Few expected that American billionaires could die without federal taxation of their estates. However, that’s the situation we have in 2010. George Steinbrenner and other billionaires have died this year and, under current law, their estates owe no federal estate tax.
There have been several pieces of legislation which would reinstate the estate tax. Some would do so retroactively. But, would retroactive legislation pass constitutional muster?
In Untermyer v. Anderson, 276 U.S. 440 (1928), the Supreme Court found that it was an unconstitutional violation of substantive due process to levy the gift tax retroactively. The court in Untermyer was convinced of the unconstitutionality because of the inability to plan. In that case the taxpayer made a gift without knowledge of a gift tax. Perhaps they would not have made the gift if they had known it would have incurred a gift tax.
However, in U.S. v. Carlton, 512 U.S. 26 (1994), the Supreme Court upheld the retroactive modification of an estate tax deduction. It appears logical that a retroactive reinstatement of the estate tax similarly might be constitutional because people do not choose the timing of their own death (typically).
It may be unlikely that Congress will choose to go back and re-impose an estate tax for 2010.
But, would it be unfair for them to do so? What do you think? Should Congress re-impose an estate tax for 2010 retroactively?
Stephen C. Hartnett, J.D., LL.M.
Associate Director of Education
American Academy of Estate Planning Attorneys, Inc.
6050 Santo Rd., Ste. 240
San Diego, CA 92124