A recent trip to the Clabber Girl museum and restaurant in Terre Haute, Indiana reminded me just how fine an example the Hulman family is of succession and estate planning gone right.

“The 100th running of the Indianapolis 500 brings inevitable questions about the long-term future of the race and its famous track,” Anthony Schottle writes in the Indianapolis Business Journal. “But,” sources told IBJ, “thanks to a savvy tax-avoiding maneuver made long ago by late track owner Anton “Tony” Hulman, Jr., his grandchildren and great-grandchildren appear poised to lead the Indianapolis Motor Speedway into the next era.”

Decades ago, a highly-tax-advantaged strategy called a generation-skipping trust was set up by Tony Hulman, into which he placed his family businesses. And, while the Tax Reform Act of 1976 changed the law so that a transfer tax is imposed at least once in every generation, the measure “grandfathered” earlier trusts, which were allowed to continue under the old rules, continuing for generations of beneficiaries with estate and gift tax deferred.

The point of generation-skipping trusts is to protect a family’s assets while they appreciate in value.  Heirs receive income in the form of dividends, but the assets themselves remain in the trust.

One source commented to IBJ’s Schottle that the Hulman generation-skipping trust should remain valid for 21 years after the death of Mari Hulman George’s last living child.

“Business succession planning should include some form of estate planning,’ writes G. Matthew Loftin of the Family Business Resource Center. Here at Geyer & Associates, we’ve often found that business owners are so busy developing their business that they do not have time to address the legal issues necessary to ensure their continued success, much less their succession planning. As we advise clients on proper organizational structure, the use of buy-sell arrangements, corporate restructuring and other planning, two goals are often:

  1. preserving the business
  2. reduction or elimination of costly taxes

Not always is the next generation interested in becoming involved in the family business, of course.  But when the next generation of family members wants to stay involved, good estate planning helps keep the business in the family!

– by Ronnie of the Rebecca W. Geyer $ Associate blog team