That afternoon, Jack, Sr. returned to Jerry’s Bar. There sitting in the same spot was the same woman, he met yesterday. “Hi Sally, back for more poison I see.” She touched his hand and said, “You know I really enjoyed our talk yesterday. You are such a kind and friendly man and well my life of late has been filled with a lot of abuse.” He smelled perfume on her that he hadn’t smelled the day before and noticed a little make-up where none was yesterday. They talked some more and he discovered that she had attended Alabama, but had to leave when her dad died. She then met this guy, got pregnant, got married and pumped out about three other kids over time. There was no doubt that he had been abusive, she seemed jumpy the whole time they were in the bar. She seemed to fear that her husband would appear at any moment.

During their meeting Elmo slipped out to make a call on his cell phone. “Mr. Jenkins, your dad is talking to some women he met at Jerry’s yesterday. They’ve been talking a long time, just like yesterday.” “Keep your eyeballs peeled and see what you hear”, Jack, Jr. replied.

As she started to leave, she looked at Jack, “Same time tomorrow?” “It’s a date”, he shot back.

On their ride back to the dealership, Elmo started chatting with the Senior Mr. Jenkins. “Mr. Jenkins that looked like one nice piece of ass you was talkin’ to in there.” Jack smiled, he liked that Elmo noticed that he was talking to a younger attractive woman. “She is pretty isn’t she?” Jack, Sr. said obviously distracted in his thoughts. “Poor thing, she’s got a dirtbag for a husband who’s beating her around and calling her names”. “What’s her name?” Elmo asked matter of factly. “Sally, umm, Sally Beaudine”, Jack, Sr. responded. “She seemed nice, Mr. Jenkins.”

When Jack, Sr. arrived back at the dealership, he and Jack, Jr. hopped in a car and headed to lawyer Dobbins office to further discuss Senior’s estate plans.

At Lawyer Dobbins office, the counsellor laid out his plans for Jack, Sr. “You prepare a straight old fashioned revocable trust into which you put all your assets in that trust are two sub-trusts. The first one is the charitable lead trust into which all your real estate is to go upon your death. The second one is the family trust which will provide for Junior and his progency. We have a provision that if you die in the year 2010, the family share will become a dynasty trust which will go on for generations since there is no generation skipping tax for the year 2010 as well. As you can see this is a great benefit to your family. After the year 2010, the trust will revert to leaving everything to Junior since the Generation skipping tax would be huge as would the estate tax to some degree. We also have a new 30 year lease for the dealerships to sign with the land holding LLC which will ensure that the cash flow will be covered long term for the lead trust. This will have the effect of devaluing the dealerships to some degree. There is a mutual ten and twenty year option for both the dealerships and the land holding LLC, to terminate the lease. This allows for each party to terminate if the lease terms fall well below market or are so far above market that it is killing the dealerships.”

Jack, Sr. asked, “can I make gifts to my son until I die?” “Yes up to a Million Dollars and twelve thousand dollars per year without incurring any gift taxes. So you can make gifts up to a Million Dollars, but given the size of your estate, that’s like a grain of sand in the desert. After the year 2010, it might behoove us to look at a gift giving strategy”, the lawyer replied seriously.

At that point Jack, Sr. looked over to Jack, Jr. and asked if this made sense. Jack, Jr. said, “yes, but I am not comfortable with that Dynasty Trust. I have no wife, no children, and it kind of limits what I can do with things before I die”. Dobbins jumped in, “we can write the Dynasty Trust to give you something called a limited power of appointment in which you can appoint assets to anyone other than yourself or your estate and it will stay a dynasty trust (although that could by subsequent legislation be over-ridden)”. “But that means that I can’t just liquidate everything and blow it all on wine, women and song, you know like Dad”, he said smiling.

After listening to the exchange, Jack, Sr. sat for a moment. “Let’s do the Dynasty Trust, its only for one year, son, and I hope to live a lot longer. How long will it take to draw all this stuff up?” About a month, Dobbins responded. “Good”, let’s all get to work.

