This week, we lost one of baseball’s iconic owners, George Steinbrenner. He bought the New York Yankees from CBS over 30 years ago at a price tag of about 10 million dollars. As a long-term Yankee fan, I, like most New Yorkers, have had a love-hate relationship with George Steinbrenner and his handling of the Yankees.
How does this tie into estate planning? Well, as a result of the inability of Congress to act, New Yorkers and Yankee fans should not have to worry about any significant changes being made to the operation and management of the Yankees, since his estate does not have to sell any assets to pay for any Federal estate taxes. Yes, that is correct, even though Steinbrenner’s estate is estimated to be worth over 1 billion dollars, his estate will pass free of estate taxes to his family because of the expiration of the federal estate tax in 2010. Note: If Steinbrenner was a Florida resident, there would be no Florida estate tax, but if he was a New York resident or owned New York real estate, then his estate will owe New York estate taxes (which could be as much as or more than 160 million if his entire estate is subject to New York estate tax).
Steinbrenner’s death could prove to be a wake up call for Congress on the huge amount of tax dollars not being collected in 2010 as a result of the one year moratorium on Federal estate taxes. Just from the death of Steinbrenner and one other multi-billionaire this year, the Federal government has lost approximately 5 billion dollars in Federal estate taxes. Estimates of lost revenue range as high as 30 billion for the entire 2010 tax year as a result of there being no Federal estate taxes in 2010.
This past June, senators introduced legislation that would implement a progressive estate tax starting at estates valued at 3.5 million and a 10% surcharge on estates larger than $500 million. These senators would also like to see the 45% tax rate from 2009 retroactively imposed on all estate of individuals dying in 2010. If Congress retroactively reinstates the estate tax for individuals dying in 2010, it likely that this story and saga will continue for many years, since there are at least a few families who have the resources and means to challenge the constitutionality of a retroactive reinstatement of the estate. It can be expected that any such challenge will go all the way to the Supreme Court.
This blog does not reflect necessarily my personal views on the estate tax.