When Houston natural gas tycoon Dan L. Duncan -- the 74th richest person in the world -- died in March, many people thought his massive $9 billion estate might still be subject to a retroactive reinstatement of the federal estate tax that would potentially net around $4 billion for the federal government. One estate. $4 billion.
That didn't happen, and it almost certainly won't happen at this point. His four children and four grandchildren -- who inherited the bulk of his estate -- won't pay as much as a dime in estate tax to the federal government. Let's hope those heirs are doing the right thing and channeling a significant chunk of that tax-free inheritance toward worthy charitable endeavors -- 45% of it perhaps? That's equal to the tax rate percentage the estate would have been subject to had Mr. Duncan passed away three months earlier -- still better than the 55% if he were to have passed away in 2011 under current law.
It is looking more and more like Congress won't be doing anything about the 2010 estate tax holiday, and at this point it's hard to say if Washington will get around to deciding on a more lenient version of the federal estate tax for 2011 than the one currently slated to take effect: a low $1 million exemption and a hefty 55% estate tax.
Back in 2009, almost everyone expected that Congress would do something to prevent the 2010 estate tax holiday, and nothing was done. Then in early 2010, many figured a retroactive estate tax would be reinstated. Nothing happened.
Now the "smart money" says Congress isn't likely to do anything in regard to the estate tax before the mid-term elections in November. If Republicans dominate mid-term elections and control at least 60 seats in the Senate, they may well push to extend the repeal of the estate tax. Or we could see a deal in Congress that would lead to a permanent estate tax with an exemption level around $3 million and a rate of 45%.
While a relative few taxpayers are affected by the federal estate tax -- according to the Congressional Research Service only an estimated 1.76% of estates would be affected in 2011 if the estate tax indeed comes back with a $1 million exemption -- that small percentage of high-net-worth estates is the right in the wheelhouse of many producers who read Life Insurance Selling.
Sure makes it hard to plan when the rules of the game are likely to change -- and you have no clear indication of how or when.
If you have thoughts on the subject and about how you are proceeding in this area despite the uncertain climate, I'd love to hear them.
