Steve Jobs Estate Plan

I pulled this snip-it off of regarding Steve Jobs’ death:


Jobs, in his trademark uniform of black mock-turtleneck and blue jeans, was deemed the heart and soul of a company that rivals Exxon Mobil as the most valuable in America.  With an estimated net worth of $7 billion — including a 7 percent stake in Walt Disney Co — it was not known how Jobs’ estate would be handled.  The entrepreneur had sometimes been criticized for not wielding his enormous influence and wealth for philanthropy like Warren Buffett and Bill Gates. His death revived speculation that some of his estate might be donated to cancer research groups or hospitals.  California law requires a will to be filed in probate court within 30 days of death.  Jobs and his wife placed at least three properties into trusts in 2009, which legal experts say is a sign he may have been preparing his assets to remain confidential upon his death.  Placing stock and real estate into trusts can both minimize estate taxes upon a person’s death, and keep them from being publicly disclosed in probate court, said John O’Grady, a trusts and estates attorney in San Francisco.”

This raises the question what did Steve Jobs really do for his plan and what are some planning tools he should have considered? To state the obvious I have never worked with a client worth seven billion dollars.  I have a lot of clients worth seven million but none with billions.

Most wealthy people start with the idea of REDUCING TAXES.  That’s almost universal and, I should add, with good measure since estate taxes could take away about one half of a large estate. Did you read that right… I said HALF!  Yes, about fifty percent can easily go to estate taxes though that law is an ever-changing target (currently only 35%). Depending on what state you reside in it can be more with state death taxes added in!  As of a few years ago the top federal rate was 55%. That doesn’t even factor in the income taxes on IRAs and 401ks after death!  Ok, ok so reducing taxes is likely important. What could he do?

Well, the reducing taxes often works hand in hand with charitable planning.  If you set up your charitable gifts right with charitable lead and/or remainder trusts you can basically (and I am over-simplying here) give money to charity instead of the IRS and your family can get the same amount.  Just a simple charitable remainder trust backed by a “wealth replacement” trust (aka: an irrevocable life insurance trust) can accomplish this.

What else?  I would probably recommend a charitable foundation.  A charitable foundation would be a way to reduce taxes and give the family a purpose in life. Otherwise with that much wealth you really run the risk of creating kids with no motivation in life.  If you can get them hooked on a family charitable foundation you can keep rich kids interested in life.  It can be there job.

Well, related to above I would also consider an earn out clause in the trust.  That is for every dollar a child earns they get $___’s from the trust.  In a super wealthy family like this maybe it’s $10 or $20 out of the trust for every dollar earned.  So if you make $50,000 as a teacher the trust would give you another $500,000.  Of course we would want to build in some trustee discretion in case the child is unable to work, chooses an especially low paying (but important) job, etc….  I really like earn out clauses for wealthy people to help keep their kids motivated.

Beyond that a lot of the basics would be employed including Qualified Personal Residence Trusts, Family Limited Partnerships, GRATs, and the list goes on.

If you have an estate to plan, even if it’s less than $7b give me a call to see how I can help plan for your family’s future.   -John

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