There is an interesting article in the Wall Street Journal last week that discusses how the beneficiaries of Dan Duncan’s estate might not have been greatly impacted by the lack of an estate tax in 2010. Duncan, natural gas tycoon with an estate estimated at $12 billion died in March of 2010.
To combat potential estate tax liability, it appears much of his wealth had been previously transferred outside of his estate to his beneficiaries:
Duncan family’s closely held company, Enterprise Products Company… suggests Mr. Duncan’s heirs might not have benefited from the estate-tax lapse after all.
The statement says that well before his death, Mr. Duncan transferred his economic interest in his company to his four children. The statement says the children “are not materially benefiting from the lapse in the federal estate tax as promulgated under current tax law…the Duncan children have owned substantially all of the economic interests in the privately-held company for many years. Other than specific bequests, the bulk of Mr. Duncan’s estate will pass to his charitable foundation as outlined in his will.”
In other words, according to Duncan’s representatives, there is very little in the way of assets in Duncan’s estate that would be taxable. A majority of his assets where either transferred outside his control or he given to charity. Charitable deductions are not taxed. Duncan’s lawyers separated the economic interests from the controlling interest of his estate. Now, the question will be whether the “controlling interests” by Duncan would have amounted to a monetary value that could have been subject to the estate tax if one was in place for 2010. Certainly an interesting question.
The real take away is that estate planning is complicated and there are a variety of ways to plan your estate to lower a person’s estate tax liability. Further, if the proposed estate tax regime sought by Senators Harkins, Sanders and Whitehouse (see more here) is implemented it would have very little impact on the tax liability of the most affluent Americans. Those Americans could easily afford the thousands of dollars in legal fees to plan their estate to greatly reduce their estate tax liability that other Americans that might get scooped up by the estate tax could not do. There can be argument on both sides on whether that is good/bad policy but it is an accurate fact, regardless.