Is it too late for a retroactive estate tax?

That possibility is raised by The Trust Advisor.  Last December, when the clock ran out on the federal estate tax, many expected it to be restored within a month, two at most, so the retroactivity would be relatively trivial.

Now a full calendar quarter has elapsed, and beneficiaries are doubtless starting to chafe.  The Trust Advisor points to the estate of billionaire Dan Duncan as a bulwark against retroactivity.  His estate, estimated at $6 billion, might have produced several billion in estate taxes.   That's enough money at risk to secure the services of the highest priced legal talent available, so there can be no doubt of a protracted legal fight should Congress decide to reset the federal estate tax back to January 1. 

Ironically, the Trust Advisor reports, last year the CBO projected that the year without estate taxes would only "cost" $468 million in lost revenue.  Now it appears that a single billionaire's estate might have avoided a federal tax liability that large.  However, Duncan's estate plan hasn't been made public. It might have included substantial charitable gifts or other strategies to reduce the tax bite.

The Duncan estate

We posted on the multi-billion dollar Duncan estate in April. The New York Times catches up today.

The Remarkable Rockefellers

Tim Redmond at SFBG picked up on the same nugget I noticed in the Times story on Duncan's tax-free estate.

Back in 1937, the wealth left by John D. Rockefeller was hit by a 70% federal estate tax.

Redmond, who grew up near the Rockefeller estate in Pocantico Hills, observes that Rockefeller's kids seemed to thrive despite their tax-reduced circumstances. (New Roll Royces for their wives every year? Wow!)

How did they do it? The senior Rockefeller presumably spread a little wealth around the family before his death. And some of the kids, including banker David, did pretty well on their own.

Kykuit, the Rockefeller estate in Pocantico Hills
Photo via Wikimedia Commons

Private Trust Companies are Multiplying

"It isn't enough to have a trust fund any more," writes Rachel Emma Silverman in The Wall Street Journal (subscription). "The next step is to have your own trust company."

A small but increasing number of the super rich are setting up their own trust companies -- boutique trust firms owned or controlled by wealthy families themselves. Some want more say over how their trust assets are handled; others want to consolidate a bunch of family trusts under one umbrella.

This isn't a game for the average trust-fund baby. Families typically should have at least $100 million to set one up, and most that do have at least $250 million. Experts estimate there are only a couple hundred private trust companies in the U.S.

Still, their numbers have increased in the past decade as trust lawyers begin to tout their benefits. John P.C. Duncan, a Chicago lawyer who specializes in private trust companies, is setting up 16 this year, compared with only five four years ago. The South Dakota Trust Co., Sioux Falls, which provides back-office and other services for private trust companies, is helping to administer 12 private trust companies this year, up from five last year.

The last wave of private trust companies crested about a century ago, as the tycoons of the Gilded Age planned their estates. Bessemer Trust, for instance, was founded by Andrew Carnegie's steel-company partner, Henry Phipps.

A generation ago, Bessemer began seeking non-Phipps clients. Will a new wave of trust companies go non-private in this century?

The "billionaire's surtax"

Here's TaxProf Blog reporting on a new estate tax proposal from the Democrats. It includes a 65% top tax rate (!) and, according to the Wall Street Journal, it is supposed to apply retroactively this year. Watch out, heirs of Dan Duncan!

Perhaps now the argument on estate tax reform can be joined.