You know I like talking philosophy and morals, and our lovely government has teed up a great philosophical discussion like a Titleist Pro V1 at St. Andrews.
Assuming the new tax bill passes in its current form, the estate tax is going to raise from 0% this year to 35% on everything over $5 million.
For some historical context, 2010 was a one-year deal for having a 0% estate tax. There was an estate tax of 45% on everything over $3.5 million in 2009, and if no bill is passed before the end of this year, the estate tax will jump to 55% for every dollar above $1 million. It may change, but as of today everyone expects the bill to pass as-is, so let’s work with the 35% after $5 million rate.
Now put yourself in the shoes of a theoretical guy named Tim.
Tim is the only living family member and medical proxy of his 83-year old Uncle Dan. Tim also happens to be in line to get 100% of Uncle Dan’s $105 million estate when he dies. To make matters even more interesting, Uncle Dan is not only elderly, but has been in a coma for a year. The only thing keeping him alive is the medical machines.
His doctors say he will most likely never wake up; however, he is completely healthy aside from the whole “coma” thing. If he does wake up, he could live out the rest of his life as a happy, healthy old man.
If Uncle Dan passes in 2010 (the next 16 days), Tim inherits the full $105 million. If Uncle Dan passes on January 1, 2011 or later, Tim will only get $70 million and our wonderful federal government will gladly take the other $35 million.
Tim received no instructions from Uncle Dan regarding his wishes for any medical decision. It is entirely up to Tim whether he pulls the plug before the end of the year or lets Uncle Dan ride it out and hope for a recovery.
What would you do if you were Tim?
On one hand, you’re going to be “rich” regardless of whether you get $105 million or $70 million. On the other hand, $35 million is enough money to buy just about whatever you want; or start a moderately sized business and employ hundreds of people; or help a worthy non-profit organization do ridiculous amounts of good.
From a medical perspective, Uncle Dan is probably just gonna lie in that bed, unconscious, for the rest of his life. However, he could make it out and live a few more years in good health.
I’ve been on the fence about this all night. I think I know what I would do, but I want to see your comments first, because I bet I get some great comments that change my mind. I’ll post a roundup of the best comments, as well as what I would do, on Thursday.