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Tiger Woods Arnold Palmer Invitational Win has Estate Lessons

Tiger Woods Arnold Palmer Invitational Win has Estate Lessons

By by Martin M. Shenkman, CPA, MBA, JD

Tiger Woods Estate Planning Lesson Tiger had not one in two long years. While things were bleak, and endorsement revenue down, Tiger should have had his endorsement contracts and similar rights valued and transferred by gift and sale to a Domestic Asset Protection Trust (“DAPT”). This would have removed those valuable assets from his estate while they were valued at much less than what they might be if his recent win proves the first step in a come-back. A DAPT is a trust you can set up and also still be a beneficiary of. So Tiger could grow assets out of his estate, but still benefit from them if he needs them in the future. Better than a DAPT may be a Beneficiary Defective Irrevocable Trust (“BDIT”) which Tiger could have a family member set up for him with $5,000. Then Tiger could sell assets to that trust as described above. The advantages of a BDIT might be that since Tiger is not the grantor establishing the trust he might be able to hold greater rights in the trust and it might have a better measure of asset protection. Both of these planning ideas could be eliminated if President Obama’s proposed estate tax changes are enacted. In particular a lower $1 million gift exemption will make this planning harder. More significantly, if the grantor trust tax restrictions proposed in President Obama’s 2012 budget (Greenbook) are enacted, gifts to a grantor trust, which is how most DAPT and all BDITs are structured, would be included in the transferor’s estate. The same valuable lesson applies to everyone. If assets or business interest are at a low point, transfer them out of the estate. Look for the silver tax lining in every economic or performance cloud. Just as valuable as the estate tax lesson above, are Tiger’s sage words about his game, which perfectly tie in with how estate and financial planning should be done. One on-line newsletter quoted Tiger as saying: “It’s a part of the process – a process that may never be complete.” That is as true of golf as of estate and planning.

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