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On Estate Planning, “Death” Taxes and King Lear, Part 2

estate planning
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At our last foray into the wonderful world of estate planning law, we have a well-to-do couple in their sixties who would like to protect their assets from what was back then a pretty low estate tax threshold, to pass their business on to their sons and ensure a comfortable retirement for the survivor of them should one of them die. Both still worked at the business alongside their sons.

As we said before, the QTIP Trust requires that the estate property be split as to capture the available exemption for each of the married persons. In this case, it actually worked out quite well: the value of the business plus the local home was about $610,000. The value of the building and the Florida home were about $590,000.00. When filing an Estate Tax Return, Form 706, there are deductions available: costs of funeral, costs of attorneys fees, etc. so that $610,000.00 is still a tax-free situation. (You can claim these expenses on the Form 706 or on the Form 1041 Estate Income Tax Return but not both) The State of Illinois has its own Estate Tax and people need to be wary because, at least at this point, the Illinois exemption is less than the Federal. An estate which I handled for a gentleman here in Illinois had been planned by his son in California and he was surprised to learn that, although no federal tax was due, a substantial sum was due the State.

I presented the details of the QTIP to the couple and was taken aback by the reaction of the husband. He was adamant that he would not do anything where his name was coming off the title to any of his assets. His wife was one of the most gracious people I have ever encountered and she betrayed little or no emotion as his short tirade played out. I told him that doing nothing would saddle his children with probably selling off his houses to pay the taxes so they could continue with the business; the building’s upstairs tenants, mostly professionals, were a good source of income to pay the real estate taxes. When he asked me what was to stop his wife from selling off the property under her control, I answered, (1) correctly, nothing but (2) what would stop him from doing the same thing? and (3) if she has survived 37 years of marriage to you, what makes you think that would happen? and (4) even if it did, don’t you think that if the marriage broke up at this point, and all your assets were still joint, that a divorce judge would award her about 70% of the assets to ensure her continued living at a standard to which she had become accustomed?

After a number of fruitless discussions at his house, I finally took him to lunch at a local restaurant, just him and myself, and I indicated that he had to make a decision on this — that none of us are promised a tomorrow and after one of them died would be too late. He told me a remarkable story.

It turns out that he had a second cousin who was quite successful as a car dealer. He had eventually acquired three different dealerships from the same Detroit behemoth and you would hear his radio ads on WLS in the 1960’s and 70’s. He also had three sons. Each of them was the assistant manager of one of the dealerships Pop remained the Boss, no question. As he approached retirement age, he had a grand plan: at a big party at his house (not to say mansion, but stately) he handed over the stock in one dealership to each of his sons. He had assumed that he would continue to make the rounds of each dealership to kibbitz the customers and the staff. Well, it didn’t turn out that way. His kids had tolerated their father’s heavy handedness for many years. Within a couple of weeks, they had presented a united front and told him to stay home, or anywhere else but the dealerships. Remind you a bit of a certain Shakespearean tragedy? “sharper than a serpent’s tooth”?

Soon thereafter, his wife, who had not actually seen that much of him for most of their marriage as he built the business and made it his mission to be at the forefront on anything going on in the community. At his death, many in the community waxed rhapsodic about his contributions to their town. Unfortunately, she didn’t care so much about hearing about all his achievements and their sons’ treachery. She had seen first hand how he had treated them. That’s the way it may have been with his father who started the first dealership, but his kids had been Americanized. Freedom trumps loyalty. At the time my client related this to me, she had thrown him out and he was living in a non-luxury one-bedroom apartment in the town where he had been a prince and the courts would be a part of his life so the foreseeable future. Having gotten that tale out, my client and his wife signed the documents within a week thereafter.

The Law Offices of David Blocher is a specialty law firm serving Chicago, IL and the surrounding areas specializing in elder law, probate administration, and estate planning services. Our attorneys take a keen interest in each case and offer personalized and attentive services to every client. If you need legal assistance in any of these areas, please feel free to contact us at  (312) 855-4477 or visit our website at http://www.blocher-law.com.