Aunt Pinkie was glummer than a Democrat at a tax-cutting party.
“Everything I've got, what there is of it, everything your Uncle Franklin and I worked to build, it's all going to wind up going to Uncle Sam when I die, one way or another,” lamented Pinkie.
She was ruffling through a dog-eared ream of papers her accountant had sent her, along with a note suggesting, for the umpteenth time in two decades, that Aunt Pinkie needed to think about putting her estate in order.
Hooter had never known his aunt to seem so dejected. She might get down in the dumps or downright grumpy but there was always a spark there suggesting she'd welcome the opportunity to take on all comers. It was missing.
“Surely, it can't be as bad as all that,” tried Hooter. “Seems like things are on track to get that estate tax repealed permanently. Besides, you don't look to me like you're fixing to head out anytime soon.”
Pinkie sighed absently and let the papers drop to the kitchen table as if she didn't even know Hooter was there. “Lord knows none of this is mine, none of it was Frank's either. The Good Lord just put it in our care for a little while. I guess that's what bothers as much as anything. We're supposed to be good stewards of His resources, and we've always tried to be. Now, no matter how you slice it, passing it on means some of those resources will have to be squandered, and for what…”
Hooter set down his coffee cup and draped a comforting arm around Aunt Pinkie. “I know you must have been through that stuff with your accountant at least a jillion times, but there's got to be something that can be done so you can pass it on to whoever you want without them having to sell part of the place. Like I said, that estate tax…”
“That's what I thought, too,” said Pinkie. “It's better than it was, but depending on how you do it, if it's not estate taxes, best as I can decipher, then there's gift taxes, dead taxes and even income tax even after you're bunking with worms. They got you.”
“Well, what's Charlie say about it?” wondered Hooter.
“You know your cousin, he doesn't like talking about it anymore than I do. No, he likes it less than I do, bless his heart, he won't talk about it at all.”
Do For Others, Just Not Family
So it was that Hooter made a quick and unplanned trip to Lubbock to visit with his own recently acquired taxman, Boudreaux “Buddy” Babineau III. After his last audit had gone so swimmingly, Hooter trusted Buddy's financial and legal expertise implicitly. If anyone could put Aunt Pinkie's mind at ease, it had to be Buddy. After all, Boudreaux “Buddy” Babineau III was personally responsible for the resignations of seven IRS agents—two of which went directly to the nut factory—and the expulsion of several others. Buddy detested the tax system and anyone who would try to justify it to him as anything less than legalized thievery.
That's why Hooter was more shocked than a sparrow touching down on a bare utility line when, after reviewing the suggestions made by Pinkie's own counsel, his pugnacious accountant shrugged his shoulders stiffly and said flatly, “Yep and unfortunately, that pretty well sums it up.”
“Yeah, but what about the estate tax starting to get repealed?” wondered Hooter.
“Certainly, it's a start and it beats a polished toe to the britches, but depending on how things are set up in someone's estate and when, it's really a way to defer taxes, not avoid them,” explained Buddy. Sensing the puzzlement from across the desk, he added, “On one hand, depending on whether the beneficiary of the estate has received other financial gifts in their lifetime, and in what amount, while their may be less tax on your aunt's estate than a couple of years ago, the gift tax of the beneficiary might be equal to it. If not that, any of the estate received and sold would be subject to capital gains taxes. If not that, then any income from the property is of course subject to income taxes. The list goes on.”
Hooter's eyes hadn't completely glazed over, but they were definitely sinking in fog. “The specifics of all that elude me, Buddy, that's why I hire a guy like you. Best as I can tell all she wants to do is be able to will the place to her boy, my cousin, in such a way that neither he nor the estate winds up having to pay out the nose when she goes to her reward.”
“I understand that, Hooter. And, certainly there are some things that can be done to minimize the financial damage inflicted by our archaic system of transferring assets from one generation to the next. But there's a limit. And, in this case, I'm giving you opinion and fact based on the big, big picture. Depending on what you're aunt is wanting to do, specifically, I can give you more specific advice. For instance, you say she's willing the estate to her son; has she begun gifting it to him?”
Hooter leaned back in the leather chair, crossed his hands behind his head. “I don't know.”
“What about the operation does it operate as a sole proprietorship, a limited partnership, a corporation, what?”
“I'm not quite sure.”
“Does she have any life insurance, is the heir named in the will the same beneficiary named on the policy and who owns that policy?”
