Last month we reviewed Michael Jackson’s pour-over will, which you can view here.
On July 2, The Wall Street Journal reported, “the value of Jackson’s asset may exceed his massive debts by as much as $200 million.” Jackson’s assets include: The Neverland Ranch, his 2,600 acre estate in Santa Barbara County, Calif.; the music catalog of his songs; his 50% share of Sony/ATV music publishing that controls most of the Beatles song catalog, valued at up to $500 million; and the “pickup in album sales of between $50 million and $100 million since his death,” according to The New York Times on Aug. 19.
When you die, your money will go to one of three places: The IRS, your heirs or the charities of your choice.
What creative ideas would you have given to the attorney who planned Michael Jackson’s estate if you were his life insurance agent? How would you even go about the process of working with an estate planning attorney like the one Michael Jackson retained?
All the great estate planning ideas tend to fall under three broad categories: Leveraging, discounting and social capital strategies. Leveraging, which was discussed in last month’s column, is the use of life insurance to buy an option for cash using discounted dollars to be used when your client can use it most. Discounting is the use of structuring tools to help your clients pass assets on to the next generation with minority and lack of marketability discounts. Social capital strategies can be used with generous individuals who seek to pass assets on to charities and still benefit the family to some degree. We will cover social capital strategies next month.
Discounting strategies are smart methods to structure and pass wealth on to the next generation. The two major discounts available to Americans are still minority and lack of marketability discounts. Minority discounts are commonly seen among older business owners who have passed the majority of their private company stock to children and grandchildren but maintain a minority share of the outstanding shares of closely held stock. The older business person may wish to keep voting shares to have more of a voice in decision-making for the company.
Lack of marketability discounts occur naturally where there is a minority share of stock for sale or to be transferred. After all, who would be interested in taking the risk of purchasing stock in a closely held company when they don’t have a say in the way the company is managed?
Talk with an estate planning attorney who is an expert in your area or region to create documentation to fulfill an estate design strategy that all parties are agreeable to. Google GST trusts, GRATs and GRUTs to begin learning about a few of these tools. The American College and the College of Financial Planning have courses to help you learn more about this subject matter.
In the upcoming December issue of Life Insurance Selling, I’ll help you answer the question: “How would you even go about that process of working with an estate planning attorney like the one Michael Jackson retained?” I will explain how The Expectations Conversation™ works with high-powered technical subject matter experts.
Brent Welch, CFP, ChFC, CLU, started as a financial planner in 1984 and is founder and managing member of Welshire Capital, LLC, a firm specializing in private wealth management, retirement and estate planning. He is a past president of The International Forum, a past board member for the AALU, a 17-year MDRT member and an 8-year TOT member. You can reach him through his Web site at www.welshirecapital.com.