9 Billion Problems?

Houston billionaire Dan Duncan recently passed. Mr. Duncan had a net worth of over $9 billion. His story is pretty interesting. He started his career as a roughneck in the 1950’s. By 1968, Mr. Duncan with only $10,000 and a truck he started Enterprise which is now worth over $21 billion. Truly this a great story in capitalism. Man starts with nothing then turns nothing into a lot of something. Mr. Duncan not only made a lot of money for himself, his family, and shareholders but also has donated a lot to charity. He and his wife gave $100 million (a record level donation) to Baylor College of Medicine. The family also gave $50 million to Texas Children’s Hospital (another record donation). He also gave $35 million to M.D. Anderson Cancer Center. It should be noted that Houston was noted for a world class medical center even before these donations.

Despite all this generous giving I would imagine the there are still billions of dollars in the Duncan estate. The estate tax on the Duncan estate could be enormous. The estate tax is usually 45%. For example if an estate had $10 million the estate tax that the estate would owe the government is $4.5 million. However, the estate tax in 2010 is 0%. Congress could of course make the estate tax retroactive for 2010. I have a feeling the Duncan family is quickly filing paperwork to try to make sure the estate doesn’t owe a dime to Uncle Sam. However, the I.R.S. will flag this down and I could see a Supreme Court case in the works. With an estate of over $9 billion the government would want their 45% or $4 billion. What miracles and wishes could the government grant with this money? A case like this will force Congress to do something about the estate tax.

It will be interesting to see how this case plays out. If the case goes to court it could take years to settle leaving estate planners and attorneys in the dark with regards to the estate tax law. However, one way the Duncan family could avoid paying any estate taxes is to give all the money to charity. Although, one should remember 45% of $9 billion is better than 100% of nothing.