Estate Planning

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Whose is it? This really good question was asked toward the end of the 20th century by a client named Phil (not really, but we want to protect the real person's privacy). During the early years of our collaboration on his family's estate plan, his questions all came down to, "Isn't there something more?" He appreciated our latest planning suggestions but wanted to take the plan further in the direction of reducing estate taxes.

In order fully to appreciate Phil's "really good question," you should know that his income in is the top 5% of U.S. households. He has a considerable surplus. By the way, as of 2021 it took just over $250,000 to be in the top 5% ($170,000 to be in the top 10%), so please keep reading if you're in one of those ranges or know someone who is and who might benefit from knowing who "owns" the surplus. Think of these as order-of-magnitude numbers; different surveys yielded marginally different results.

Here was Phil's point: He gradually came to realize that he couldn't outlive his assets. He would have an estate to give away at death. That meant to him that, as a practical matter, he was holding assets in trust for someone else. Someone other than Phil and his wife would eventually own the assets they had labored to accumulate and conserve. If the "someone else" turned out to be IRS and state revenue collectors, then Phil wouldn't even know who eventually "owned" his estate. Government agents would spend his money on programs Congress considered worthwhile.

He decided that he wanted to name his own beneficiaries. He wanted to know who would own his estate after he died. He and his wife decided that their children and grandchildren would be the owners.

That decision inevitably raised a second key question: How much is too much? Yes -- it really is possible to give someone so much money that the giver winds up hurting rather than helping the recipient. Phil and his wife had lived long enough and were observant enough to know that. 

Accordingly, they placed a limit on how much will go to their children and grandchildren. The rest will go to charities they have followed and supported during their lifetimes. They delight in that prospect.