Walden, Donuts And Estate Planning

By Emily Crain

Walden Pond

Once upon a time, while getting my teeth cleaned, I received a piece of life advice from my dentist: “I recommend,” he said, “that you read Walden every year.” Later that year, I read Henry Thoreau’s book for the first time and have taken to re-reading it whenever I have felt the need to reexamine Thoreau’s themes of self-reliance and simplicity. Thoreau wrote this literary work as he spent a season of his life alone and isolated in a cabin by Walden Pond. In the depth of quarantine last year, while encouraging my eighth loaf of sourdough to rise, I once again found myself flipping the pages of this wonderful book.

Estate Planning Recipes

There have been many discussions in the estate community surrounding the estate tax, and the consensus is that the exemption amount will likely decrease in the future. In 2020, a person’s estate would have been subject to the federal estate tax if they died with more than $11.58 million in assets. If a spouse passes, and does not fully use their exemption amount, their surviving spouse could take the unused exemption amount for themselves.

These high exemption amounts have decreased the use of creative estate planning techniques in recent history. Those still in use are all clever, usually involve a trust, and often are described with an acronym. In addition, every technique entails a difficult tradeoff, wherein the grantor relinquishes some control over assets in exchange for a tax benefit.

For example, a Grantor Retained Annuity Trust (GRAT) is an excellent tool to minimize taxes. However, the elements necessary to minimize the tax also affect the character of the gift, making the gift less flexible than simply handing the recipient a check with no strings attached.

Thoreau’s Choice

Years after picking up Thoreau’s book for the first time, I read The Art of Asking, by Amanda Palmer. This book added some color to my understanding of Thoreau’s time at Walden Pond. Apparently, his cabin was walking distance from the nearby town of Concord. In addition to his walks into town, he received a basket of baked goods, including donuts, from his family – every week. As it turns out, Thoreau did not desire total isolation. Instead, he sought a respectable distance from the bustle of everyday life.

In the future, as more of us use estate planning to avoid estate taxes, we should keep in mind Thoreau’s compromise and take the donuts! In other words, we shouldn’t allow a desire to reduce taxation overshadow all our other estate planning goals.

As a trust administrator, I know that trust beneficiaries often feel that the strings attached to complicated estate planning are not as sweet as the tax savings. We need to consider both sides of the deal and determine the right balance for each grantor and each beneficiary.

emily crain- financial planning expert

Emily Crain
Senior Vice President

(405) 840-8401