From the WSJ Opinion Archives
THE VISIBLE HAND
Ken Smith's Getaway Car
Why my dying friend bought a new Lexus.
A little more than a week before he died, my friend Kenneth Smith decided to buy a new Lexus sport-utility vehicle. Too weak to go to the dealership himself, he sent his brother.
Even the car salesman was taken aback. "Are you sure that he wants to buy a car now?"
It was a natural question. Ken knew he was dying; the doctors had given him less than three months to live. He was too sick even to test-drive the car. A painful form of liver cancer was devouring him at 44. The last time I saw him alive was in May. Simply raising himself from his hospital bed was a slow, difficult task. He was pale and small--a skeleton with skin--but too strong and stubborn to give up. He probably looked even worse when he finally showed up at the dealership to sign the papers.
Ken wasn't a wealthy or extravagant man. He hated to spend money and wasn't impulsive on big-ticket items. I knew him for more than a decade and I never heard him talk about luxury automobiles. So why was my dying friend so desperate to buy an SUV? His final acts told me something important about his character--and, strangely, something about the estate tax.
All that's true. But my friend's passing, which will haunt me for a long time, made me see the human dimension of the estate tax.
Almost two years ago, long before Ken was sick, his father, a professor of French history at Ohio's Miami University, died. Ken's father, like so many children of the Depression, was a committed saver. He bought some blue-chip stocks and held onto them for years. And he was very careful about spending his own money. On his occasional trips to France, he flew economy class and stayed on the fifth floor of a one-star hotel with no elevator. Prof. Smith was always the ant saving for the winter, never the grasshopper living for today.
It was left to Ken to manage his late father's estate. He was astonished to learn that his father had accumulated so much--more than enough to cross the $675,000 threshold for the estate tax. Many people--teachers, firemen, farmers--who worked hard and save leave their heirs in the same position. Maybe they bought a house in the early 1970s, or purchased some stocks in the early 1980s, or simply lived a life of quiet thrift. When they die, they become what Washington's class warriors call "the rich."
Ken had no time for class warfare. But in trying to sort out his father's estate he found himself lost in a sea of paperwork. Since Prof. Smith never thought of himself as rich, he had done very little in the way of estate planning. As a result roughly half of his life savings were due to be confiscated by the federal government. His hard-won bequest to his three sons was to be slashed in the name of charity and fairness.
Ken spent hours on the phone with lawyers and accountants, and the desk in his basement office was covered with faxes and legal documents. Somewhere along the way, I suspect, he made a mental note not to put his heirs--his brothers, as it turned out, for he never married and had no children--through the same thing.
When Ken learned he was dying, he decided to give away as much money as he legally could, while he was still alive. That meant money for his church, for a nonprofit group that he saw give away Bibles in Southeast Asia and for other good works. But he was surprised by how much money he had squirreled away in individual retirement accounts, savings accounts, mutual funds, life insurance and other investments.
Which brings us to the Lexus SUV. Ken knew the old saw that a new car loses a big chunk of its book value the minute you drive it off the dealer's lot. He knew that if he bought a new car he could leave it for his brother and legally the tax take would be calculated on a lower value. It was more tax-efficient, in other words, to leave his brother a depreciating new vehicle than a pile of cash. While lying in a rented hospital bed in his small living room he rasped out the words: "The taxman is only going to get one bite of this apple."
Like his father, Ken was never rich but he was a saver. (When his liver failed, he visited a transplant specialist in Birmingham, Ala., and he flew economy class--in a wheelchair.) The many small things that he had given up he wanted to see in the hands of those who cared for him and shared his ideals. Maybe Mr. Gates and his fellow class warriors consider this greed. But I think it's sad that in his last days Ken had to worry about the greedy hand of the government.
When a man knows that he is dying, he thinks about the few things still within his control. For Ken one of those things was the savings he was going to leave his family. That's the true social cost of the death tax: Its very existence forces prudent people to spend time thinking about it. There's something insidious about a tax regime that riffles the pockets of the dying.
President Bush's recently enacted tax bill will phase the death tax out over the next decade. That means for 10 more years it will linger over the dying and their families, forcing them to spend their final days together talking about money.
Mr. Miniter is an editorial page writer for The Wall Street Journal Europe. His column appears Fridays.