After leaving the lawyer’s office, Jack, Senior stopped back by Jerry’s Bar and nursed a bourbon and soda. He had to let all that sink in and a quiet drink was what he needed. His driver sat at the end of the bar sipping a cola and resenting the fact he couldn’t have a cold beer. At the other end of the bar was a delightful looking thirtyish looking woman drinking alone. She was not dressed like a pro, but rather like a housewife who just needed some time away from the day. Jack slid over, “Hi, I’m Jack Jenkins, can I buy you a drink.” At first she demurred, but Jack ever the salesman said, “I really don’t like to drink alone, that makes one an alcoholic, and you wouldn’t want me to be an alcoholic would you?” She smiled, “Of course not, but I’ve had my limit, is it okay if you buy me a ginger ale?” Jack smile, “no problemo, Jerry fix this fine lady up with your best ginger ale.” She giggled. Despite her modest attire, she was attractive. After much flirting and an afternoon of talking, she had to leave to go pick up her children. He promised himself, he would come the next day for a drink to see if she returned.

That evening Jack, Jr.’s phone rang. “Hi, Mr. Jenkins, this is Elmo, you Dad went to some lawyer’s office today for a long time.”

January 16, 2010

“Hey Dad, how are you doing?” Jack, Jr. asked as his father walked into the dealership. “Great, Son, but I do need to talk to you. I met with a lawyer who specializes in Estate Planning. He went over my options and we are looking into creating something known as a Charitable Lead Trust. What that does is reduce my death taxes and gives a bunch of money to the University of Alabama each year for 20 years. After 20 years, whatever is leftover is yours. I don’t understand it all, but he is sending me some projections. Then, you and I need to look at them and go over to the University of Alabama President and see how they would spend the money. We need to make this a priority. If someone is out there to kill me, we need this plan in place.”

anuary 15, 2010

“Hello, Mr. Jenkins, how are you today, did you bring with you that financial statement?”

“Yup, sure did” replied Jack Jenkins, Sr. to the estate planning lawyer, Mr. Thaddeus Dobbins.

“Before I show it to you, is everything I tell you confidential?” Jack inquired. “Of course, anything you tell me is as sacrosanct as if you told it to your priest”, the lawyer responded.

As the lawyer looked at the financial statement he made some ‘hmm’ noises. After about two minutes, he looked up at Jack, Sr. “I’ve got good news and I’ve got bad news. First the good news, if you die this year, you won’t owe any estate taxes. The bad news is that you have to die this year or you will get hammered. There is a moratorium on estate taxes this year, but next year you will owe estate taxes on everything above $1.0 Million. You do get a closely held business exclusion instead of $1.5 Million, but big deal. So, you need to look into some estate planning. Given your recent DWI arrest, insurance companies would rate you for life insurance, so a life insurance trust is not an option (and it would be expensive at your age anyway). How charitably minded are you?” Lawyer Dobbins asked. “I, of course, have some great feelings for the University of Alabama, and wouldn’t mind leaving them something.” There is something called a Charitable Lead Trust. In theory, you give a chunk of your estate for a number of years to the charity and at the end of that term it goes to your family. For example, let’s say that you give $100,000,000 of your estate to such a trust, and it paid two percent to the University of Alabama every year for 20 years. You would get a tax deduction of $32,322,300. About 1/3 tax deduction. If you gave 4% per year to the University, it would total about 54,000,000 in deductions. But this would mean that the assets need to generate at least 4% per year in income.”

“Can that include rental income?” Jack asked, sheepishly. “Of course and quite frankly given that fact that you own the land that your dealerships sit on, that might be a good plan for the land which is pretty valuable.” Dobbins replied. “Yeah, the rents are already about 4%, net” he added. “The catch is that the rents would have to equal 4% of the net fair market value of the land, each year.” Dobbins responded. “So, if the land over 20 years increases to say $200,000,000, the rents would have to double over that time frame which could cause some cash flow issues for the dealerships, but also would possibly lower their value for estate tax purposes if we made the leases read that way now”, Dobbins added smartly.