Planning to Die in 2010
Under current law, there will be no estate tax for individuals who die in 2010. Accordingly, some wealthy individuals may plan for their demise to occur during 2010.
The following is from Stephen Moore, Death by Taxes: Seniors May Plan Their Demises to Maximize Their Bequests, Wall St. J., May 30, 2008, at W11:
On the occasion of Lady Bird Johnson’s death last year, her daughter Lynda Robb told the press: “Mom wanted to last until 2010 so she would not have to pay the estate tax.”
When George W. Bush signed his first tax reduction bill in 2001, which included the gradual phaseout of the death tax, Congress demanded that the tax be reinstated in 2011. “I don’t think members of Congress ever gave any thought to the chaos in estate-tax planning they were causing. By bringing back the estate tax in 2011, they have created a roulette wheel of death,” moans Dick Patten, head of the American Family Business Institute, a group lobbying to eliminate the tax for good. * * *
Congress’s tomfoolery might inspire a few Americans to consider the Menendez brothers’ solution. * * *
Another estate-tax planner tells me: “I don’t know if we will see an increase in suicides, but the threat of the government taking half of a lifetime of earnings and assets will certainly lessen the will to live past 2010 for many at death’s doorstep.” * * *
All of this may seem overly dramatic or far-fetched, but it isn’t. We know that estate taxes alter all sorts of human behavior. Studies confirm that Americans with wealth move from high estate-tax states, like New York and Connecticut, to states with no estate tax, like Florida and Texas. Wealthy seniors spend hundreds of millions of dollars each year on estate-tax planning and defending themselves in court against claims by the IRS to avoid a super-size tax bill at death. If speeding up death can prevent a small fortune from being captured by the government, it’s not a stretch to suspect that death will be timed conveniently. Many senior citizens who care most about the future of their beloved children and grandchildren may conclude, as Jimmy Stewart did in “It’s a Wonderful Life,” that they are “worth more dead than alive.” But in this case it will be many millions of dollars more.
A 2007 study by two Swedish economists reports that when Sweden abolished its inheritance tax (yes, even socialist Sweden now has no tax at death), “mortality decreased by 16% the day before the beginning of expected tax reductions.” * * *
But the obvious solution to a death-tax nightmare scenario in 2010 is to make the estate-tax repeal permanent. The economic arguments for doing so are well established: The tax raises a tiny amount of revenue (just 1% of all taxes), which is a pittance compared with all the trouble it causes; it encourages wild spending during the late years of life while reducing the incentive to save and accumulate wealth during one’s lifetime; it leads to the breakup of family businesses; and it is an unfair double tax on money that was already taxed when it was earned during a worker’s lifetime.
But now we can add a new case for abolishing the death tax permanently: It’s the pro-life solution.
Special thanks to Joel Dobris (Professor of Law, UC Davis School of Law) for bringing this article to my attention.
You may also find this advertisement to be amusing — “Fatal Accident” Estate Planning Service.