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Estate Planning Missed Opportunities

Skilled at building wealth, less so at protecting and passing it on.

We all know of individuals who for a variety of reasons seem to have become very successful. Their vision, perseverance and dedication led to an accumulation of wealth, which is rare within ones lifetime. Somehow they seem larger than life to the rest of us who will likely never see such wealth.

We presume that such success would permeate the lives of these great people and they would assiduously attend to protecting and passing their great bounty to those they love most. Often this is not the case.

John Pierpont Morgan regarded as our nation’s foremost banker in the first half of the 20th century parlayed his family inheritance to build United States Steel Corporation. At that time, the world’s first billion dollar corporation assembled by purchasing Carnegie Steel from Andrew Carnegie. He pioneered dozens of mergers and held controlling interests in a wide variety of financial and industrial institutions. Unlikely as it may seem, his own financial planning, or the lack thereof, permit the estate to be reduced by 69% to taxes and transfer costs.

The estate of Joe Robbie, an attorney and owner of the Miami Dolphins as well as Joe Robbie Stadium in Florida was forced to sell both at his death to settle a $47 million dollar estate tax. It is possible that both assets in today’s market place could be worth nearly one billion dollars.

The list goes on and on. Alwin Ernst (Ernst and Young), Frederick Vanderbilt, William Boeing all shared more than half of their wealth with government tax collectors. Would they not have preferred family or charitable causes to perpetuate their values? Did they believe that the federal government was the wisest choice for intelligent resource deployment?

What causes such a dichotomy of attention so as to permit otherwise brilliantly successful persons to fall victim to the devastating impact of forced sales and destruction of a lifetime achievement? Perhaps the skills and techniques useful in careful planning are not intuitive and require the attention of estate owner along with a team of coordinated specialists. Isn’t that generally how any major objective would be undertaken? For many entrepreneurs it is clearer, and more pleasant to envision the building and accumulation process than the post demise transfer and safeguarding. "The good is the enemy of the best!" Or, as Goethe said, "Things which matter most must never be at the mercy of things which matter least."

Several key areas of opportunity:

The assembly of a planning team commensurate with the amount of wealth and nature of assets to be addressed. There is usually a team leader that assumes the coordination and timeliness of communications with the principal as well as the other team professionals. Values and preferences are essential to be surfaced in order that the long-term effects of actions may be appreciated and controlled. Often this process involves discussions and “education” of the principal in order to derive considered opinions and multi-generational family cooperation. Understandably this subject is distasteful and not likely to be popular at first. After reflection however, it becomes apparent that few areas of attention can be more compensatory than that which impacts half, or more of all you have. Also there is an opportunity to “make a difference” in the lives of others and the world we reside in. When the long view is taken, this sort of effort and time commitment overshadows the day-to-day events that consume our discretionary time. The team leader needs to impact the principal in such a way as to uncover the core values and how failure to plan or taking proactive steps when we are able would affect them and all they care about. It is out of character for great persons to allow happenstance to dictate the result of areas within their control.


Liquidity is critical to all phases of business and commerce. It is especially critical when taxes, debts, and costs of administration may exceed 50% of all there is. Remaining highly liquid is often the opposite of what an aggressive empire builder likes to do, leverage assets. This leads to a “Joe Robbie” situation.

Careful planning can reduce tax exposure to a minimum and set into motion “liquefying” techniques to facilitate cash flow when likely to be required.

Tax Awareness comes about when we learn that it is not necessarily better to own an asset than it is to have unfettered use of it with out the tax and liability burden. Sophisticated techniques and strategies seek to accomplish just this.

Liability Wagering comes about often unwittingly by risking our wealth to the jurisprudence of our court system. The McDonald’s corporation paid millions to a patron for the “sin” of serving too hot a cup of coffee which the patron accidentally spilled on her lap. Given modern day clever legal manipulators and the incentive of huge settlements, and contingency compensation for lawyers, it is difficult to predict with much certainty how a court or jury will decide a case based on ever expanding theories of liability. Until such an event occurs, many successful people have not considered the impact on their wealth and family of such an action. Can any of us feel comfortable that we have no extended liability for employees, business judgments, remarks, vehicles, loans, agreements and so forth? It may be beyond possibility to prevent lawsuits by creditors or predators, it is however possible to become an unattractive target. Litigation generally pursues the “deep pocket” more so than the perceived liable party. Entities and jurisdictions have a wide variety of rules which when orchestrated in concert may well thwart pursuit of asset attachment and thereby the action itself.

Risk Shifting is hundreds of years old in concept. Pay a bit now to protect and assure the indemnification of a large loss should it occur. We can certainly afford to “build in” the cost of insurance to our business in order to insure the unaffordable lack of survival of its assets. The scientific and creative use of risk management is not intuitive. Specialists exist with a lifetime of experience is assessing the cost and benefits of risk shifting and should be a member of the estate planning team. Someone always pays for risk, either in the form of insurance, or the cost of self-funding.

Family Discord is an evil of immense proportions. Family members litigating one another may transcend the logical bounds of creditor’s avarice and need for retribution. Family feuds may be long lasting and destroy all the economic underpinning of a lifetime of building. This area requires more art form and people insight than necessarily science of technique. Skilled planners assist the principal to envision the reality of the world without them making decisions and taking action. Well-crafted trusts may make all the difference in future management of assets by those qualified to do so for the benefit of those we care about. Sometimes the objective is to protect our heirs from themselves; In-laws may one day become out-laws.

Duty to pay taxes. It is the right of every American to do whatever they can to avoid taxes. Judge Learned Hand wrote, "Anyone may so arrange his affairs so that his taxes shall be as low as possible; he is not bound to choose that pattern which will best pay the Treasury; there is not even a patriotic duty to increase one’s taxes." Should our current plan call for tax payment when we die, it is likely because we choose to do so, or have not explored our options.

Coordinated game plan:
The assembling of a qualified planning team may well be the most valuable money and time investment a family of substance may make. The end results of good planning can change the lives and environment in which we reside by minimizing the disorder brought about by surprise of the unforeseen as well as the toll that uncertainty and disharmony brings to human existence.

Ray Chodos and Adam Chodos, JD, CPA are members of the Wealth Preservation Group LLC, a Greenwich, Connecticut based planning organization specializing in wealth preservation, business succession, and executive benefits. e-mail:

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About the Author

M. Ray Chodos, Wealth Preservation Group LLC
Aiken Road
Greenwich, CT 06831
203-539 1516

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