This is the second of a two-part series on succession planning lessons we can learn from the In-N-Out Burger story.
The Power of Legacy Planning
In 1989, Esther Snyder established the Esther L. Snyder Trust (Her husband and cofounder Harry died in 1976). This was an irrevocable trust into which she gifted the majority of In-N-Out stock “to make provision for my two sons and other lineal descendants, including my granddaughter, Lynsi.” Her intent in establishing the trust was “to enable the stock ownership of my closely held corporation to be transferred from one generation to the next such that the business of the corporation could continue to grow and prosper.”
Esther’s trust accomplished two major objectives:
First, all the future appreciation of the In-N-Out stock gifted to the trust occurred outside of Esther’s taxable estate. This move alone saved Esther’s estate literally tens of millions of dollars in estate taxes on her death and hundreds of millions over time.
Second, it allowed the company to continue in perpetuity in the Snyder bloodline. In our last estate post, we learned about the tragic and untimely deaths of Rich and Guy. The company is now in the third generation, in the hands of Harry and Esther Snyder’s only grandchild, Lynsi, and prospering like never before.
The last post focused on the reasons for this – how the Snyder’s established business systems to ensure the In-N-Out structure was stronger than the individuals involved so the company could thrive beyond the retirement or death of the founders. That’s great for the company, but it doesn’t guarantee the company stays in your family when somebody dies. That’s where legacy planning comes into play.
A common myth in estate planning is that all trusts are created equal. Most trusts we are asked to review do not do what Esther Snyder’s trust is doing:
- Perpetuate your wealth for multiple generations of lineal descendants.
- Protect your wealth from your descendants’ divorces, lawsuits,
bankruptcies, creditors, addictions, or other life crisis events.
- Protect your wealth from estate taxes.
Perpetuate Your Wealth for Multiple Generations
In almost half the states, a trust is not required to have an expiration date. If properly written by a qualified estate attorney (don’t try this online or with a part-time estate attorney!), a trust may continue in perpetuity. This affords your heirs the protections a trust can provide (but most don’t!) through the generations.
This legacy structure allows you to turn your trust into a “golden goose”, rather than just a “golden egg.” If your goal is for your heirs to grow what you leave them into a golden goose that keeps laying golden eggs, the right kind of trust can continue through the generations.
Protect Your Wealth from Your Heirs’ Crisis Events
With legacy planning, it’s critical that trust assets be immune to your heirs’ creditors. We can protect the assets you leave your heirs from crisis events that may occur in their lives. If your heirs file bankruptcy, are sued, or go through a nasty divorce after your death, the right kind of trust will shield your wealth from your heirs’ predatory creditors.
A well-written trust should also protect your wealth from your heirs themselves. If your heir is struggling with personal problems such as mental health issues, addictions, criminal behavior, or hanging out with the wrong crowd, safety measures can be put into place that will prevent them from using your wealth to destroy their lives.
Protect Your Wealth from Estate Taxes
Esther Snyder’s wise decision to hire an expert estate attorney to write her trust paid off to the tune of hundreds of millions of dollars saved (yes, hundreds of millions) in estate taxes. Once the In-N-Out stock was gifted to the trust she created for her granddaughter, the appreciation of the stock was exempt from estate taxes. This was true on Esther’s death. It will be true on Lynsi’s death. And will be true for each generation that follows.
Can your trust do what Esther Snyder’s trust is doing? If you’re unsure, schedule a complimentary consultation with us, and we will tell you!