If Santa and Mrs. Claus were U.S. citizens, how would they create an estate plan? Although they may be great clients, their estate plans might include the pieces mentioned below.
Estate Tax Concerns. In 2017, the federal estate tax exemption will increase to $5,490,000 for a single person. With proper estate planning, a married couple may exempt $10,980,000. For nearly every citizen, particularly if their home state is Florida (assume the North Pole has no estate tax just like Florida), there is not an estate tax to pay when one dies. However, Santa and his wife will likely have a taxable estate under current U.S. law.
It is hard to calculate the size of their estate. Santa’s toy making business is prospering. His inventory is enough to give every child on Earth at least one toy every year. Now, about 7.28 billion people are on our planet. If just one-half of those are children and Santa spends on average of $20 for each child, annually Santa is trying to reduce his estate’s value by well over 70 billion dollars.
Alas, this formal gifting program is not reducing the size of their estate. The Clauses have been actively involved in their annual gifting program since the 4th century, but despite their efforts, their estate continues to grow.
Estate Tax Repeal. Even if the federal estate tax is repealed, reducing estate tax is not Santa’s and Mrs. Claus’ only estate planning goal. Santa and Mrs. Claus are part of a growing group of persons that have established a written estate plan and annually review their plan to update it when their circumstances change or when a law changes that may affect them.
Caring for Dependents. Another consideration for Santa’s estate plan will be caring for the hundreds of elves working in his shops. The elves are totally dependent on the continuation of Santa’s business. There are no known relatives to serve as guardians if Santa and Mrs. Claus both pass away. Even if relatives can be tracked down, it is doubtful they will have the wherewithal to care for so many dependents. Santa may want to consider starting a charitable organization that establishes homes, jobs, and caretakers for the loyal elves.
Creating a Pet Trust. Santa has invested a lot of time, money, and love in his wild animal preserve. Besides the normal elk, caribou, and polar bears, Santa has successfully bred a unique species of flying reindeer. At least one reindeer has a light-emitting nose. Santa and Mrs. Claus could set up a pet trust as part of their estate plan to continue to care for their furry friends when they are unable to do so.
Business Succession Planning. Death is not the only concern for the Clauses. What happens if Santa was disabled? Not Santa you say! Never happen you say!
What if there is a collision with his sleigh and an aircraft, he falls from his sleigh during a rapid take-off where he forgot to buckle his lap and shoulder belt, or he suffers a gunshot wound from someone who mistakes him as a burglar. Mrs. Claus hasn’t been involved with the business. It would be wise to pick some key elf employees from executive management who are trained to take over. An experienced business law attorney can help Santa negotiate a buy-sell agreement with the elves.
Due to Santa’s advanced age (he’s over 1600) and his high blood pressure, he may have difficulty qualifying for life insurance but it should not be ruled out because of his overall good health, vitality and his extremely positive outlook on life.
Creating an estate plan for Santa and Mrs. Claus may seem daunting to them. If you see Santa sometime, please let him know our estate planning attorneys would be pleased to help him and Mrs. Claus establish and maintain an estate plan that works for them and their many loved ones.
Like Santa, our firm wishes you Merry Christmas, a Happy Holiday Season, and a prosperous 2017.