14 Sep WHAT WE CAN LEARN FROM JACKIE KENNEDY ONASSIS’S ESTATE PLAN
WHAT WE CAN LEARN FROM JACKIE KENNEDY ONASSIS’S ESTATE PLAN
Some people get it right because they are priority driven; others mean to but are distracted by successful careers or life in general!
When people die intestate and significant sums of money are involved, it frequently triggers conflict among family members, draws other interested parties into the fray, and causes the situation to degenerate into an explosive battlefield that fractures family relationships and drains estate coffers.
Consider this: The battle for Jimi Hendrix’s estate raged on for more than forty years after his death. He died intestate at age 27, and while he did not have much to leave at the time, the rights to his music and image became a protracted legal free-for-all. Pablo Picasso also died intestate (at age 91). His estate took six years to wind up at a cost of $30 million.
Huge sums of money flushed down the drain and wasted on contesting rights and property ownership. If only they had drafted Wills…!
Jackie Kennedy Onassis was the opposite. A woman with an enviable fortune, she optimised the benefits of estate planning within the constructs of United States law and held the belief that not everything should go to your children.
The United States has a legal mechanism called a charitable lead trust (South Africa does not). It is a special type of trust that allows an annuity to be paid to a charity for a specific number of years and then disburses the remainder to the ultimate beneficiaries – her children. (The charities she wished to support were identified in her Will.) She sought to minimise her tax liability and optimise the long-term benefits to her beneficiaries by creating one cash flow stream to charities for a fixed term so that she could save federal estate tax!
Her Will also made alternative provision for the following contingencies:
- What to do if any of her beneficiaries predeceased her.
- What to do if any of her beneficiaries did not want or need the money and preferred that it pass directly to her grandchildren (thereby mitigating her children’s estate tax burden when they die).
Of course, this example relates to the laws of the USA. South African laws are different but there are legal instruments available to South Africans that can help minimise the impact of applicable taxes when they die. Different but doable.
The general goal is to leave as much as possible to one’s beneficiaries, including charities if one is so inclined, without falling foul of the law. Should you like specialised advice or assistance in this regard, please call for an appointment.