The Edmonton Sun just published an informative piece on the issue of estate taxes and the passing of Yankees owner George Steinbrenner.
The article is both fun for its outside view of the United States: “(The Death Tax) is actually no big thing relative to the U.S. GDP or debt, probably garnering about $25 billion a year. Still, the U.S. is struggling to stay afloat these days $25 billion here, $25 billion there; soon you’re talking real money. Every little bit helps.”
And informative for its dissection of the assertion that the Steinbrenner estate will pass to heirs without taxation since he passed away during the one-year hiatus of the death tax. As we recently reported on our New York Probate Lawyer Blog, the tax, which applied to estates valued at more than $3.5 million in 2009, was eliminated for 2010.
It is due back next year and could apply a rate of up to 55 percent on all estates valued at more than $1 million. Some studies have found the impact of the death tax is such that it can actually sway the death rate, with more people dying right before a scheduled increase and more people hanging on just before a scheduled drop in the taxation rate.
But lost in this debate is the fact that all estates –Steinbrenner’s included — are subject to all sorts of taxation, regardless of the status of the estate tax. Most importantly, Steinbrenner’s death will trigger capital gains taxes. While typically 15 percent — much less than the 55 percent death-tax rate — capital gains taxes alone will cost the Steinbrenner estate several hundred million dollars.
And Steinbrenner lived in Florida, a state where homestead and other property tax exemptions can save homeowners tens of thousands of dollars in property taxes each year. Florida law only permits property values to increase by three percent a year for taxation purposes, a tax-break called “Save our Homes,” that is meant to protect retired residents from the taxation that comes from rising property values in retirement paradise.
Transferring a home after death — especially a multi-million property, can increase property taxes from $8,000 to $10,000 a year, to $50,000 or more as the taxable value of the property returns to fair-market value.
But, as the article points out, the wealthy use trusts or other vehicles to protect themselves from excessive taxation. The estate tax frequently hits family businesses the hardest.
Consulting a New York estate and tax planning attorney is the best course of action to protect your estate from excessive taxation at the time of your death.
New York City Probate Attorney Jules Martin Haas handles all types of probate cases, including Wills, estate planning, estate settlement, advanced directives and guardianship matters. Please call me at (212) 355-2575 for a free consultation to discuss your rights.