Ben Reach got the call on the morning of November 1. The caller was Bob Blain, formerly of Boston, now a resident of Thomasville where his family had owned a quail plantation since 1895. Until now Bob had resided on the plantation only Thanksgiving to March 1 each year, plus a week for Spring gobbler season and some bream fishing and some weekends in dove season. Bob was Ben’s age.
“Ben, I want to review my estate plan with you now that I am a Georgia resident, “ Bob said after opening pleasantries. They agreed on a meeting time a week later.
“Would you send me, or have your Boston lawyer send me, copies of your current documents and an asset summary? “ Ben asked.
“I have a package for you, will drop it off at your office today,” Bob said.
Ben knew Bob was a widower and had had two children, both of whom had died too young. Ben could not imagine the grief that brought Bob. Death of a child before a parent was the ultimate dread. The second child had died just a year ago. Ben could detect the lingering sadness in Bob’s voice.
When the next morning Ben read the documents Bob had delivered, he saw that Bob had six grandchildren, two from his daughter, four from his son. He immediately knew the first question Bob would likely want to discuss: Should his assets go to the grands in equal shares (per capita) or half to his daughter’s two children and half to his son’s four (per stirpes). The current will and revocable trust specified per stirpes.
The one-page asset summary revealed a cool hundred million in Bob’s name—he’d run a technology business—plus another sixty million in trusts established by his parents that were not in his taxable estate but over which he held powers of appointment. Dated in the 1970s, they were currently held to pay him income but would not be taxable when he died, and he could direct the assets among the grandchildren (or others) as Bob saw fit. His plantation, called Gnarly Pine, was also held in the trust established for him by his father. He showed no value for it on the asset sheet. Ben estimated it at $20 million.
As Ben had anticipated, the first thing Bob wanted to discuss was whether to leave the assets equally to the grandchildren or stick with his parent’s per stirpes plan.
“Before we get to that, tell me about them, and your concerns about them,” Ben said.
“They range in age from fourteen to thirty. Three boys, three girls. The two oldest, a boy and a girl, a lawyer in private practice in Boston, and a physician-internist in rural West Virginia who wanted to serve an underserved community, seem solid. The middle two are in graduate school, both want to teach, one math at the college level, one elementary education, also a boy and a girl. The youngest two are in high school, one seems brilliant, the other struggling, likely has learning disabilities but shows talent as a painter, landscapes and portraits. Their parents never talked to me much about the children’s problems, but I knew from Mary (Bob’s wife, dead three years now) that they had some, as all kids do.
“Frankly, Ben, my biggest worry is that inheriting big wealth will ruin my grandchildren.”
It was the worry haunting all wealthy people, and the bigger the wealth the greater the haunting, Ben knew.
Ben also knew from a note on Bob’s asset sheet that Mary had left her asset outright to Bob, which meant he had also inherited her estate tax exemption through a new provision in the law called “portability.”
Seemingly reading Ben’s mind, Bob said, “What I hate most is the thought of paying 40% estate tax on about $75 million. That’s $30 million up in smoke.”
“How would you like to pay none of that tax and in twenty years have all the capital you have now in the hands of the family, plus do a lot of good with your money in those twenty years, directed by your grandchildren?” Ben asked.
“How could I do that?” Bob asked.
“On your death create charitable lead trusts to pay a 7% return each year to the Community Foundation for say twenty years. You can give each grandchild a right to advise the Community Foundation on what to do with an equal share of that 7% for their favorite charitable causes. Then after twenty years the capital will come back to trusts for the grandchildren (and their children) for family use.
“The Community Foundation can educate the grandchildren on the real needs of the disadvantaged. That’s a great education, can help make good citizens of them.
“You can also give your grandchildren powers to control how their shares of that family capital benefits their children—or not, same as your parents gave you the power to say where the trusts they created for you go when you die. I’ve detected you do not like the idea of youngsters learning young that they do not have to do right, or work hard, to have inherited money. Being able to tell a confused adolescent or young adult—even a not-so-young one—he or she can lose inheritable wealth can be a sobering influence,” Ben said.
“By the way, are there people connected with Gnarly Pine or your business life that you would like to help? “ Ben asked. “If so, you can earmark some of the 7% annual payout to the Community Foundation for scholarships. You cannot limit recipients to those families, but you can include them among those eligible for help.”
When their meeting ended, Bob asked Ben to prepare drafts of the necessary documents. “What is the plan for Gnarly Pine?” Ben asked.
“I frankly do not know. Six owners seems impractical. Need your help thinking this through,” were Bob’s last words to Ben for the session. Ben figured there would be several more before Bob decided the fate of Gnarly Pine.
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