Having No Estate Tax: Is It an Opportunity to Die For?

As we all know, there is no estate or GST tax in 2010. However, the estate and GST taxes return next year. Without Congressional action, the applicable exclusion will be $1 million. Thus, a wealthy individual who dies on December 31, 2010, will face an entirely different tax outcome than one who dies the following day.

Let’s look at someone with $100 million. If they die on this New Year’s Eve, their estate would owe no any estate tax, regardless of to whom the assets were given. If the person died the following day, they would have $99 million estate taxed at 55%. Their estate would owe $54,654,200 to federal and state taxing authorities, leaving $45,345,800. If they had chosen to leave the assets to skip persons, the result would be even more burdensome. Depending on the GST exemption available next year, only about $30 million would end up in the beneficiaries’ hands and $70 million would end up in the hands of the tax collectors.

Is a day of life worth millions of dollars?

With less than two months left before the estate tax returns, this is no longer merely an abstract question anymore. U.S. Rep. Cynthia Lummis (R-Wy.) has stated that she has constituents who have told her that they are contemplating taking their life at the end of the year rather than see their estates be subject to estate tax.

Contrary to popular belief, suicides normally decline during the winter months and rise again in the spring, according to the Annenberg Public Policy Center at the University of Pennsylvania.
http://www.psychologytoday.com/articles/200401/holiday-suicide-myth

Will we buck the norm and see a significant rise in suicides among the wealthy at the end of the year because of the imminent return of the estate tax? Should estate planning attorneys prepare for a wave of trust and estate administration cases? Or, do you think that clients are not serious about it? Are clients really willing to die to save estate tax, even lots of it?

As I examined in my blog from February 18^th of this year, the estate planning attorney may have varying ethical duties with regard to a client’s expression of suicidal intent depending on the ethical rules and the legality of suicide in the jurisdiction. If your client has expressed a serious plan to take their own life, re-read that blog to see what the ethical duties are.

What do you think? Are clients really willing to die to save estate taxes?

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
(800) 846-1555
www.aaepa.com