The NYT gets all hot and bothered about the fact that a billionaire has died in this year when there is no estate tax in the US.
A Texas pipeline tycoon who died two months ago may become the first American billionaire allowed to pass his fortune to his children and grandchildren tax-free.
Well, actually, yes and no.
Had his life ended three months earlier, Mr. Duncan’s riches — Forbes magazine estimated his worth at $9 billion, ranking him as the 74th wealthiest in the world — would have been subject to a federal tax of at least 45 percent. If he had lived past Jan. 1, 2011, the rate would be even higher — 55 percent.
Umm, no it wouldn\’t.
Mr. Duncan’s will, which is on file at the Harris County Probate Court in Houston, was written in 2006 and amended in 2008, a time when most estate planners assumed that Congress would not allow the tax to lapse. Federal law has long allowed an unlimited amount of assets to pass untaxed to a surviving spouse, and Mr. Duncan left his home and ranch to his wife of more than 20 years, Jan, along with stock valued at hundreds of millions of dollars.
Right, so that part wouldn\’t have paid tax anyway.
But the bulk of his estate is left to his children and grandchildren, and would have been taxable in 2009 or 2011.
Umm, no it wouldn\’t actually.
The stock involved includes more than 100 million shares in Enterprise GP Holdings, which closed at $43.23 the last trading day before Mr. Duncan died. That asset alone could have resulted in a $2 billion estate tax.
Elaborate estate plans with sophisticated trusts are often made many years before death to reduce estate taxes owed by the richest.
Mr. Duncan’s eldest daughter, Randa Duncan Williams, is serving as executor of the estate and is a voting member of the family trust that will now control her father’s interest in Enterprise GP Holdings.
See? Duncan had already organised his estate so that estate duty wouldn\’t be payable anyway. Because if you stick the money in family trusts then it ain\’t taxable!
So that he died in a year when there is no estate duty is simply an interesting quirk: the IRS wouldn\’t have got any of the money anyway!
And this is the dirty little secret about inheritance taxes (both here in the UK and there). The really rich don\’t pay them anyway.