Toronto Estate Law Blog : Toronto Estate Lawyer : Hull & Hull Law Firm : Trust Mediation and Succession Planning : Serving Ontario, Ottawa, Mississauga, Hamilton

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Yesterday I wrote about Edward Kennedy – I began to wonder about the tax implications on his estate.

Assuming he held $75 million in assets, his estate would have been taxed at a rate of 45% and the bill owing would be $33,750,000. But this is unlikely because much of his wealth was held by trusts which, in Ontario, are separate taxable entities. 

My colleague, Sarah Fitzpatrick wrote in July 2008 about the upcoming changes to the U.S. tax law.  That time is four months away. Congress must act soon; if it does not, taxes on nearly everyone will soar under a plan enacted in 2001 called the Economic Growth and Tax Relief Reconciliation Act (EGTRRA) which provides that in 2011 the tax law that had been in effect in 2000 will reappear.

The estate tax is set to vanish for a year if nothing happens before the end of 2009 as the EGTRRA sunsets in 2010. In 2011, an effective rate of 55% on estates would come into effect.

Only a small number of individuals pay the estate tax each year. In 2007, there were 36,458 estate tax filers – out of 235 million total tax filers that same year in the United States.  . Smaller estates (under $3.5 million) make up the bulk of filers – over 60 percent in years 2002-2007. Large estates (over $10 million), however contributed between 18 and 30 percent of the total revenue in the same time frame.

During the 2008 campaign, President Barack Obama supported permanent extension of the 2009 law – effectively a permanent 45 percent top rate with $3.5 million exemption per individual ($7 million for couples).

Either side of the political spectrum will present different numbers, but what seems certain is that if there is no legislative action in the U.S. in the next few months, 2010 will be a good year for estates. My bet is that the large loophole will be filled quickly, especially as the U.S. operates with a large deficit.

Thank you for reading. Please remember that Hull & Hull is hosting another breakfast seminar tomorrow morning.

Enjoy your Wednesday.

Jonathan Morse - Click here for more information on Jonathan Morse.

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"Your worth consists in what you are and not in what you have." --- Thomas Edison

Considered one of the most prolific inventors in history, Thomas Edison held over a thousand U.S. patents in his name (click here for a full list of all 1,093 patents).  Incredibly, when awarded the Congressional Gold Medal in 1928, Edison's work was valued at nearly $16 billion.

So how could the man who invented the phonograph, incandescent light bulb, motion picture camera, the stock ticker and the alkaline battery amongst others, possibly have died a comparatively poor man?  When he died in 1931, his estate was worth about $12 million, but most of this was buildings and equipment in his labs and factories.

In the January 1932 issue of Modern Mechanix, Remsen Crawford, biographer and personal friend, reported that Edison had revealed that his many patents never made a fortune for him, rather his income was primarily derived from his activities as manufacturer.  Edison went on to explain that U.S. government patent protection expires after 17 years, but in the case of such great inventions, someone always steps forward to challenge the real inventor's right to his patent.  Edison spent a lot of money in court trying to establish his claims to his inventions.  In fact, Edison indicated that he spent more defending his patents in court than he had ever derived from them on a royalty basis.

As so eloquently summed up by his good friend Henry Ford:  "He was not a money-maker...his own portion was a mere nothing compared with the wealth he created for the world."

David M. Smith