I recently read an article titled “What Makes for Success?” by Kemmons Wilson, the founder of Holiday Inn. In it he said, “It is great to attain wealth, but money is really just one way — and hardly the best way — to keep score.”
It's an interesting quote, huh? Most readers of this column call me with tax problems because they have attained wealth (no doubt they do keep score of money) and they don't want to share that wealth with the IRS. That's perfectly normal. Yet, it's amazing. Once the reader realizes that we can show them how to pass their wealth — all of it and intact — to their family (and really eliminate the estate tax), the conversation turns to other ways that they might keep score.
Sure, they are delighted to find there are legal ways to totally win the estate tax game. But they readily admit that they don't know how to deal with their other problems (which really are other ways to keep score).
The other problems fall into the general category of little kids, little problems and big kids, big problems. They want to know which of their kids should run the business and how they could treat their kids fairly. What about the nonbusiness kids? What happens if one (or more) of their kids gets divorced? They also ask how they should take care of their spouses. The callers tell me about family problems, business problems and/or assorted personal problems. To me, every word is important, even though I've listened to so many tales of woe before. Although similar, each problem, as explained by each client, has its own peculiar twists and turns.
Let's face it, stuff happens. After years of solving wealth transfer, business succession (usually the business is at center stage) and estate planning problems, experience has taught me that solving only the money problems can never yield a perfect economic and tax plan.
The human stuff (your spouse and kids support your plan) must be solved too. What about your son-in-law or daughter-in-law? Do you “love” him or her? Or is “hate” the better word? I know it sounds cornball, but if you really want to win the game of life after you have won the money game (often the easy part), you must attempt to solve the human part and the emotional stuff.
Here's my suggestion to start the process: Make two lists — the money-problem list and the human-problem list. Solve the money-problem list first. Usually you are home free if you solve three money problems. First, maintain your lifestyle — and your spouse's — for as long as you live. Second, transfer you business to the business kids, tax-free. Finally, kill the estate tax.
An important note: Unless the client tells us otherwise, we always assume you want to control all of your assets — especially your business — for as long as you live.
Once the money-problem list is complete, then it's easier to tackle the human-problem list. It's interesting that solving the money problems often solves some or all of the human problems. Finally, you must work with experienced professionals who know how to solve both problems, the money problems and the emotional human stuff that comes when you accumulate significant wealth and then want to pass it to your heirs.
One more thing — each piece (whether intended to solve a money problem or a human problem) of your final plan must be part of a single comprehensive and integrated plan, all implemented at the same time. Piecemeal planning, based on my 50-plus years of experience, is a disaster that not only enriches the IRS but also fails to satisfy the normal problems of a typical well-to-do family.
Irv Blackman, CPA and lawyer, is a retired founding partner of Blackman Kallick Bartelstein LLP and chairman emeritus of the New Century Bank, both in Chicago. He can be reached at 847/674-5295, e-mail [email protected], or on the Web www.taxsecretsofthewealthy.com.