As a lifelong Yankees fan, I was saddened that we lost two members of the organization this week: longtime stadium announcer Bob Sheppard and Yankees majority owner George Steinbrenner.
Love him or hate him, Steinbrenner just wanted to win — at any cost. The Yankees have the highest payroll of any team, thanks to his need to land the biggest free agents in the game at the most exorbitant salaries. I remember when they gave Bernie Williams (one of my favorites) a seven-year deal worth $87.5 million, at the time making him the highest-paid player in the major leagues.
And who could forget the hirings — and firings? As a kid coming of age in the 1980s, I loved seeing whether or not Billy Martin would be back for another year — or if he would even MAKE it through the season (not once, actually).
Steinbrenner even had the audacity to “win” in a financial sense by kicking the bucket in 2010, rather than in 2011 — making his heirs very, very happy. Why? Because according to MSN Money, they will save $600 million in estate taxes.
How It Happened
The most recent estate tax (a rate of 45% on inheritances valued at more than $1 million) put into law under President George W. Bush expired at the end of 2009, and the new 55% (!) tax doesn’t go into effect until Jan. 1 of next year. Which means anyone dying in 2010 can leave 100% of their assets to their heirs. Steinbrenner is estimated to have been worth $1.1 billion, well over the $3.5 million exemption threshold.
However, Congress can choose to come up with a new version of the estate tax bill, perhaps raising the exemption to $5 million and lowering the percentage of inheritance assets lost to taxes.
In theory, dying with $3.5 million in assets isn’t too shabby (for your heirs, obviously, not for you, who would no longer be roaming the Earth). But if you’re running a small business (a retail store, a farm, etc.) and the government comes and takes 55% of that from your estate if you die next year, your family likely will have to sell the business. Or, if it’s property that makes up the majority of the estate, the homes would likely have to be sold.
George Steinbrenner died this week, and still managed to come out a winner.
Pretty amazing, isn’t it? 55%! All that hard work, and poof! It’s gone.
I’m definitely a believer in passing down money to the subsequent generations, rather than “spending it all on myself” approach. Of course, one way or another, much of that money will be spent anyway. Makes one want to revisit thoughts, and maybe spend it on loved ones before you pass away, periodically over time.
That said, I really hope I’m a long way from worrying about this directly!
By the way – I live in Chicago, so while I’m not a Yankee fan, I thought Steinbrenner was great for baseball and was a guy who went all out to win. Entertaining too…especially when spoofed on Seinfeld!
@Squirrelers: I’m a fan of passing the wealth along, too (assuming I have any left by the time I kick the bucket). And Steinbrenner definitely made things interesting!
Man, I wish someone I hardly know would pass away and leave me a few mill, damn I’ll take like $500.
This is gonna affect me bigtime. And I HATE it. I’m the executor of my 90 year old grandparents estate, half of which is property. My grandmother keeps saying how she doesn’t want anyone to sell her childhood home in Boston. Well guess what Grandma, thanks to the Dems I will have to sell that house in order to divide up the 45% of what’s left as you have stipulated. Grrr…
Will the estate be worth more than $3.5M? That was last year’s estate tax exemption (next year’s isn’t definite), so you’d only pay estate tax on the amount over that. Even in Boston, that seems high for the price of a house. 2010 may have no estate tax, but the method of calculating capital gains has also changed. Normally when the estate tax is in place, the basis used to calculate capital gains on inherited property is set to be the value of the property on the date of death (called a step up in basis, allowing you to escape capital gains on inherited property). This year, the basis on inherited property is the value(s) that your deceased paid plus an aggregate $1.3M step up in basis. That means for this year, estates valued between $1.3M and $3.5 will get hit with significant federal capital gains taxes whereas last year (under the estate tax) they would have paid no federal tax. (State laws vary.) Estates under $1.3M still get away without federal tax.
To me, it seems a shame that people are focused on the penalizing effects of estate tax on estates worth more than $3.5M, when estates less than $3.5M are being penalized this year. I’d suggest that $1.3M-$3.5M are precisely the size estates that correspond to many small businesses (including family farms).
I think the estate tax is CRAZY high! I won’t die with enough for it to matter probably, but if I earn a billion dollars, I should be able to leave it to whoever I want…it shouldn’t get taxed twice…that just seems wrong.
I understand a bunch of our tax revenue comes from this and that getting rid of it would mean raising taxes for everybody else, which would suck, but doesn’t it seem a little unfair to have your money taxed twice and the second time is more than half?!
@BITFS: What I just found out is that my state, NJ, has its own estate tax rules – and the exemption is only $675,000!
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