Some of you may think, what is the big deal, there are no estate taxes this year! But wait next year the tax rate is set to rise to 55%. Read the article below about the owner of the Yankees who recently died. But hopefully, no one is planning on dying this year.
Just because you don’t have estate tax doesn’t mean you avoid probate and probate costs money. You don’t want to give away money do you? What about your minors?
Do you have Minors named as beneficiaries for any of your accounts? If so that is the quickest way to end up in Probate. In California, the court must supervise the distribution of money left to kids under 18! Then it is a slow and potentially costly process, usually approximately 16-18 months. Not to mention the costs being approximately 5% of you entire estate. Oooh and one more thing it’s a public process so all those creditors and predators out there will know when you child turns 18 and bingo he or she will have X number of dollars given to them outright!
So you have the next 30 days to change those beneficiaries before all the craziness starts in September. Of course if you need assistance and guidance schedule your Free Family Wealth Planning session in the month of August and I will have a special gift for you!
Forbes recently estimated the Yankees owner’s net worth at $1.1 billion, largely from the YES network
The New York Yankees, which he acquired in 1973 for $10 million, are now worth $1.6 billion but are 95% leveraged due to debt from the new Yankee Stadium, according to Forbes.
Because Steinbrenner died in a year when there is no federal estate tax, he potentially saved his heirs a 55% estate tax on his assets — or a tax bill of about $600 million. The 55% tax takes effect on January 1, 2011. If Steinbrenner had died in 2009 when the estate tax rate was 45%, his estate tax bill might have been nearer $500 million. Because the wealthy often do elaborate planning, putting assets into trusts taxed separately from the estate or into foundations that are tax-exempt, it is unclear how large his estate will be. Estate taxes may also be postponed on assets left to a spouse in years when there is an estate tax.
Steinbrenner is survived by his wife, Joan, two sons, and two daughters, plus two sisters and several grandchildren.
There is no estate tax this year due to changes made by Congress in 2001. Those changes eased the estate tax over several years and culminated with its repeal this year, followed by a return to high tax levels in 2011. Experts say few ever expected the tax’s repeal, and its 2011 reinstatement, would actually take effect. Instead they believed lawmakers would smooth out the tax rates at some point between 2002 and the end of 2009.
Congress never got around to it, and the tax lapsed this year. Many still hope lawmakers will fix this year’s law, which actually raises taxes on heirs of the merely affluent (with assets between $1.3 and $4 million). But they still haven’t acted and have little time to do so.
Because of the huge chasm separating 2010’s zero tax rate from 2011’s 55% rate, some fear that Congress has provided the wealthy with an incentive for dying–or their relatives with an incentive for making sure they die–before the clock strikes midnight on Dec. 31).
This year’s lapse potentially provides huge windfalls for the very wealthy, like Steinbrenner. Other billionaires who have died this year include Houston energy magnate Dan Daniels and real estate developer Walter Shorenstein.
So you have the next 30 days to call and get your financial and legal life in order.
