Celebrity Estate Planning - Estate of George Steinbrenner - Episode 201
- Jenny Rozelle, Host of Legal Tea
- 11 minutes ago
- 7 min read
Hey there, Legal Tea Listeners! This is your host, Jenny Rozelle. We are over the hurdle of hitting two hundred episodes, so here we are with episode 201 – We’re back to “estate planning of the rich and famous” where we chat about celebrities and their estate planning (or lack thereof!). Today’s episode is about George Steinbrenner – If you’re not a baseball fan, you may not recognize his name – because he was the owner of the New York Yankees from 1973 to 2010 – which, according to his Wikipedia page, he holds the longest streak for Yankees ownership. Now, if you’re not a baseball fan, but an estate nerd like me, you may know his name because his death came at a very interesting point of time. You’re probably like, “What does that even mean?!” Well, just keep listening…
As we always do on these types of episodes, let's talk a little about George first, then get into what happened estate-wise following his death. Born into a wealthy shipping family in Ohio, George was not just handed success – he seized it with the same fierce determination that would later define his management style. The son of a tough-as-nails kind of guy, young George learned early that second place was just the first loser. This cutthroat philosophy would become his hallmark when he led a group of investors to purchase the struggling Yankees in 1973.
George married Elizabeth "Joan" Zieg in 1956, forming a partnership that would weather the storms of his volatile career and personality for over five decades. Together, they raised four children: Hank, Jennifer, Jessica, and Hal. As George's health began its slow decline, his sons, Hank and Hal, stepped into the Yankees' operational spotlight, with Hal eventually emerging as the controlling partner after his father’s death.
George transformed not just the Yankees but the entire landscape of professional sports ownership. His authoritarian management style was sort of legendary – like, George fired managers with such frequency that Billy Martin alone was hired and fired five separate times! He publicly berated players who did not meet his standards. A type of management that probably would not do so well nowadays. Under his relentless ways, the Yankees reclaimed their throne with 7 World Series championships and 11 American League pennants, cementing their status as one of baseball's most dominant franchise and growing the team's value nearly 5,000% during his tenure.
His larger-than-life personality surpassed sports and made him a genuine American cultural icon. Perhaps nowhere was this more obvious than his recurring portrayal on the hit television show "Seinfeld," where Larry David's boisterous, absurd caricature of George became one of the series' most beloved running gags – a portrayal George himself reportedly enjoyed despite its unflattering nature.
George ended up passing away in his Tampa, Florida home on July 13, 2010 – just nine days after celebrating his 80th birthday. After years battling declining health including multiple strokes, his heart finally gave out. The official cause was listed as a heart attack, but those who knew him best might tell you it was simply that his oversized heart could no longer contain his outsized passion. His death marked the end of an era not just for the Yankees, but for American sports ownership – the final inning for a man who had forever changed the game.
So when he passed away in mid-2010, his family basically won the tax lottery. His estate was worth around or just over $1 BILLION dollars. And guess how much estate tax they paid on all that money? ZERO. Not a single penny! But interestingly, had George died just a few months earlier or a year later, his family would have had to fork over something like $500 million in estate taxes. But because he happened to die in 2010, his heirs got to keep every cent. It's like, what I am about to say is a pun very much intended, they pitched a perfect game against the IRS.
So you may be wondering - how on earth did this happen? How did we end up with a year where billionaires could die and pay NO estate tax? Well, it's actually a pretty crazy story that goes back to 2001. So, let’s go back to that year … According to the Illinois Bar Association, who did a piece on George’s estate, which is of course linked in the source links for the episode … When George W. Bush became president, one of his campaign promises was to cut taxes, including the estate tax. So in June 2001, he signed this law with a really long name - the Economic Growth and Tax Relief Reconciliation Act - but everyone just called it EGTRRA (pronounced "egg-tra"). And this law did something really unusual. Instead of just setting new tax rates, it created a weird phase-out of the estate tax.
So, let’s talk about BEFORE this law, if you died with more than $600-something,000, your estate would owe taxes on anything above that amount. But under EGTRRA, they started gradually increasing that exemption. It went from $600-something,000 to $1 million, then $1.5 million, then $2 million, and so on. Each year, fewer and fewer estates had to pay any tax at all because of these increasing exemptions.
