Dan Duncan
For one calendar year — 2010, and only 2010 — the United States had no federal estate tax. A Houston pipeline billionaire died on March 29 of that year worth about $9 billion, and his heirs are reported to be the first American billionaires to pay no estate tax since the tax was created.
Dan Duncan started with two trucks and finished with Enterprise Products Partners, a Houston pipeline company running more than 48,000 miles of pipeline and hundreds of millions of barrels of storage. He took it public in 1998. By 2010 Forbes put him at about $9 billion.
He died on March 29, 2010, aged 77, of a cerebral haemorrhage.
In any other year of the previous ninety-four, that death would have triggered a federal estate tax return and a very large payment. In 2010 it did not, because in 2010 the federal estate tax did not exist.
A ten-year fuse that nobody defused
The Economic Growth and Tax Relief Reconciliation Act of 2001 phased the federal estate tax down over a decade. The exemption climbed from $675,000 in 2001 to $3.5 million by 2009; the top rate fell from 55% to 45%. In 2010 the tax was repealed outright — for that one year — and in 2011 the whole structure was to sunset and the pre-2001 rules were to return.
The repeal came with a catch that made it a mixed blessing for smaller estates. Normally, assets get a stepped-up basis at death: the heirs' cost basis resets to the date-of-death value, and a lifetime of unrealised capital gain simply disappears. Under the 2010 repeal, that was replaced by modified carryover basis — the heirs inherit the decedent's original basis, with only limited step-up allowed. So for many families, the year with no estate tax was also the year with a much larger future capital-gains bill.
For an estate the size of Duncan's, that trade was not close. A 45% estate tax on billions dwarfs a deferred capital-gains liability that only bites when an asset is sold.
Then, on December 17, 2010, Congress acted. The Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 set the exemption at $5 million with a 35% top rate for 2011 and 2012, and applied that regime retroactively to 2010 deaths — while giving each 2010 estate an election to opt out and take the original deal instead: no estate tax, carryover basis.
Estates that died in the gap therefore got to look at both sets of numbers and choose. Duncan's heirs are reported to have paid no federal estate tax, which makes them, in the phrase repeated in every account of the case, the first American billionaire's heirs to do so since the tax was enacted in 1916.
Two trucks to 48,000 miles of pipeline
The tax outcome is what made this case famous, but the structure underneath it is the part worth studying.
Duncan's wealth was held overwhelmingly in a single closely held partnership. His four children — Randa Duncan Williams, Milane Duncan Frantz, Dannine Duncan Avara, and Scott Duncan — each ended up holding roughly an 8% stake in Enterprise Products, and Randa Duncan Williams is reported to have inherited about $3.1 billion.
That concentration is the ordinary condition of most American business owners, at every scale. The value is in the business; the business is illiquid; and a tax computed on the value must be paid in cash within nine months. Where the tax applies, that arithmetic forces one of three outcomes: sell the business, borrow against it, or plan for it in advance.
Duncan's family was spared the arithmetic entirely by the calendar. Nobody else should count on that.
You cannot plan the date
The temptation with this case is to read it as a story about luck, and it is. George Steinbrenner died on July 13, 2010, in the same window, with the same result.
But the real lesson runs the other way. The 2010 gap is the clearest demonstration available that the tax rules are not a fixed feature of the landscape. They moved five times in ten years. The exemption has been $675,000, $3.5 million, infinite, $5 million, and — after later legislation — far higher again, with a scheduled reduction always somewhere on the horizon.
A plan that only works at one exemption level is not a plan. A plan that survives the exemption moving in either direction is.
Timeline
- 2001EGTRRA begins phasing the federal estate tax down: exemption rising, top rate falling, full repeal scheduled for 2010 and a sunset in 2011.
- 2009Exemption $3.5 million; top rate 45%.
- Jan 1, 2010The federal estate tax lapses. In its place, modified carryover basis replaces the step-up in basis at death.
- Mar 29, 2010Dan Duncan dies in Houston, aged 77, worth roughly $9 billion.
- Jul 13, 2010George Steinbrenner dies in the same window, with the same tax result.
- Dec 17, 2010Congress enacts the Tax Relief Act, setting a $5 million exemption and 35% rate for 2011–2012 and applying it retroactively to 2010 deaths — with an election for 2010 estates to opt out and take no estate tax with carryover basis instead.
- 2010–2011Duncan's heirs are reported to pay no federal estate tax. His four children each hold roughly an 8% interest in Enterprise Products Partners.
