WHY THE WEALTHY NEVER PAY ESTATE TAXES: Estates of George Steinbrenner and Dan Duncan

In 2001, president Bush was “elected” president by the Supreme Court of the United States in the most controversial presidential election in United States history. After his election, interesting enough, President Bush’s first order of business was to repeal the Federal Estate Tax otherwise known as the Death Tax. The Death Tax is the tax on estate assets after someone’s death. Any and all assets subject to this tax are usually taxed at a rate of between 50-65% depending on the State of residency for the decedent. As such, the Death Tax was and remains a significant concern for any NY estate lawyer as well as their clients.

Bush successfully persuaded both Congress and the Senate to sign onto this fiscal experiment and the estate tax was repealed for the year 2010. In other words, any person who died with estate assets in the year 2010 owed nothing to the Federal Government. If you think this created a windfall for wealthy individuals who died in 2010 think again.

In the calendar year 2010 5 billionaires died. This list included the notorious George Steinbrennerentrepreneur and owner of the N.Y. Yankees, and Dan Duncan, one of the wealthiest oil tycoons in history. Had each of these men died in any other year, their estates would be facing a 50-65% tax liability. As a NY estate lawyer I can tell you the Steinbrenner estate alone would have owed approximately $495 million. However Dan Duncan’s estate was substantially greater, $9 billion dollars, and was estimated to have supposedly generated a $4 billion estate tax bill.

So 2010’s repeal of the estate law was a windfall for wealthy Americans right?

WRONG. You see none of the heirs of billionaires who died in 2010 such as the Steinbrenners orDuncans actually benefited from the repeal of the Estate Tax in 2010. You may be wondering why? After all, had either of these billionaires died in any other calendar years billions of dollars would be owed to Federal Government, right?

Any NY estate lawyer can tell you it is because the wealthy never pay estate tax in any year. The only families who pay the estate tax are the uninformed and unprepared. The wealthy do not get wealthy by being either of these. Through a highly experienced NY estate lawyer, the wealthy create elaborate arrays of trusts and tax shields to ensure that none of their assets are subject to the dreaded Death Tax. As the general public becomes increasingly aware of similar strategies, the revenue generated from the estate tax has decreased significantly.

In 2009 the Federal Estate Tax generated $18 billion dollars in revenue for the Federal Government, in 2010 there was no estate tax, in 2011 the Federal Estate Tax generated $7.4 billion dollars and in 2012 it is estimated the Federal Estate Tax generated $11.5 billion dollars in federal revenue. This shift indicates more people are enlisting the help of a NY estate lawyer to circumvent death tax liability.

Who is Penny Pritzker?

For those who are not familiar with the name, Penny Pritzker will soon be anointed Secretary of Commerce for the United States. As part of her vetting process, Penny Pritzker was made to disclose her entire financial history. It only seems fitting, as the Secretary of Commerce regulates trillions of dollars in commerce each year. Normally this would not be news, unless the applicant is the heiress to the Hyatt fortune and is worth $1.5 billion dollars as in Penny Pritzker’s case. Penny’s father, Donald was the co-founder of the Hyatt Hotel chain. When he died in 1972 he left Penny a substantial inheritance.

As a NY estate lawyer it is always intriguing to me to see how the super wealthy manipulate their wealth around the estate tax so easily. After all, when you die with $1.5 billion dollars one would expect an $800 million dollar estate tax bill. However when it comes to the wealthy they take no chances, enlisting the help of the most experienced estate lawyers in the business.

Once exposed, Penny Pritzger’s finances revealed a labyrinth of hundreds of trusts and family limited partnerships designed to completely and entirely circumvent the Federal Estate Tax. Of Penny Pritzger’s 180 page financial disclosure to Congress, it was shown that she created hundreds of offshore trusts to circumvent the income tax as well. In fact her estate lawyer did such a good job in camouflaging her assets, Penny Pritzger forgot to mention $80 million dollars of income from a trust she had received.

So how do these partnerships and trusts shield billions of dollars from estate and income taxes?

The reason why these families of billionaires who died in 2010 did not benefit from Bush’s repeal on the estate tax is because their assets had already been transferred to their heirs. When you put an asset in a trust or Family Limited Partnership, you’re removing the assets from your estate. While you still maintain complete control over the assets, they are no longer in your possession for tax purposes. A good NY estate lawyer who knows what they are doing can transfer millions if not hundreds of millions of dollars through vehicles such as these.

Some types of partnerships and trusts are more elaborate than others and can be tailored to the needs of the individual. Most of the time a simple will, will do the trick. However in the cases above something more intricate was required. Most of us are not billionaires or even millionaires but that does not make our need to plan our estates any less real.

If you or a family member would like to sit down with a NY estate lawyer to plan your estate or address estate tax liability issues, feel free to call the Law Offices of Jason W. Stern & Associates at (718) 261-2444 for a free consultation.

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