The Korean Family Business Wealth Formula

Few stories grip your attention quite as strongly as those that involve someone with a relative lack of advantage rising up and surpassing another that did, in fact, have superior advantages. Aesop covered it. Shakespeare covered it. F. Scott Fitzgerald covered it. A hundred years from now, stories will cover it.

With that narrative arc in mind, I have begun studying how the families of Korean immigrants, with next to no capital and the extreme social disadvantage of not having a strong command of the English language, arrive in the United States with nothing and die with fortunes estimated worth millions of dollars. What are they doing that a native-born American, born into a middle-class family, that dies with an average amount of $164,000 to his name, does not?

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Incentive-Based Trusts In The Modern Era

Between now and 2049, an estimated $51 trillion in wealth will be transferred between the baby boomer generation and their children, grandchildren, favored individuals, and charities of choice. This intergenerational wealth is absolutely staggering, especially in light of how many states decline to administer an estate tax and the fact that the federal marker for triggering any estate tax obligations is somewhere around the $22 million mark.

Historically, to ensure that one’s intended beneficiaries not lay to waste decades of intelligent wealth-building, the funders of various trusts would create age-based distribution mechanisms for disbursement. If you were putting $3 million in a trust for two children, you might only provide that they receive $100,000 at the age of 25, $250,000 at the age of 30, $500,000 at age 35, until the funds were extinguished.

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Asa Candler vs. Warren Buffett

I recently visited a library to review the media treatment that Asa Candler received in Atlanta, Georgia during his heyday of running the Coca-Cola Company. I started by looking at articles in The Atlanta Journal (n/k/a the Atlanta Journal-Constitution) in the 1920s, and after encountering my surprise at finding news stories penned by Margaret Mitchell of “Gone With The Wind” fame, I was able to do cross-reference many of the citations from Google Books that alluded to Asa Candler’s treatment in the Atlanta media when he would enforce contract rights against some of Coca-Cola’s bottlers and other supplies.

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The Advantage of a Gift Over Provision in a Trust Fund

During the 1820s, a rich British investor named Richard Wright set up a trust fund with 2,000 pounds worth of East India Company common stock, worth approximately $4.8 million in current U.S. dollars, in a trust fund for his great-nephew Daniel Vautier. The trust instrument stated that all the proceeds would be paid out when he was 25, and the trust would terminate at that time.

When Vautier turned 21, he petitioned the trustee to terminate the trust and either give all the East India stock to him, or liquidate it and give them the proceeds. It posed a fascinating legal question: “If the sole beneficiary consents to termination of the trust, but that is not what the settlor wanted, what prevails?”

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Master Limited Partnerships: 2018 and Beyond

After all the bankruptcies, restructurings, and share dilutions in the MLP sector during the 2014-2017 fall in the price of oil, I decided to take a close look at the balance sheets of these companies to determine which ones had seemingly learned their lessons and were better prepared for the next cycle’s pricing declines in the price of oil and other natural resource commodities.

Upon reviewing the top fifteen MLPs by market capitalization, I gave up on the exercise. I don’t think you could make the argument that any of the top fifteen MLPs could survive $50 per barrel oil without cutting their distributions to unitholders, and many of them would repeat the exact same hardships that previously occurred.

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