Jacqueline Kennedy Onassis lived a high profile – and tragic – life. Her first husband, President John F. Kennedy, was assassinated in November 1963. Her brother-in-law, Senator Robert F. Kennedy, was assassinated just five years later in June 1968. Shortly thereafter, she was quoted as saying: “If they’re killing Kennedys, then my children are targets… I want to get out of this country.” Four months later, she married Greek shipping magnate Aristotle Onassis, who provided her family with the privacy and security she desired. The marriage brought her considerable publicity. Paparazzi followed her everywhere she went and nicknamed her “Jackie O.”
Family Office Blueprint
A few years ago, multibillionaire Warren Buffett revealed how he kept himself in a lower tax bracket than many of his employees.
In 2010, Buffett’s adjusted gross income (AGI) – the bottom line of the front page of IRS Form 1040 – was $62 million. But he only paid a 15% rate in federal income tax. How did he do it? Buffett took full advantage of his charitable tax deductions. It sounds easy enough. But there’s more to this than writing checks to your favorite charities… You see, Buffett used specific strategies to achieve maximum tax savings.
Let’s face it: Large gifts to children can be risky… It doesn’t take much for an irresponsible child to blow through an inheritance quickly. One way to combat this is to spread out distributions to your children over time. This increases the likelihood that the assets will be used responsibly. For example, you could provide your children with income only until they reach the age of 30, at which time they would receive half the principal due to them. Then, at age 40, they would receive the rest. This type of approach makes sense. But it provides little protection from creditors.
This is a true story about a guy named Mark… Mark owned a successful printing company. In 2005, he decided to expand his operation. Mark’s company borrowed $5.2 million from a bank to construct a building and buy a new printing press. He personally guaranteed the loans. Then things started to go bad… The $3.85 million printing press was defective, causing major problems in Mark’s business. The company eventually failed. Mark struggled to repay the loans. The bank worked with him for a while… until he stopped making payments.
Nicholas Pritzker, a Jewish immigrant from Ukraine, was flat broke when he arrived in the US in 1881. By 1903 he had established the Pritzker & Pritzker law firm in Chicago. In 1957, his grandson, Jay Pritzker, bought the family’s first hotel – the Hyatt House in Los Angeles. With the help of his two brothers, Donald and Robert, Jay went on to build the Hyatt Hotel empire – along with many other successful businesses. At the time of Jay’s death in 1999, the Pritzker family’s portfolio consisted of more than 150 private companies owned through nearly 1,000 trusts.
I’m sure you’ve heard of the term “asset-rich but cash poor.” Unfortunately, it’s a situation that many families find themselves in when the estate of a loved one contains illiquid assets such as a business, land or foreign holdings. Even with the best planning, large estates may still owe estate taxes. And without cash, the executor may be forced to sell assets to raise cash to pay the tax. Because estate taxes are due within nine months of the date of death of a person with a taxable estate, this could lead to unloading valuable assets at fire-sale prices.