The Greatest April Fool That Never Was

April Fool’s Day, 1975

Offices of The Merrill Anderson Company at 100 Park Avenue

The preposterous invitation was addressed to Merrill Anderson's chairman, Earl MacNeill. He raised an eyebrow and handed it to his second in command, Bud Sommer. Bud looked, smiled and handed it to me.

Back in my office I examined the mailing. Ostensibly a new afternoon newspaper was starting up. A Merrill Anderson representative and spouse were cordially invited to learn more about it. On a five-day Bermuda cruise. On the QE2. All expenses paid!

Any temptation to suspend disbelief vanished after a glance at the return address: 90 Park Avenue, the building across the street. From my office window I could see dozens of workers sitting, standing, scurrying about. Which one was the April Fool’s prankster?

Still, no harm in calling their bluff. I RSVP’d to 90 Park.

A few days later came the phone call. There had been a change in plan, a voice said. (That figured. Out with the cruise. In with a free ride on the Staten Island Ferry.)

A change in plan?

Irving Trust's Remarkable Pop Ad

After Earl MacNeill retired from Irving Trust and joined Merrill Anderson, he continued to write a trust periodical for Irving. In print advertising, however, the bank concentrated on commercial services. In 1969, seeking to become a player in mergers and acquisitions, Irving published the amazing ad above.

At the time the artist, Jacqui Morgan, was known for her Electric Circus poster. Commissioning her to do an illustration for a staid old Wall Street bank was a deliberate shocker – as if the Saturday Evening Post decided to buy cover art from Peter Max instead of Norman Rockwell.

Unfortunately, Irving never gained the critical mass to compete with the megabanks. In 1988, after a bitter battle, it was taken over by Bank of New York.

To glimpse the stature Irving enjoyed in earlier times, see the art deco skyscraper at 1 Wall Street that served as its headquarters.

More of Jacqui Morgan's early work can be seen here.

Secrets of Successful Estate Planning

I didn't know a codicil from a Corvette when I joined The Merrill Anderson Company. Summer courses at what became the National Trust School helped a bit, but my practical knowledge of estate planning was imparted by Earl MacNeill.

Mac taught me that tax planning should never drive estate planning. The first planning step is to help the client decide what, specifically, he or she wants to do with the assets of the estate. The second step is to compare ways of achieving those wants. The third is to choose the most satisfactory ways, taxwise and otherwise. If tax savings conflict with client wants, goodbye tax savings.

Also, Mac frequently urged me to explain "irrevocable." The fancy word has a serious meaning: What's done cannot be undone. An irrevocable gift cannot be called back.

Mac's emphasis on that point must have had a history. Last year (see below) probably wasn't the first time estate lawyers led their wealthy clients to make tax-oriented gifts that the clients later regretted.

Life Spans and Estate Plans

In Making the Most of Your Estate, Milo Watts, Earl MacNeill's typical salaried man of the Nifty Fifties, is 43; Mary, his wife, is 38. Mac tells us three of their four parents are dead. Only Milo's mom survives at age 68. That's how it was in those days. At least that's how it had been. Hard-driving businessmen were expected to keel over with fatal heart attacks in their fifties, and many did so.

Yet life spans were already lengthening, and estate planning began to adapt. Planning inheritances for minor children lost prominence. Planning trusts for the grandkids took over. Some years later, at Merrill Anderson, Mac urged men to review their old wills with this warning: Your Heirline is Receding!

As life spans kept stretching, estate planning expanded to include living trusts for financial protection in old age … durable powers of attorney … living wills. Not to mention "Medicaid planning."

Durable powers of attorney were seen as a growing necessity, but not without danger. Wish I could remember Mac's views. Certainly he made me aware that a traditional power of attorney relied on the supervision of the individual granting it. If Mr. Gotrocks gave me his power of attorney while he sailed around the world, I could be in big trouble if he didn't like what he found when he got home.

The exercise of durable powers usually cannot be supervised by the individuals who grant them. Since the Brooke Astor case, concern regarding that hazard seems to be growing.

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.

•

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.

