Many people fear the estate tax even though they do not know much about it or who exactly has to pay it. However no matter how little you know about it, I am sure you would be surprised to know that the heirs of George Steinbrenner, billionaire owner of the Yankees and boss of George Constanza for Seinfeld fans, who recently died could end up paying no federal estate tax because there is no federal estate tax in place for this year.
In 2009 Steinbrenner’s heirs would have had to pay 45 percent on the bulk of his estate in taxes. Next year, the tax is set to return to a 55 percent rate; although, there is at least one bill in Congress trying to lower that percentage right now.
The prior estate tax bill had the tax disappearing in 2010 to return the next year. Everyone thought there would be a temporary measure passed for 2010, but it never happened. It is possible an estate tax will be reinstated this year and applied retroactively, but that will cause its own problems.
The Obama administration has proposed renewing the estate tax at its 2009 level which is 45 percent with the first $3.5 million of an individual estate ($7 million per couple) transferred tax-free. The House passed such a measure last year. As it is now if no law is changed the tax will affect estates of one million dollars and over which is not difficult to reach especially if a large life insurance policy is involved.
No matter what the limits turn out to be, there are ways to avoid estate taxes and many of these can help you avoid probate as well which is something for another blog entry but is something to also be thinking about. Stay tuned to our blog and we will keep you updated on what the decision is if one is ever made. And by the way, go Yankees!