How Did One of the Wealthiest Men in the World Address His Estate Plan?

We may never know how one of the founders of Microsoft structured his estate plan. His finances were addressed wisely, and his legacy will likely continue for many years, if not many generations.

Paul Allen left Microsoft back in the 1980s, when he had to fight a mild form of a lymph node cancer, so he had many years to put his financial house in order. According to a recent article from Wealth Advisor, “Paul Allen Had A $20 Billion Estate Plan (The IRS Can't Touch),” those who knew him know that he had a long-term plan. His money has been working for him for many decades, and he had very little control of it.

Paul-Allen-007-e1391194838233Allen was rich, so he spent his life engaging in a wide range of interests, like venture capitalism, research, real estate development, yachting, sports and music. His fortune flowed through a holding company. Subsidiaries of Vulcan Inc. ran his investments, as well as his charities, sports teams and high-tech toy collections. Vulcan isn’t a conventional family office, so there’s no division between the principal and his interests on the “family” side and the day-to-day operations on the “office” side. That makes it much harder to separate Allen’s personal estate from his corporate interests. He was sole owner of the company, but the company owned everything else.

The cancer came back 10 years ago. He licked it then, but probably took that as a wake-up call to be sure the operations would continue without him. Execs at his company have mentioned his plan for continuity. Therefore, Vulcan will look exactly the same without him, as it did when he was running it.

Vulcan invested billions into reshaping Seattle, purchasing real estate and sometimes selling it for big profits. He owned the local sports teams and a few of the museums. Vulcan also ran the most prominent local movie theater. On the business level, Vulcan was the vehicle through which he bought into the start-up companies that he liked.

Allen was never married, and his sister and her children were his only close family. His sister was a key employee at Vulcan, but Paul kept control and full ownership. She moved to the family foundation side. Her three 20-something children are probably well off, and the older ones have already worked for family businesses. The youngest is still in school. These children will most likely find spots at Vulcan, but whether they ever own the company in their own right is unknown.

The unanswered question is how he set things up to keep the IRS at bay. He maintained full ownership and control of the company. There is no obvious trust, and the private equity structure of the firm ensures that there has not been a lot of information shared with the general public.

It should be noted that Allen had signed the giving pledge, where the world’s billionaires promise to give most of their wealth away. Handing formal ownership of the firm to the foundation satisfied that commitment. The firm would continue unchanged, following Allen’s directives to invest in things that mattered to him and fund causes that mattered to him. We may never know more than that.

Reference: Wealth Advisor (October 22, 2018) “Paul Allen Had A $20 Billion Estate Plan (The IRS Can't Touch)”

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