With the recent deaths of Steve Jobs, Apple co-founder, and Al Davis, owner of the Oakland Raiders, we are reminded how important it is to properly plan for the transfer of assets upon death. While the average American does not have the wealth that Mr. Jobs had (estimated at $7 billion1) or Mr. Davis (estimated in the hundreds of millions with just his stake in the Raiders2), we can still learn from their planning or lack thereof.
Steve Jobs
It has been reported that Mr. Jobs’ estate plan will never be fully disclosed but speculation seems to suggest that he utilized trusts to ensure his wealth was protected as well as his privacy.3 We often talk about utilizing trusts for the advantages of protecting wealth, avoiding ancillary probates and to aid in incapacity situations. However, trusts are also extremely beneficial to protect the decedent’s privacy and the details of his or her estate (see Jayne Sykora’s article A Living Trust: Is It Right For You?).
Many are also curious as to whether Mr. Jobs donated any of his wealth upon his death.4 Again, we may never know given the fact that if Mr. Jobs did bequeath any charitable gifts, he may have done so anonymously. For individuals whose assets exceed the federal and/or state estate tax exemption limits, charitable giving is a way to save on taxes. Charitable giving can decrease the value of a decedent’s estate and eliminate or reduce potential estate taxes.
Al Davis
The status of Mr. Davis’ estate is also still up for speculation. One early report is that his estate “could be facing hundreds of millions of dollars of taxes based on the price appreciation of the Raiders.”5 However, the potential tax liability will be delayed until after his wife passes away because the marital exemption is unlimited; thus she can inherit everything tax free. But once she passes away, the estate could have a significant tax bill and the issue will be whether the estate has the funds to pay the bill. Individuals who know that their estate will incur taxes upon death can often pre-plan by purchasing life insurance to cover the costs, especially when there is little liquidity in the estate.
Additionally, if an individual’s most valued assets are securities, there are ways to disburse an individual’s wealth while still maintaining control of the shares and underlying business interests. We’ve written posts on the use of family partnerships and limited liability companies to transfer wealth within families.
Robbie, Wrigley and Steinbrenner
Mr. Davis’ death has also raised the tales of the estates of Joe Robbie, former owner of the Miami Dolphins, P.K. Wrigley, former owner of the Chicago Cubs, and George Steinbrenner, former owner of the New York Yankees.
The estates of both Mr. Robbie and Mr. Wrigley incurred millions of dollars in taxes. In both situations, after the deaths of Mr. Robbie and Mr. Wrigley, the surviving family members sold the sports team in question – the Miami Dolphins and Chicago Cubs, respectively. Many attributed the sales to the inability to pay the estate taxes. However it seems that other factors, such as family disputes and personal choice, caused the sale of the teams.6 Family dynamics and the decisions of surviving loved ones do often dictate what happens to an estate. It is important for testators to keep this in mind while drafting an estate plan.
Presumably, Mr. Steinbrenner had a thorough estate plan since his assets were valued in the billions. However, even with all the proper planning, the major factor that saved his estate from incurring estate taxes is that Mr. Steinbrenner passed away in 2010, a year that did not have any estate tax in place.
Again, most Americans do not have the level of wealth mentioned in the above estates, however, it is still worth the time and expense to properly plan to pass on as much wealth as possible to your heirs.
4http://www.forbes.com/sites/hanisarji/2011/10/05/steve-jobs-dies-in-year-with-35-estate-tax/
6http://www.ctj.org/taxjusticedigest/archive/2010/07/reports_of_my_estate_tax_have_1.php
