Clintons Have Their Financial Ducks in a Row

Should anyone be worried – Chelsea Clinton will be just fine when her parents pass away. That’s the basic take-away from an article written by Kerri Anne Renzulli. In the article, Renzulli meticulously analyzes the care with which Hillary and Bill Clinton have put their financial lives in order, and shows it as quite an example to the rest of us. Politics aside – they certainly have their financial lives well organized.

As the article explains, the couple has investments valued at between $10 and $50.1 million, according to their disclosure forms. Their disclosures do not include the value of their homes or retirements accounts since they don’t have to be released. Herein lies the key to their estate planning. They have created a residence trust which means that the property’s value can’t be counted in their estate, or be taxed when they pass it to their heirs. As Michael Delgass, CEO of Sontag Advisory explained,

“When you create these trusts, the benefit you’re relying on is the appreciation down the road — you’re counting on it to grow into something much more valuable.”

The Clintons actually created two of these trusts in 2010. If the value of their Chappaqua, New York home continues to grow, the move could save them hundreds of thousands of dollars in taxes, according to estate planning and taxation expert Jonathan Blattmachr. Jonathan Blattmachr of Pioneer Wealth Management, who co-authored Bloomberg BNA’s tax management book on personal residence trusts explains the move.

The couple also owns another home in Washington DC that they haven’t placed in a property trust. Jonathan Blattmachr explains that they may have chosen not to do so because they don’t think that home will appreciate as much or because they intend to sell it.

The article continues to explain other areas of their lives where they have taken the financial steps to cover themselves and their heirs. The rest of us would do well to take notice and perhaps to use their example.


Prince Has Left Behind a Reign of Complications

Some of us lead complicated lives. And some of us leave behind complicated deaths. Prince has just done the later. According to a recent article in the Wall Street Journal, Prince did not leave behind a will with his recent untimely death.

But that is just the beginning of the issues. Estate tax attorneys have the job, at the moment, of placing a financial value on his name, image and likeness. The only similar situation with which they have to access is Michael Jackson, and his estate-tax battle will be in U.S. Tax Court this February. In Michael Jackson’s situation, for instance, the estate said his image and likeness were worth $2,105 when he died in 2009, while the IRS placed his worth at $434 million. That’s quite a difference.

As Jonathan Blattmachr, a Principal in the estate planning advisory group of Pioneer Wealth Partners, “This could be very ground-breaking.” As he explained, a victory for the IRS could mean that celebrities change how their estate plans handle their image rights.

Certainly, Michael Jackson’s case has tax planning consequences for any famous person who is famous enough to earn money beyond the grave. But, as Jonathan Blattmachr points out, there are no rules for the IRS or taxpayers to follow. He has made some interesting suggestions for these situations. He suggests exempting the value of names and likenesses from the estate tax but taxing future earning as regular income. As Jonathan Blattmachr said, “Michael Jackson will be different from Prince who will be different from Madonna. It’s horribly speculative as to what the value is.”

As the Wall Street Journal explained, the hardest issue won’t be his real estate, song royalties or unreleased recordings – but figuring out the cumulative value of his profit potential on the day he died.

Now what? Prince’s estate will have nine months to file its tax return and estimate his net worth. The IRS will have three years to challenge their predictions and numbers if they disagree with the assessment. And, of course, tax court is always an option.