“Tell you the truth, I'm not even sure she has a will, exactly,” beamed Hooter, knowing what the news would do, even to a free-spirit renegade accountant like Buddy.
“You mean to tell me your aunt doesn't even have a will. How old is she?” demanded Buddy.
“She's in her eighties I'd guess—no one seems to know for sure and she ain't telling—and I'm just guessing on the will. Anytime I ask her about it, she just tells me things are taken care of.”
“How could someone of that vintage, with any kind of estate, not at least have a will?” said Buddy, more to himself as he slumped back into his chair. “Preparation is the only weapon of defense anyone has against this blood-sucking marauder called the tax system. If she just leaves it up to the courts to probate her will, they'll get a lot more of her estate than otherwise.”
Hooter was still grinning. “Yeah, but it's obvious you don't know Aunt Pinkie. She still totes a shotgun to blow woodpeckers out of what few trees are left around the house that she hasn't already blown to Kingdom Come. All I'm after is trying to figure out some things we might could suggest to her; there won't be any telling her anything.”
Buddy was more serious than Hooter had ever seen him. “Look, I'll help you anyway I can. I'm just saying without specific information about your aunt's estate, I'm limited in how I can help; anyone will be until or unless your aunt is willing to share some information.”
Hooter leaned forward, a cocky twinkle in his eye. “I understand. I've been reading up on it some, and I think I have a solution for her, but I wanted to bounce it off you before I told her about it.”
“I'm all ears,” said Buddy, lighting up his cigar for the first time since Hooter had arrived.
“Well sir, the way I figure it, why can't she deed the place over while she's alive, what I mean, sell it to her son for $1. No estate tax. No gift tax. What could be simpler?” said Hooter, easing back into the chair with the sigh of victory.”
Buddy smiled back. “You know, Hooter, that's a creative attempt. And, your aunt could basically do exactly what you describe as long as she sold it to someone outside the succession of her lineal heirs.”
“She could sell the place for a penny to someone she's not related to or someone she wouldn't likely be willing her property too, and accomplish what you suggest.”
“What's the difference?”
“It's up to her to sell her property to whoever she wants for however much she decided to sell it for. But in the case of an estate that includes property, unless it is sold for fair market value to potential heirs, the IRS will ultimately go back to the heirs that purchased it and make them pay tax on the difference between fair market value and what they paid for it.”
Hooter slapped Buddy's desk: “You mean to tell me I can make a trade with some nimwit off the street that I can't even make with my own family? How's that even legal?”
“It's quite legal,” said Buddy. “It's not fair or even right of course, but it's legal, and these twain shall rarely if ever intersect in life.”
Hooter looked like a helium balloon two weeks after the party.
“So, it's a great idea, Hooter, but we're back where we were a moment ago. Short of short of telling someone what she's up to, or living forever, it will be next to impossible to help your aunt with any degree of confidence,” said Buddy.
The idea shot through Hooter faster than a new rumor in a small town. “What did you just say?”
“I said unless you aunt is willing to share…”
“No, the other part,” said Hooter excitedly.
Buddy thought for a minute. “Hmmm…the only other thing I mentioned was her living forever.”
“That's what? Hooter are you sure you've been keeping the shop door open while you paint those armadillos?”
“Tell me something, Buddy. If Aunt Pinky never passes away, then she never has to will her property to anyone and there's never any estate to pay taxes or any heir to pay gift taxes, etc. Is that about right?”
“Well sure, if you could figure out how to live forever, but…”
“How does the government know when someone dies?” wondered Hooter.
“Well, there's a certificate of death, paperwork.”
“What if no one ever filed it?”
“That's all well and good, but if she's gone and the government keeps sending Social Security checks and whatnot, then you're talking fraud.”
Hooter was grinning wider than a West Texas hat brim. “She doesn't get any social security, doesn't believe in it.”
“Of course there are other official documents like credit cards and drivers licenses.”
“She doesn't have any of those, either, for the same reason.”
“She has to have a drivers license, you told me last time you were in that she'd just traded cars.”
“Yep, but you don't need a license to trade, just cash. And I've seen lots of folks who have a license that couldn't hit lake with Mack truck and a short road. Aunt Pinkie does OK.”
“Thanks, Buddy. Did I tell you how young Aunt Pinkie looks for her age? I'll guarantee you she's feeling younger this instant.”