Number 1: By helping you avoid family financial disasters
By Jeff S. Barganier, JD
Everyone could benefit from a legal mentor: a trusted generalist with some knowledge of the law.
I used to work as a financial advisor. A client once asked me if I would meet with his parents. He was terrified that his depression-era-generation parents had accomplished little or no estate planning. They loathed spending money, especially on lawyers, and thus had accumulated a bunch of it. He was justifiably concerned that his parent’s estate would be subjected to egregious estate taxes, the responsibility would beset him and his siblings to come up with money to pay Uncle Sam, and they would fight like cats in a burlap bag over what was left, if anything.
They arrived at my offices one sunny morning and my assistant showed them to our conference room. When I entered, they were sitting quietly like people being arraigned in criminal court—been there done that, too. The skeptical father was early eighties. His pleasant and healthy wife of five blissful decades of marriage was several years younger. There were three sullen middle-aged children staring back at me as if I held the keys to their respective vacation homes; and there was another sibling not present and not speaking—to anyone. My job was to convince the parents that their lack of planning was steering the children’s inheritance toward the rocks and that, unless appropriate action was taken, most of their hard-earned wealth would end up at the U.S. Treasury and not in the pockets of the sullen children where, of course, all concurred that it rightfully should land.
My client had already informed me that his parent’s estate was in the vicinity of eight million dollars. At the time, the estate tax exclusion was about one million dollars and the estate tax rate was 49%. As with current law, there was no tax on the first parent to die due to the Unlimited Estate Tax Marital Deduction. However, without careful planning, the estate of the second spouse to die would avoid taxation on only the first one million while the balance would be slammed by the full fury of confiscatory tax policy.
I asked to see his will. He quickly produced a three-page document. I counted the pages without reading it and promptly handed it back. “Mr. Smith, according to this will, your family’s estate tax liability is about three and one half million dollars.” You could have heard a pin drop. The sullen children shifted their stares to their father. He grimaced then asked me how the h--- I knew the amount of tax, given the fact that I hadn’t even read the will. That’s when I calmly explained that I knew, from experience, that a three page will was too brief to encompass the necessary language for provision of a trust—a trust that would hold all but the one million dollars excluded from estate taxation. It was a quick and simple calculation for me to make in my head…eight minus one times 49%.
Sometimes it takes an outsider, a trusted generalist, to point a family in the right direction and keep them from imploding the family fortune. Who’s your legal mentor?
Jeff S. Barganier is an attorney, writer and entrepreneur.
This post is the first part of a series -- Check back soon for the other ways that a legal mentor can save you time, money and heartache.