According to a recent article in the New York Times, as a result of a Congressional lapse, the descendants of the 74th wealthiest person in the world were able to receive his entire estate, free of any federal estate tax.
Dan L. Duncan, a Texas natural gas tycoon, died in March of 2010. Had his life ended in 2009, his estate, estimated a $9 billion, would have been subject to a federal estate tax of at least 45%. In 2011, the rate would be even higher - 55%. Instead, because Congress allowed the federal estate tax to lapse for 2010, Mr. Duncan's four children and four grandchildren will receive billions in net worth that would have been otherwise earmarked for the United States Treasury.
The only downside of having no estate tax in 2010 is that if the Duncan children/grandchildren ever decide to sell their inherited assets, they will have to pay capital gains tax on the difference between their selling price and father's/grandfather's cost basis. As part of his estate, Mr. Duncan passed on 100 million shares in Enterprise GP Holdings, which closed at $43.23 the last trading day before Mr. Duncan died - the asset alone could have resulted in a $2 billion estate tax. However, with the capital gains tax capped at 15%, the finality of the situation is insignificant in light of the big picture. Finally, if the children/grandchildren never sell the assets, retaining them until death, the assets will get a stepped basis and avoid a capital gains tax.
As a result of no estate tax being paid, and being able to retain all the wealth, the Duncan heirs now have an extraordinary opportunity to become the wealthiest family in the world - at the expense of the federal government.
Copyright ©2010 Krause Financial Services, Inc.