How to Choose a Fiduciary

From Making the Most of Your Estate, by Earl S. MacNeill, published by Harper & Brothers, 1957:

Trusteeship is one of the most diversified jobs on earth. No one with less diversified talents than can be found within the walls of a trust institution should be appointed as trustee – or as executor.

Tax and Trust Planning, 1936

We will get around to a post on Earl MacNeill's two estate planning books – maybe next week. Meanwhile, look what turned up in a December, 1936 issue of the Cornell Alumni News:

BOOKS
By Cornellians

TO SAVE TAX COSTS
Adjustments to Minimize Taxes. By
Earl S. MacNeill '15. Trust Department,
The Continental Bank and Trust Company,
30 Broad Street, New York City.
This useful booklet illustrates various
plans for reducing the payment of taxes
by the establishment of trusts. With
hypothetical cases it indicates ways of
lessening the effect on an individual's income
of the new tax on corporate surpluses,
of using insurance as an automatic
offset to estate taxes, of setting up a life
insurance trust to avoid Federal and
State taxes which apply to life insurance
proceeds in excess of certain statutory
exemptions, of saving estate and gift
taxes by gifts anticipating increasing
values, of making savings by systematic
giving, and of ascertaining the ideal
ratio of gifts and testamentary estate
for maximum tax savings.
It includes also non-technical discussion
of such matters as gifts made in
contemplation of death, reservation of
control of trust property, reversion of
principal to the donor, establishment of
the right in another to terminate a trust,
the giving of trust income to dependents,
the valuation of large blocks of securities,
costs of trusts, and the necessity of employing
professional advice in setting up
trust plans. Appended are convenient
tables of gift taxes and Federal and state
estate and individual income taxes.
The author is assistant trust officer of
The Continental Bank and Trust Company
of New York. Stephen L. Vanderveer
'08, vice-president of the Bank,
writes that the booklet "is in great
demand."—A. M. P. Ί8

Continental was absorbed into Chemical Bank in 1947. Eventually Chemical merged with Chase and took the Chase name, which survives as the "brand" for the retail banking arm of JP Morgan Chase.

Seniors As Entrepreneurs

Business Week sees a surge in senior-run businesses. Here on the New England coast, anecdotal evidence supports that view. For those ending long-term business or professional careers, "retirement" often means the start of something new. Some seniors pursue a long-nurtured Great Business Idea. Others seek to turn a hobby into a source of retirement income. A significant number start business ventures in partnership with sons or daughters, hoping to give the younger generation a leg up.

Senior entrepreneurship is not a new trend. Far from it. Here's a mid-twentieth-century example from the annals of The Merrill Anderson Company:

Earl S. MacNeill, senior entrepreneur

in 1958 Earl S. MacNeill – estate attorney, trust executive, author – retired from a fine old trust institution in New York City. Presumably fearing that estate planning and writing wouldn't keep him occupied, he joined Merrill Anderson. He'd already moonlighted a bit for the company, contributing booklet copy and articles for the trust newsletter.

When the eponymous founder retired, Earl MacNeill became Merrill Andersons's principal stockholder. Under his leadership the company morphed from a small ad agency, mainly serving a handful of major clients, to the premier provider of newsletters, presentation materials and other marketing tools to hundreds of trust institutions nationwide. One of Mac's innovations, still going strong today, is Estate Planning Studies and Briefs.

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Mac, as everyone called him, wasn't the sort of highly polished, expensively tailored estate attorney you read about these days. Genial and down to earth, he never lost his unpretentious, upstate New York manner.

Here's the jacket blurb for the first of his two books, published by Harpers in 1957, a year or so before he joined Merrill Anderson full time.

Earl S. MacNeill is Vice-President of the Irving Trust Company of New York. He is the author of numerous articles on tax and trust subjects. He has long been active in the Trust Division of the American Bankers Association, is a member of the Committee on Taxation of Income of Trusts and Estates of the American Bar Association, and is on the faculty of the Graduate School of Banking, Rutgers University.

Mac's books, and what they tell us about the evolution of estate planning, deserve a post of their own. Watch this blog.