How Did the Deaths of Four People Cost the U.S. Government $6.5 Billion?

No, it wasn’t because of lawsuits.

No, it wasn’t because the four people were buried with trade secrets worth a lot of money.

It was because they happened to die in a year during which the estate/death tax is zero. From a post at ElderLawAnswers.com:

[George] Steinbrenner was worth an estimated $1.5 billion, meaning his heirs could save as much as $600 million in taxes because he died this year. Steinbrenner’s wealth — mostly consisting of the Yankees, a new stadium and a regional cable network — could pass to his wife tax-free even if the estate tax were in effect, but this year she might have an incentive to disclaim (or turn down) any bequest, which would allow the assets to pass to Steinbrenner’s four children free of federal tax. (But, as the Probate Lawyer Blog points out, Steinbrenner’s family would have to pay a huge capital gains tax if it were to sell any highly appreciated assets, since along with the disappearance of the estate tax, there is no “step-up” in the cost basis of inherited assets during 2010.)

The other billionaires to die in 2010 are Janet Morse Cargill of the family that founded Cargill Inc. (net worth: $1.6 billion), Texas pipeline magnate Dan Duncan ($9.8 billion), and California real estate mogul Walter Shorenstein ($1.1 billion). By rough calculation, their deaths in 2010 have cost the government some $6.5 billion.

We’ve blogged on this topic before. The inconsistencies of U.S. tax law, if it weren’t rather serious, would be comical.

Question: this being December, with a January to follow that may see an entirely different estate-tax law, might there be some surprising death activity this month among the wealthiest American families?

(HT: Van Brenner)

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  1. Brett says:

    You could also frame this… 4 deaths save the us taxpayer $$$$

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  2. Dismayed says:

    Yes, the inconsistency in laws is mind-boggling. However, these deaths did not cause a loss. Presumably, and this is a huge presumption given what we know of the super-wealthy and taxes these days, presumably taxes were already paid on these monies. The estate tax amounts to double taxation, which, I believe is not allowed here in the US, and as such should be abolished.

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  3. Chuck says:

    I protest your use of the word “cost”. The government had to pay nothing. I agree it may have been a lost income opportunity.

    But using the word “cost” implies the money was somehow rightfully owned by the government.

    Using such wording is a subtle way of making taxes more palatable. We would all be better off by focusing on other issues instead of giving the government another excuse for robbing us!

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  4. Robert says:

    Were any of these guys hit by State level Estate Taxes?

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  5. Marcus says:

    Actually it didn’t COST the government a dime. The family SAVED that much money. Our income is our income first. After it is taxed legally and not given could it be considered LOST by the U.S. government. REPEAL THE DEATH TAX!

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  6. Brian Begley says:

    Your Headline is misleading. Theses deaths did not cost the govenment anything. Wouldn’t a cost imply that the US governmnet actually paid someone the 6.5 Billion? THe current tax law prevented the government from collecting 6.5 billion from the estates of private citizens who used their skills to build enormous wealth during their lifetimes.

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  7. Ryan says:

    You can only say that it “Cost” the US Government if you approach it from the assumption that the US government is entitled to those assets in the 1st place. Bad assumption to start from. The more correct analysis here is that $ 6.5 Billion of legally earned private property escaped pillaging by the US Treasury department.

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  8. TimBob says:

    Well, in Douglas Adams’ “Restaurant at the End of the Universe” one of the minor characters was spending a year dead for tax purposes. Does it seem so odd that George Steinbrenner, never one to let rules/laws/ethics get in his way, might try to do the same?

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