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Monday, July 26, 2004

$550 Million Estate Tax Bill: "Very Effective Estate Planning"

Monday, July 26, 2004

The July Trusts & Estates journal has an interesting piece on the $550 million estate tax tab faced by the children of Estee Lauder, who died at 96 in April. Trusts & Estates asks "why Lauder, who surely had access to the best legal advice, would die with so many taxable assets. Wouldn't a good advisor have helped her transfer most of the money out of her estate long ago?" After noting that rich matriarchs often resist tax-driven efforts to diminish their power and net worth, Trusts & Estates observes that Lauder actually "did some very effective estate planning" by passing on to her family a $3.5 billion stake in Estee Lauder Inc. at an estate tax cost of "just" $550 million -- 16%.

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Comments

The late Estee Lauder may have received plenty of estate planning advice from tax lawyers and accountants, and even from beneficiaries, but chose to ignore most of it because it provided no direct benefit to her. After all, the estate tax is borne by the beneficiaries. Perhaps the estate tax is considered by some wealthy persons as a form of charitable contribution. The primary issue in any estate plan is how does the decedent wish his/her assets to devolve? The planner can suggest various techniques that may or may not work, that will generate fees for complex trusts and other esoteric planning arrangements for the planners, that the client will have to pay for from his assets during his lifetime. Some clients may wish to leave such problems with their beneficiaries. Even after the payment of the estate tax in the Lauder estate, there will remain just under $3 billion for the beneficiaries. Not a bad piece of change for the beneficiaries who did not earn the assets by their own efforts. Perhaps there is a lesson to be learned by estate planners other than the reduction of the estate tax liability.

Posted by: Shag from Brookline | Jul 26, 2004 4:35:56 AM