5 billion, will now convey to his heirs without a penny of tax. If here were to have suffered this misfortune next year, then his heirs would have owed over $2.5 billion to Uncle Sam. There is no rhyme or reason behind this 2010 exclusion — it is just how the compromise worked out. Obviously, no one wants to die — but if you gotta go, then 2010 is the year to do it.

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