What actually went wrong
- Nothing went wrong for this family — and that is the point. The outcome turned on the calendar rather than the plan. No competent adviser can reproduce it, and no plan should assume it.
- The rules moved five times in a decade. Anyone whose plan was built around the 2001 numbers, the 2009 numbers, or the 2010 numbers had to redo it. Fixed-dollar formula clauses in older wills are the specific casualty; they were drafted against exemption figures that no longer exist.
- Carryover basis was the trap in the gap. For estates below the old exemption, losing the step-up in basis was a straight loss. The headline said “no estate tax” and the arithmetic said otherwise for a great many families.
- Concentrated, illiquid wealth with no liquidity plan. Where the tax does apply, it is due in cash within nine months on an asset that cannot be sold in nine months. That is what forces family businesses to be sold, and it is entirely foreseeable.
- Retroactive legislation is a real risk. Congress reinstated the tax in December for deaths that had occurred in March. Any plan whose success depends on a specific rule staying put for a specific period is exposed to the legislature changing its mind after the fact.
Would it have gone that way in Florida?
Florida imposes no estate tax of its own — so for a Florida decedent the only estate tax question is the federal one, and the whole planning job is liquidity and domicile.
Start with what Florida does not do. Fla. Const. Art. VII, §5 prohibits a Florida estate tax beyond the amount of any federal credit, and since that federal credit was replaced by a deduction in 2005 there has been no Florida estate tax and no Florida inheritance tax. Florida also has no state income tax. For a Florida resident, the entire death-tax exposure is federal.
That is a genuine advantage and it is the reason a great many people move here late in life. It is also the reason domicile is the single highest-value planning item for anyone who keeps a home in another state — several northeastern and midwestern states impose their own estate or inheritance tax with exemptions far below the federal one, and they will look hard at whether a decedent was really domiciled in Florida.
§222.17 provides the tool: a sworn declaration of domicile filed with the clerk of the circuit court, expressly available to a person who maintains an abode in more than one state and wishes to declare that the Florida home is their predominant and principal home. The filing is evidence of intent, not a magic shield. It works when the rest of the facts agree with it: Florida voter registration, Florida driver licence, the homestead exemption claimed here and nowhere else, vehicles retitled, professional and medical relationships moved, and the days actually spent.
On the liquidity problem, Florida's creditor and claims rules set the clock. A personal representative publishes a notice to creditors, and under §733.702 claims must generally be filed within 3 months of first publication or 30 days after service on a known creditor, with §733.710 imposing an absolute 2-year bar from the date of death regardless of notice. The federal estate tax return and payment are due nine months after death, extendable for filing. Illiquid estates therefore need a source of cash identified in advance — life insurance held outside the taxable estate, a buy-sell agreement funded at the entity level, or a marketable-securities sleeve set aside for the purpose.
Two more Florida notes for business owners. §736.04117 allows decanting an existing irrevocable trust into a new one, which is how outdated formula clauses drafted against a $675,000 or $3.5 million exemption get repaired without a court. And §736.04113 and §736.04115 allow judicial modification where a trust's purposes have been frustrated or where modification is in the beneficiaries' best interests — subject to the limits in §736.04115(3), which excludes trusts created before January 1, 2001 and trusts that forbid modification.
The practical instruction: if your will or trust contains a formula tied to “the applicable exclusion amount,” have it read again. Those clauses were written to fill a credit-shelter trust to the exemption and leave the rest to a spouse; at today's exemption levels many of them now fund the trust with everything and leave the spouse with nothing. Then file the declaration of domicile, make the other facts match it, and identify where the cash comes from if a tax is ever due.
What people ask us about this.
Further reading
Third-party sites. Not ours, not endorsed, not kept current by us — just the places worth going next.
Sources
- Dan Duncan — death, net worth, and the 2010 estate tax repeal — Wikipedia
- Randa Duncan Williams — the inherited stake in Enterprise Products — Wikipedia
- Economic Growth and Tax Relief Reconciliation Act of 2001 — the estate tax phase-down and 2010 repeal — Wikipedia
- Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 — Wikipedia
- Estate tax in the United States — exemption and rate by year — Wikipedia
- Fla. Stat. §733.702 — Limitations on presentation of claims — The Florida Senate
- Fla. Stat. §222.17 — Manifesting and evidencing domicile in Florida — The Florida Senate
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Nearly every case in this archive turned on something ordinary — an unwitnessed page, a stale beneficiary line, a document nobody could find. Those are cheap to fix while you're alive and expensive to fix afterward.