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Avoiding 'death tax'
Inheritance isn't only option
Found in: Akron Beacon Journal
05-02-2004
Planners help aging boomers get most value for their money
By Jim Mackinnon, Beacon Journal business writer
Cliche it may be, but death and taxes are inevitable.
Still, increasing numbers of wealthy families are working to minimize, or ideally eliminate, taxes after death.
We're talking potentially tens of trillions of dollars that the post-World War II baby boom generation may inherit in upcoming years, studies show.
Thing is, it doesn't have to go to them. It also doesn't have to help fill the coffers of federal and state governments.
Cleveland-area businessman Richard Tanner says he sees opportunities not necessarily in the value of the money, but in personal values.
Tanner, head of Ownership Advisors Inc., is among fee-based financial planners nationwide whose niche is wealthy families, many of whom are small-business owners. He gets them to think about their values and what they want their money to accomplish after they die.
Tanner, and planners like him, endeavor to help aging parents of today's baby boomers decide if they want to leave large chunks of change to specific causes -- not exclusively to their children, grandchildren and Uncle Sam. The so-called WWII generation, born before 1945, is the wealthiest bunch of seniors in U.S. history, according to American Demographics magazine. The boomers, too, are also expected to leave behind tens of trillions of dollars.
"There is going to be an explosion in the transfer of resources from one generation to the next," said Bob Mahaffey, vice president of the Washington, D.C. based National Center for Family Philanthropy, which advocates for about 40,000 family foundations nationwide. Setting up or donating to a nonprofit foundation is one way people can reduce or eliminate estate taxes. The foundations, in turn, provide such things as scholarships or funds to charitable causes.
Many people now are interested in succession, raising charitable children and ensuring the perpetuity of their values, Mahaffey said.
Tanner wants to help his clients, who typically have high net worths, to work through those issues.
"Money has emotionally charged aspects," Tanner said. "Most people will say the government isn't a good steward."
Tanner's process includes having clients extensively discuss their values. They then create something he has trademarked called a "loving will," a document that spells out those values and gives direction to heirs and professional advisers. The paper is intended to complement other legal documents, he said.
"They can take control of their social capital." Tanner said. "What we want is people to be proactive about their thinking.... Our best use is to show people how to be charitable."
In Tanner's experience, the spouses he has as clients initially have very different understandings of their wealth.
Tanner said he typically sees a husband who owns his own business and who knows it is worth millions, but the bulk of the money is typically tied up in the business assets and not available for spending. The wife, who is often not involved in the business world, may not feel they are extraordinarily wealthy, he said.
"They're uncomfortable with the idea that they're wealthy," he said. "The complexities get even more dramatic when you talk about families."
In addition, a husband who started and built up a business may not think of wealth as an entitlement, he said. "It's something you have to earn."
Spouses also often have different ideas about how to treat their heirs, he said.
Tanner said he brings couples in and gets them to talk to him and to each other. The process involves each spouse answering a questionnaire and the couple going on a "retreat" that can last anywhere from three hours to all day with Tanner.
Richard Abbott, who in 1985 founded the Cuyahoga Falls-based vegetation management business ACRT, used Tanner's services to convert his company to employee ownership. ACRT, which provides services to utilities, now has about 300 employees who work around the nation.
Stock from the company was put into a trust as part of the switchover. Afterward, Abbott, now 75, said he and his wife decided they would use the proceeds that they received to educate their grandchildren and to donate to various charitable causes.
"We got good value for our money," Abbott said.
Dudley Blossom, former part-owner of the Cleveland Indians (Blossom Music Center was named for his father and grandfather), said Tanner's approach helped him better understand the concerns of his wife, Kay. He said he learned she wanted to better understand how she would be taken care of if he dies before she does, he said.
Tanner's goal is to not pay the government anything when you die, Blossom said. Tanner pushed him and his wife to question their values, he said.
"The process, if you will, clarifies what it is you want to accomplish," said Blossom, 63. "The issue we struggled with the most is, how much is enough for the kids?"
He and his wife have six children between them, ages 32 to 39, from previous marriages.
"In the final analysis, we wanted to make sure our kids had enough money available to them to survive but not enough that it would discourage them from working," Blossom said. "Our experience is, there's a great deal of meaning in the work-a-day world. It gives life purpose."
Blossom and his wife also have decided to leave money to Christian causes.
"Somehow, we want to be part of advancing God's kingdom here," he said. They are still working out details, he said.
While lengthy, the process has been worthwhile, Blossom said. "It has an awful lot to do with what you want to accomplish in life."
For more information, contact Ownership Advisors at 216-328-5538.
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