But HERE is the really bizarre part - the law said that in 2010, which is the year George died, the estate tax would completely disappear. Poof! Gone for just one year. And then - get this - in 2011, it would come roaring back with a vengeance, with only a $1 million exemption and higher tax rates than before! It sounds a little inappropriate, but a lot of people started joking that 2010 was the "Throw Grandma from the Train" year, because, well... you can imagine the dark humor there. You may be wondering … well why did they create such a strange system? Because of budget rules and political stuff in Congress.
Now, almost nobody thought this would actually and seriously happen. Most professionals assumed Congress would fix this weird situation before 2010 arrived. The general consensus was that that they would probably just make the 2009 rules permanent - a $3.5 million exemption with a top tax rate of 45%. That seemed reasonable enough. But then something unexpected happened. In late 2009, Congress got completely bogged down with a bunch of other political battles, and the Democrats and Republicans could not agree on what to do about the estate tax. And so, as the clock struck midnight on December 31, 2009, the unthinkable happened - the estate tax actually disappeared! Professionals across the country were absolutely shocked.
So, for the first half of 2010, most people thought Congress would quickly pass a new law and make it retroactive to January 1st. There was even a Supreme Court case called Carlton that suggested this would probably be constitutional. But as the other political battles dragged on and months passed, something started happening that made retroactive legislation much less likely - rich people like George started dying! For example, besides George, there was this energy tycoon from Houston named Dan Duncan who died in March 2010. Forbes magazine estimated his fortune at about $9 BILLION. Had he died in 2009, his estate might have owed something like $4 billion in taxes. But because he died during this weird tax holiday in 2010? His family paid absolutely nothing in federal estate tax. There was also this real estate developer named Walter Shorenstein who died with a massive fortune. Again - no estate tax.
Now, you can imagine that the families of these billionaires were more than ready to hire lawyers if Congress tried to pass a retroactive tax. They would have fought it arguing that it was unconstitutional to change the rules after the fact. And this
created a real nightmare for people managing estates that year. Imagine you're the executor of someone's estate who died in early 2010. What do you do? Do you distribute all the money to the heirs right away? Or do you hold back a huge chunk in case Congress brings back the tax retroactively? If you give it all away and then later find out the estate owes millions in taxes, you could be personally liable for that mistake. But if you hold onto the money unnecessarily, the heirs might sue you for not distributing their inheritance. Talk about being stuck between a rock and a hard place!
To make a long story short, in July 2010, there was another (and final) effort by a group of senators to fix things. They proposed setting the estate tax exemption at $5 million with a 35% rate, and giving estates of people who died in 2010 a choice - they could either stick with no estate tax, or opt into the new system. But an agreement could not be reached. At this point, it became clear that nothing would happen until after the November elections. And by then, it was getting too late to make anything retroactive for 2010. So the billionaires who died that year really did escape the tax completely.
After all this chaos, what eventually happened? Well, in December 2010, Congress finally passed a new tax law that set the estate tax exemption at $5 million per person with a top rate of 35% for 2011 and 2012. Later laws made even higher exemptions permanent (adjusted for inflation) – and I have done podcast episodes on estate taxes and the exemptions nowadays, so tune in to those. But the point of this episode on George … those weird months in 2010 when people, including billionaires like George here, were dying during a zero-tax year? That was truly a once-in-a-lifetime tax situation that we probably won't ever see again! So that's the wild story of how George Steinbrenner hit the ultimate tax home run - not by clever planning or using loopholes, but simply by having the incredible luck to die during the one year when the estate tax vanished! Just a really wild story, huh.
Alrighty, let’s wrap this episode up and shift to a sneak peak at next week. Next week we’re back to a “cautionary tale” episode where we talk about real-life clients, real-life cases that I, or my office, have worked on -or- maybe they are just generally good things to know/be aware of so you don’t slip up and turn into a cautionary tale one day. Next week’s episode is going to be about family that argued over personal property (specifically jewelry of their mother). There was a Frasier episode that I stumbled upon recently that is pertinent to this idea of personal property after we die .. so Frasier gets a shout-out during the episode, too. Alright, so that’s next week, Legal Tea Listeners…until then, take care and be well!
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