Control Your Money Even After You Die

I had coffee with Armond Budish this morning, who's plugging his new book on estate planning. It's called "Why Wills Won't Work (If You Want to Protect Your Assets): Safeguard Your Estate for the Ones You Really Love," and, yes, it does italicize the "Really". That's one of Budish's points: it turns out that people love to play favorites when they decide who they're giving their money to, and they're often particularly keen to give their money to their their own direct descendants rather than to people who simply married into the family.

Budish has been an estates lawyer for many years, and has had a lot of clients, so he knows how people really think. "The biggest concern people have is that they don't want their money to go to the spouse," he says. "I hear that all the time." In his book, he even talks about ways of setting up a trust so that not only does your son-in-law or daughter-in-law not benefit from it, but in some circumstances that person doesn't even find out about the trust's existence, even during a divorce proceeding.

The book goes into a lot of detail about all the different types of trust that people can set up to perform all manner of functions. These trusts all avoid the hassle of probate, but they also can't be seized in those divorce proceedings; they can't be attached by creditors; they can be structured so that they don't count towards one's wealth for purposes of Medicaid eligibility; etcetera. There's a lot of talk about how best to avoid paying taxes in general, and estate taxes in particular.

So it came as a surprise to me that Budish is not only a Democrat, but is actually the State Representative for District 8 in Cleveland, Ohio. He sounds quite Republican in his book – he refers to the "death tax" rather than the estate tax, for instance – but it turns out he's all in favor of the estate tax, calling it "probably the most fair tax". He spends a lot of the book talking about how to protect assets from frivolous lawsuits, but he's also opposed to tort reform, and will admit, if pushed, that protecting assets from frivolous lawsuits also protects assets from entirely justified and proper lawsuits which he thinks people should be able to bring.

Of course, there's no real contradiction here. Budish is a good lawyer, and like any good lawyer he puts his clients' interests first when he's representing his clients; on the other hand, when he serves politically, he puts the greater good first. But it's still very interesting to me that a Democrat wrote this book. The main theme of the book is that people can and should target their estates very carefully, making sure that their assets trickle directly down, vertically, if you will, to their direct descendants. The book is full of the nasty things that can cause money to be distributed horizontally, away from direct descnedants: lawyers' fees, litigation, divorce, taxes, and so forth. But a large part of the difference between Republicans and Democrats is that Republicans like to keep wealth where it is, while Democrats are more inclined to favor horizontal redistribution.

We did talk a bit about one of my favorite examples of horizontal redistribution of wealth: the multi-millionaire John Kerry. Kerry became so rich by marrying Teresa Heinz, who became dynastically wealthy by marrying the late senator and ketchup heir John Heinz. Did Budish really want to prevent this kind of redistribution? That's certainly the impression one gets from reading his book, although really all Budish does is enact the desires of his clients. If they're happy for their money to be able to flow first to their wife and then to their wife's second husband, that's fine. And if they're not happy about that possibility, they can prevent it.

And it turns out that rich people – people in general, most likely – have a desire to control things even from beyond the grave. They can't spend money at that point, but they can try to ensure that their money benefits certain individuals and not others. The trusts in the book are all essentially ways in which people can live, or at least enact their wishes, after their death. No one, it seems, is ever happy just letting go.