Estate Planning in the Nifty Fifties

The Greatest Generation went through hell in World War II. (On Iwo Jima alone, 6,800 American lives were lost, more than in the entire Iraq war to date.) After V-J Day, those who made it home craved security. Many went to work for major corporations, lured by good, steady income and generous benefits.

In the decade of the Nifty Fifties they prospered. That prosperity caught the attention of an aspiring author. Earl S. MacNeill was vice-president of Irving Trust and moonlighting writer for The Merrill Anderson Company, which he later headed. The book Mac wrote, published by Harper & Brothers in 1957, he titled Making the Most of Your Estate: A Guide for the Salaried Man.

[A] new class of wealth has arisen in this country …. This wealth has new ingredients or, more exactly, old ingredients in new forms. There are also new forces shaping this wealth, notably tax laws that [encourage] pension plans, profit-sharing plans, matched savings plans and stock options. Previously written books on estate planning have dealt generally with traditional forms of wealth. The present work is dedicated to the salaried man, the "rental" of whose brains is his fortune.

Over 50 years later, Making the Most of Your Estate reads surprisingly well. Taxes were a whole different ball game back then, but not the basics of wills, trusts and joint ownership. Much of the book's success was the result of its innovative structure. Mac consigned the required chapters on wills, trusts, joint tenancy, gifts and such to the back of the book. Tax details he kicked all the way to the Appendix. Up front are four case histories. "Any resemblance to real people is wholly intentional, but to any specific person or family – emphatically not!"

Milo Watts, age 43 and a supervisory engineer at Westvania Electric, is the prototype salaried man: Wife, three kids, and an estate consisting mostly of jointly-owned assets and group life insurance. Milo needs more life insurance to capitalize his earning power. And he needs a revocable insurance trust to assure that the proceeds are wisely invested and flexibly distributed.

Chester Uplake. "Aged sixty-four, Chester is getting his affairs in shape for retirement from the presidency of Universal Plastic Appliances, a subsidiary of Universal Plastics International…. His business life has been spent in the Universal family, going back to the days when it was the Molded Woodpulp Panel Works, Inc., sturdily contributing its mite to the then fashionable overornamentation of the American home."

Chester is High Net Worth. Therefore he needs to learn the ins and outs of the estate-tax marital deduction, then limited to 50% and introduced to the Internal Revenue Code, along with the joint income tax return, in 1948. (If Congress had not reluctantly extended the tax benefits of community property nationwide, today the number of community-property states might be approximately 50.) Chester's old, 1946 will left his estate in a trust that would bypass estate tax at the later death of Harriet, his well-heeled wife. Now, to take optimum advantage of the marital deduction, he needs a more sophisticated plan.

Ralph Allen, 55-year-old sales manager, likes to keep things simple. So he has a simple, all-to-wife will. Not good! In the jargon of the day, Ralph has "overqualified" for the marital deduction. He needs a trust that will shelter the taxable portion of his estate from repeat taxation at the later death of Hazel, his wife.

Adrian H. Yates, president of General Diatonics, is a man with too much income. "It is difficult to imagine having too much income, but the phrase is relative, of course, and has reference to that kind of income which pushes the recipient up into income tax brackets so high that he has little of it left." Mac notes that Adrian has a favorite saying, one that Jim Gust will roundly applaud: " Incentive lags as its rewards approach the point of no return."

Income shifting got a lot of attention in the Nifty Fifties, a decade of punitively "progressive" income-tax rates. The object was to shift streams of investment income to members of the family in lower tax brackets. Adrian gets a crash course on how to do so using reversionary trusts. (If grandmother was a tax lawyer, ask her about Clifford Trusts.) Adrian also has a bunch of stock options to deal with.

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Mac followed the case histories with discussions of estate planning, will, trusts, life insurance and so on. The most striking chapter is entitled, "Like a Cosmos Expanding: Pension and Profit-Sharing Plans:"

Fifteen years go it was a puffball on the horizon; slowly at first it rose, then suddenly it mushroomed; it has covered our world – the world that men on salary live in; it has become a world of wealth in itself: he world of pension, profit-sharing and similar deferred compensation plans. The conception had two parents – a not untypical origin. One was desire to obtain the best possible employee relations by providing incentive and security. The other was recognition of opportunity to build funds, for the later benefit of all concerned, in an area favored by the tax laws. One parent virtuous, the other raffish. It was a shotgun wedding, of a not reprehensible sort – the "gun" being a triple-barreled income tax advantage.

Wonder what Mac would have thought if he knew that cosmos would expand enough to include Ken Lewis' $64 million in pensions and deferred comp?

You can guess Mac's recommendation for serving as executor and trustee. You probably cannot better his sales pitch:

A sad legend is that corporations are soul-less, as if they were machines whereas they are, after all, made up of men and women; and in the case of corporate fiduciaries they are men and women with a variety of skills appropriate to their business, including skill in handling people. A trust administrator, over the years, serves people who range from morons to geniuses; from gay to morose; from thrifty to spendthrift; from unfailingly healthy to chronically ill; from grateful to hateful. Think of all the opposites you can, and all the in-betweens; all of them, at one time or another, have sat at the trust officer's desk, or he has visited them in their homes or the institutions wherein they are immured. He has, in short, observed humanity in every stage of psychic dress and undress; and he must love humanity, or he would long ago have turned in his desk plate reading "Trust Officer."

The dust jacket on Making the Most of Your Estate lists three other volumes in Harper's small but elite stable of financial books. One is The Intelligent Investor by Benjamin Graham. Mac was proud to travel in such good publishing company, and by and large he held his own.