Benefits Of Estate Planning

If you are fortunate enough to have a large estate then a concern for any parent is how the receipt of any large sum of money is going to affect their children upon the death of the parent. If the children are either young, or irresponsible, then being given a large sum of money is probably going to have a negative effect.

Recently I was discussing a probate case with a very well seasoned attorney who related to me an interesting story. He had a rather wealthy client, as in the two million dollar range. This client did not have a spouse and his only heir was his son, who was around the age of 25. This son had not gone to school, and was essentially a “ski” bum and would make just enough money during the ski season to support himself through the year until the next ski season. Knowing this about his son the father did not want to bequeath a large sum of money upon his death to a child that had no direction. The father came to my well-seasoned attorney friend and said he wanted to establish a will and a trust.

The will provided that upon his death all of his wealth would pass into a trust for his son. The attorney would be the trustee. The provisions of the trust were simple. For every dollar the son paid in federal income tax, the trust would pay him five dollars. In other words, the more the son worked, the more money he could draw out of the trust. It required the son to provide his federal tax return once a year to the trustee before a payout could occur.

The son was unaware of the trust prior to the father’s death. Upon the father’s death, the son assumed he would inherit the entire estate. He was quite shocked to learn his father had established a trust and the payout was based upon his federal tax return. At first the son attempted to challenge the will and trust, but the father was of sound mind and the idea for the trust came entirely from the father. After a few years of grumbling, the son began to make some changes in his life. Soon he was back in school, then he landed a good job, and eventually became very successful. The last payout from the trust was close to $100,000 because by this time the son was earning six figures and paying a substantial amount in federal income tax.

The lesson in estate planning is, that we never appreciate what we are given unless we have some “skin in the game.”