The test of any wealth transfer program is how long it survives contact with reality. The Apple founder’s influence is fading fast now. It’s a cautionary tale.

Steve Jobs has been dead since 2011 but we still talk about him. He changed Silicon Valley, the market and the world.

Steve Jobs and his Estate

That’s a tribute to his role in history. The rest was just deciding where the money goes, whether his heirs are comfortable and how to best protect the legacies he left behind.

On the whole, he did as well as we’d expect from a genius obsessed with detail and outside-the-box thinking.

Unfortunately, his vision has faded into the background over the decade. Bigger fortunes have crowded the Jobs estate into relative obscurity and the people who replaced him have generated vast wealth on their own.

It’s not that Jobs built his legacy badly. It’s just that the world, being alive, kept moving forward faster than his dead hand could keep up.

Diversification and other details

When Jobs died, he left his wife and kids substantial stakes in what was then the most dynamic company on the planet (Apple) and also a lot of Disney.
Apple remains a Wall Street juggernaut, delivering a round 500% return in Jobs’ wake.

Disney, however, which Jobs was brought into when Pixar got acquired, has come a long way toward catching up. It’s only tripled in the last decade, largely due to massive acquisitions and now streaming content.

Passing on roughly $10 billion in the form of Apple and Disney stock was one of the best ways Jobs could have structured his bequests, at least at first.

Since he held the shares in a family trust, the estate didn’t need to sell any of it to pay the inheritance tax. Instead all that wealth passed on without the IRS taking a cut.

That fit his stubborn refusal to diversify away from the companies he helped build. Other than surrendering his Apple stake when he left the first time, he never sold a share.

Dividends from both companies ensured that cash kept flowing while the stock remained locked up. Those payments would have generated about $175 million a year in purely passive income.

In other words, the heirs weren’t hurting.
However, widow Laurene Powell Jobs and the children didn’t get that $175 million a year because the trust started selling the stock.

Laurene Powell Jobs

The last public filing revealed that the trust’s Disney stake had been cut in half by 2017. Reading between the lines, the Apple position is lighter now as well.

That’s all right. Both stocks had soared in the intervening time and any sensible financial planner would urge a little rebalancing out of what were always extremely concentrated positions.

Now that the trust’s stakes are too low to require public statements of ownership, the Jobs family might be down to market weight on Apple and Disney alike.

Laurene Powell Jobs

Apple Computer $5 Billion World Headquarters

Apple Computer $5 Billion World Headquarters

In that scenario, they might be earning around 2% in dividends on index funds or a little more on bonds. They’re still not hurting.

Besides, the long-run logic insists that diversifying is the right thing to do. Even the most dynamic companies in history will hit a slow cycle sooner or later.

Jobs didn’t have to worry about this because he was out of Apple in its bleak years. The stock plunged. He didn’t care.

Sooner or later, another slow cycle will come. Apple will run out of ideas and fall behind. But for now, the company thrives on the platform he built, which might make it galling for the heirs to know that they sold out early or even carved out a little room in the portfolio for less-dynamic alternatives.

It’s always complicated to cut ties with the family business, especially when the stock is performing well.

But I know a lot of ultra-wealthy families would rather be rich and nostalgic than poor and principled. Jobs left Apple and went on with life.

And Disney always had another dynasty’s name on the letterhead. It was never a Jobs creation, and as the role of Pixar got diluted, the bond there got even weaker.

At the end of the decade, it’s all just another pool of cash. I suspect Tim Cook at Apple takes extremely good care of Laurene. She’s as involved in the company culture as she wants to be.

Laurene Powell Jobs

Tim Cook, Apple CEO

Tim Cook, Apple CEO

There’s even a decent chance that the company started paying dividends in the first place explicitly to keep her happy and then quietly authorized some of its massive buyback budget to take her shares first.

The widow dumping on the open market would have been a massive sign of no confidence.

No CEO with trillion-dollar ambitions and big shoes to fill needs that.

Enter the trust company

But Laurene calls the shots. She was the only trustee of Steve’s trust and then when it was broken up in 2015 she continues to run the successor trusts set up in her name and for the kids.

If holding onto the family shares mattered to her, she’d still own them and remain comfortable either way.

However, I can’t help but notice that the local law firm that ran Steve’s trust has been replaced with BMO’s trust operation. There’s an outside family office weighing in now.

BMO runs proprietary funds for ultra-high-net-worth accounts and incorporating the Jobs family trusts would be a huge AUM win for them.

I don’t think they’re bad funds. Management fees aren’t huge, especially if you’re working with billions of dollars. (Account minimums there start at $30 million.)

But the motive is naturally to divert a trust you’re working with into in-house solutions. Presumably you like the in-house funds. You know and like the people.

Unless there was a strong emotional reason to keep Steve’s stock, they could have made a compelling case to reallocate everything.

Laurene Powell Jobs

Again, the family isn’t going to lose a lot of sleep. The back of my envelope says they might have given up as much as $5 billion in appreciation switching out of Apple and Disney into an S&P 500 fund.

That’s practically paper money for them at this point. They should still have at least $17 billion in the account.

The dividends line up relatively well to provide income. It’s only the direction the fees move and the principle of the thing that change.

Looking toward the next generation

And it’s the future that counts now. While it’s interesting to speculate about a scenario where Laurene fought for control of either company, she never showed much interest.

Steve stayed on the Disney board to vote his agenda and maintain a link back to Apple. He was the sign of the companies’ alliance.

But Laurene never went to board meetings. And now that Disney CEO Bob Iger has resigned from the Apple board, the stage is set for the two companies to compete.

Bob Iger, then Disney CEO

Bob Iger, then Disney CEO

The alliance is over. It makes sense for the Jobs heirs to distance themselves from Disney if the future pits it against Apple.

And without Steve’s guiding hand on Apple, they don’t really have an emotional bond to that company either. It’s Tim Cook’s company now.

The Jobs heirs are all about building their own legacies now. Laurene is very interested in education and community outreach. Her $4 billion foundation has been liquidating its Disney stock at breakneck speed.

She’s evidently clearing the decks to make room for the next act.

Goldman Sachs handles the portfolio over there. The money is moving into safe, secure and perpetual corporate bonds Goldman picked out.

Again, proprietary strategies to make the professionals happy. I don’t know if Steve ever needed a financial planner to do anything more than reinvest his Disney dividends or set up the trust in the first place.

His heirs have attracted planners and private bankers, all the apparatus of modern wealth. They probably make great clients now.

What’s remarkable a decade on is how small these numbers seem. While the Jobs trusts might account for half of BMO’s reported $41 billion in AUM, it’s almost nothing compared to what Jeff Bezos or Mark Zuckerberg are worth today.

The House of Jobs is unlikely to earn many more billions. The money is moving into bonds and other slow growth / low risk instruments. They’re living on income now.

It happens. But it’s hard to ask for anything more, short of immortality.