Mrs. Jobs required to pay nearly $1B in Death Taxes after Steve
Mrs. Jobs likely to pay $1 Billion in estate taxes after the passing away of Steve Jobs. For the perfectionist that he was, Steve was ready even for death. He had already put shares that he owned in Apple ($2.05 billion) and Disney (worth $4.74 billion) in a trust in order to avoid probate taxes. The inheritance that his four children shall receive will greatly benefit from this move. Trusts let people distribute wealth over time and avoid probate fees. However not even Steve could have planned for the forthcoming tax increases that the American government have planned.
Capital gains taxes in the U.S. are slated to increase from 15 percent to 20 percent in 2013. Powell Jobs (wife of the late Steve Jobs) is now in a place where she must decide whether to sell off the Disney and Apple stock that is collectively worth almost $7 Billion immediately or pay the taxes. Under U.S. law, Jobs’s heirs may sell Apple and Disney and avoid $867 million in capital gains taxes. If Apple’s late co- founder left his estate to his wife, Laurene Powell Jobs, the family won’t be liable for the 35 percent estate tax until she dies or gives money to others, according to estate planners.
If Powell decides to stick with the stock then she may even be taxed on the 3.8 percent levy that the American government is planning on unearned gains.
Under U.S. law, the trust can sell the shares and incur taxes only on the appreciation since Jobs’s death — a gain of about $338 million. If Jobs had died in 2010, when there was no estate tax, his heirs would have faced the capital gains tax on his entire investment profit if they had sold. That provision lapsed in 2011 when the estate tax was reinstated.
Whether they decide to sell everything or not, one thing is clear – the family must diversify. Steve was his own person and had his reasons for remaining invested in these two companies that he played a vital role in (Disney through Pixar). It makes sense from the tax point of view as well as economic point of view to diversify into other companies and sectors given the extent of the fortune.