The New York Yankee empire wept on July 13, 2010, following the death of their owner, George Steinbrenner. Most well-known for his successful ownership of the New York Yankees, Steinbrenner purchased the team in 1973 from CBS for $8.7 million. Steinbrenner’s story of success rests in the numbers – at the time of his death, Steinbrenner’s estate was worth an estimated $1.1 billion.
While Steinbrenner had many lifetime successes, including the evolution of the Yankee empire, he also successfully avoided the federal estate tax. If Steinbrenner had died in 2009, his $1.1 billion estate would have faced a tax amount of nearly $500 million. Instead, by dying in 2010, his beneficiaries will pocket that amount rather than pay the tax.
If Steinbrenner had died in 2011, his estate would have faced an even higher tax rate of 55%, with only a $1 million exemption amount, under current law.
The key to Steinbrenner’s $500 million savings was the adoption of the Economic Growth and Tax Relief Reconciliation Act of 2001. That law repealed the estate tax, but for calendar year 2010 only. Many people assumed that Congress would take action and re-impose the estate tax in 2010; however, that action has yet to be taken. There is still uncertainty as to what action Congress will take for 2011, and it is possible, but unlikely, that Congress may impose a retroactive estate tax for 2010.
While Steinbrenner did escape the estate tax, his estate likely will have to pay capital gains tax for any assets (such as the New York Yankees) that are sold. However, at the current 15% capital gains rate, that is still a mere $165 million compared to $500 million in estate tax. However, there is no indication that Steinbrenner’s family has any intention to sell the Yankees in the near future.
We can’t all be as lucky as George Steinbrenner in escaping the estate tax, and there are only a few months left in 2010. Since the estate tax is scheduled to return in 2011, planning ahead is the best protection. There are many estate planning tools that can be used to minimize your estate tax liability. Just give us a call (770) 992-4325 or send us an email (firstname.lastname@example.org) to further discuss estate tax consequences and your options for preserving your assets.