Estate Planning: Lessons Learned from Steve Jobs

Federal Estate Tax

Steve Jobs’ reported net worth was about $7 billion, including significant share-holdings and real estate. The federal estate tax is currently 35% but is scheduled to increase to 50% in 2013. This means the government could receive up to $2.5 billion in taxes from Jobs’ estate. However, the first $5 million of an estate is exempt from federal estate taxes, and certain components of the estate are tax-exempt (e.g. charitable donations, funeral expenses, debts and certain types of property left to one’s spouse). These exemptions and inheritance designations can significantly reduce the amount of taxes paid on your estate.

Living Trusts: Asset Distribution and Privacy

A Living Trust is an estate-planning tool used to manage asset distribution after your death. When you establish a living trust, you transfer ownership of specific assets into the trust. While you are alive, you are both the trustee and the beneficiary, meaning you both manage and have access to the assets in the trust. After your death, the assets in the trust are distributed to designated beneficiaries (e.g. your spouse and/or children).

With his health declining due to pancreatic cancer, Steve Jobs and his wife transferred ownership of three pieces of real estate into two trusts early in 2009. Unlike a last will and testament, the details of a trust remain private after you die. Wills typically must pass through probate court and are therefore public record, while trusts remain out of the public eye (as long as there are no lawsuits or other problems).

Jobs may have taken additional steps to maintain privacy, namely by keeping other assets out of the court-supervised probate process. Naming children as beneficiaries to certain assets and establishing joint ownership (e.g. with a spouse) ensures that these assets will pass directly without entering probate.