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Tax Secrets of the Wealthy: Helping Family is More Important Than Beating Up the IRS
One question I ask every client is: “Tell me about your family.” Most of the time, I get an earful — sometimes more than I bargained for — but it’s all good stuff that helps us work together to create exactly the right tax plan.
Almost always, the original reason a client calls is to ask me to create an estate plan that would kill the estate tax.
Everyone loves to beat up the IRS. Ah, such delight when they find out that avoiding the impact of the estate tax is the easy part.
So what’s the hard part?
Satisfying everyone in your family is by far the greatest challenge. Usually, the more kids, the tougher. Remember, those little kids grow up, get married and each “I do” brings a new son-in-law or daughter-in- law. Often, the growing family brings different opinions.
Life goes on.
Well, you get the idea.
Oh, and before we forget: Soon those cute — and almost always wonderful— grandchildren come along. And if you and your spouse live long enough, those little grandbabies repeat the cycle (grow up, marry, have babies of their own). The family grows bigger. That’s good. Yet now there are more family members to satisfy.
Let’s take a closer look at this trying-to-satisfy-every-member- of-the-family problem. What’s interesting is that a bit more than half of the time there is no real problem. Sure, there are differences from time to time, but the typical family knows how to deal with issues as they pop up. Then my job is easy. All efforts can be directed toward creating a plan that solves the lifetime goals of the family.
Beating up the IRS always is one of the goals.
But what happens when one or more of the family members just can’t be satisfied?
Unfortunately, my sad experience is most people do nothing. Since they can’t solve the problem — either as they see it or as some other family member sees it — the problem persists and festers.
Ultimately, Mom and Dad die. It’s tax disaster and the IRS wins.
Can such a result be avoided?
Almost always, the answer is a loud ‘Yes.’
But first, let’s divide the differences into two clear and separate categories: financial (money) and emotional (the full range of human feelings, more often than not without any logical explanation).
Money differences are the most common and are the easiest to overcome to everyone’s satisfaction. How?
Get everyone involved (usually only direct family members and no in-laws, subject to rare exceptions) in the same room at the same time. A moderator posts everyone’s likes, dislikes, wants, goals or whatever else is involved for all to see. Only one person speaks at a time. No discussions. No negotiation.
Each person gets as many turns as needed.
Amazing! Almost every time the posted-on-the-blackboard goals and wants show agreement rather than disagreement. We isolate the differences — almost always about money. Putting in the right tax-saving (income, gift and estate taxes) plan usually solves the money issues.
What happens if there still are differences — serious stuff — not from my viewpoint, but by one or more members of the family?
Remember, doing nothing while waiting for total peace (which rarely comes) among quarreling family members favors the IRS. So we build a tax plan around the agreements and continue to work on the disagreements. The head of the family (usually Mom and Dad working as a team) must make the final call.
A well-structured plan makes tough decisions much easier.
Indeed, perfection should be sought in every tax plan. But the sad fact is that an imperfect plan is way better than no plan for a family that can’t seem to get everyone on the same page.
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Estate Tax Blog
by Irv Blackman
First and foremost, Irv Blackman is both a CPA and a lawyer. Irv is a tax guy. Stay tuned to the site by signing up for the RSS feed.
