estate planningtrusts

The Other 1%*

By January 11, 2017No Comments

Oil WellIn the beginning of my career as an estate planner, like many Americans, I was constantly bombarded with news about the “one-percenters” – Americans who were the wealthiest of our population. With respect to estate planning, these folks had all kinds of complex trusts – GRATs, SLATs, DAPTs, CRATs, pick your trust acronym – to suit their particular needs. The one-percenters have so much wealth that in addition to lack of anxiety over financial matters, future generations of their families generally share this liberating lack of anxiety.

Because our community beat the drum so loudly in an effort to assist the one-percenters in preserving their wealth, when asked what I did for a living invariably, upon hearing the response, someone would say:

“Oh, you help the one-percenters; that’s not me. I’ll call you when I get there.”

Yet, as an estate administrator, I also know that those who rejected the notion of needing planning help because they weren’t a one-percenter were gravely (pun intended) mistaken. Folks in the 99% category are adversely affected in a much greater proportion by loss of wealth or earning potential than the one-percenters who experience loss of wealth. On a dramatic scale, a one-percenter who loses significant wealth may go from a McMansion to a bungalow; a 99%r may go from a bungalow to a homeless shelter. I witness it nearly every time I step into probate court.

Consider this example:

Ben owns thousands of acres that includes a successful dairy farm, a few oil wells, a couple of streams, and farmland that produces various grains. Ben’s family has not had any financial worries in more than a century; so, yes, they’re in the one-percenters.

Several years ago, Ben assumed running the family “business” from his mother and when he did so, he spent about $100,000 in estate, retirement, and business planning fees. He now spends a nominal fraction of that annually between the 3. Ben’s plan safeguards the land and income it produces, and the initial fee structure represented less than 1% of the value of his family’s wealth.

Now, consider your own wealth or your family’s wealth, whether you’re at the beginning, middle, or end of your “peak” wealth accumulation period. Next, consider your health. If you were to become seriously ill, is your earning potential, current capacity, or nest egg protected?

Just like Ben, the one-percenter, you too, can use less than one-percent of your wealth or earning potential to protect what you have earned or your capacity; you can safeguard you and your loved ones and even future generations with just 1% of your family’s annual earnings.

After the popularity whirling about the one-percenters cooled, we started hearing a lot about “leaning in.” I recommend we zoom in.

Focusing on the one-percenters while fun is also futile; instead, focus on the other one-percent – the 1% of you that can 100% help your family.

*Credit for the title goes to my dear colleague, Stephen L. Hoffman.

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