By now most of you have heard that George Steinbrenner passed away this morning at age 80. We’d ask that you to wait at least a few hours before you start dispensing with the Costanza or GS quotes in Larry David’s voice (“Big Stein wants an eggplant calzone!”) but we realize not every one was a fan of the Boss.
The silver lining in Big Stein’s death is that since the estate tax still remains in limbo among the hallowed walls of Congress, his $1.1 billion fortune (Forbes’ latest ranking) could possibly pass to his heirs tax free.
It’s an especially well-timed passing if you read yesterday’s morbid Wall St. Journal article. If you didn’t happen to read it, the article more or less made the case for every wealthy person to give serious consideration to paging Jack Kevorkian, taking a nice warm bath with a toaster or whatever their preferred method of self-imposed death would be.
Steinbrenner is the third billionaire to pass on to the big baseball diamond in the sky (btw, can someone up there keep him away from Billy Martin?) this year – Walter Shorenstein and Dan Duncan are the others – and if the family is as shrewd about their money as they are about their baseball team, they will likely fight any retroactive provisions in the new estate tax (assuming it ever passes).
As with mentioned in the Duncan post, we hope that the Steinbrenners are able to keep their fortune; not because we’re opposed to taxing the rich (just ask AG), it’s because we’re opposed to an incompetent and impotent Congress who allowed the estate tax to expire in the first place. Besides, GS went out with the Yankees as reigning champs, so it seems fitting that he gets a final win against the tax man as well.
RIP Big Stein.
Great post! Do you think that they intentionally did not resuscitate because of the estate tax situation?
Too late. He's already fired Billy Martin in Heaven
As the estate tax is the most immoral tax to have been created as all of the income earned has been taxed at least once and double taxed in many cases I am glad his heirs will not have to deal with the IRS.
The estate tax is immoral? Dividends are also double-taxed, once at the corporate level and once when received by shareholds. Where's the outcry about the immorality of dividend taxation? Plus, the estate tax promotes the idea that in America everyone has to make their own way. Would you prefer Feudal Europe where families may create fiefdoms to pass onto their incompetent children? And I shed no tears for heirs who inherit “only” $500 million instead of $1 billion.
What about the kids that can't take over the family farm cause the estate tax bankrupts them so the farm gets sold to big corporations?
It's theft, period. Just because the government passes a law that allows it, does it doesn't make it right. Many family business have to be SOLD to pay the taxes. As one who watched as part of a family business was sold to pay TAXES this tax should be ABOLISHED COMPLETELY. Frankly, its none of your business, my business, or the governments business if someone leaves 10 dollars or 10 billion dollars to their heirs.
It is a real shame there are individuals in this country that support the theft of private property from their fellow man.
There is no theft of property from fellow citizen because its former owner is deceased.
In my will when I die all of my property transfers to my children, thus it has a new owner. Your point is moot. You can package it however you want, it's theft. I know I am probably in the minority on this issue since this country is full of wealth envy types who think they are entitled to other people's property.
a) can someone please explain to me how receiving a valuable and profitable farm or small business as an inheritance can possibly cause the recipient to immediately become bankrupt? i must be missing something obvious because i would be quite happy to receive a farm with a net value of $10 million, even if the estate were subject to tax at an average rate of something like 35% (which is quite roughly the relevant percentage – this is all in flux of course due to congress failing to act). worst case scenario i sell 35% of the business to pay the tax; more likely i can borrow $3.5 million against the value of the business to pay the tax. i'm pretty sure that leaves me $6.5 million better off. perhaps someone can explain how instead i am bankrupted.
b) steinbrenner is survived by his wife. as long as she lives until january 1, 2011, this post and all similar news articles are almost completely irrelevant due to the unlimited exemption for bequests to one's spouse. (this is also true of one, but not both, of the other billionaires who passed away earlier this year).
c) because increases in the value of property (such as land or stock) are generally not taxed by the federal government until such property is sold or exchanged, much of the wealth of a multimillionaire or billionaire will in fact not be taxed prior to death. (there are semi-complex issues involving the so called stepped up basis at death that are also relevant and that i am not going to describe here).
The estate tax next year as the law stands will require approximately 50% of the value of the estate to be paid in cash within nine months of the date of death (in most cases). In the case of a $10 million estate what lender is going to lend $5 million to pay taxes? Not many today. Selling the business at such short notice might be considered a fire sale. Better to have lots of life insurance in an irrevocable trust.
In the case of an estate that involved a profitable enterprise, wouldn't it be more accurate to look at as borrowing to purchase a business than as borrowing to pay off taxes?
I'm actually replying to Guest's comment. It may be more accurate but it doesn't make it any less ludicrous, especially in the case of family businesses.
Once assets have been earned by an individual, the ability to pass those assets on tax free upon their death should be considered an inviolable right. It doesn't matter that it will only impact a small portion of the population, it is a morally reprehensible tax.
many farms are built on debt. Debt to buy seed and fertilizer machinery to farm lets say 1000 acres. if the family has to pay 45% (last years estate tax) they would have to possibly sell 70% of their property. They also inhereted the debt and the value of the machinery. Now they have un paid debt on tractors ect. to farm 1000 acres and only have 300 left. Hence bankrupt? Doesnt take a genius.; and they also have to pay sales tax and capital gains. Theres your explanation lefty.
The debt is already deducted from the value. I.e. if a 1 million dollar farm with a 500,000$ outstanding mortgage is owned by the decedent, the fair market value of the farm is only 500,000$. By the way, the 2001 law which would come back into effect in 2011 allowed for a 1 million dollar exemption on all estates plus a 1 million dollar exemption on a family farm or business (i.e. 2 million$), the 2009 rate included an exemption up to 3.5 million dollars given continued ownership of the farm business for 10 years. It would be a shame for a family business/farm to go under because the owner dies, but it rarely, if ever, happens. And stop with the morality argument. Taxes are moral. The people have a legitimate interest in promoting an egalitarian society. Part of that society is to have forces in place to counteract the concentration of wealth and the establishment of an aristocracy. We simply will cease to be America if we allow the establishment of dynasties.