It’s no surprise that the wealthiest Americans take every legal opportunity to evade estate taxes. As one billionaire put it, no one wants to pay taxes on money more than one time. You don’t have to be a billionaire to take steps toward asset protection, especially when planning your estate. Wills, trusts and other legal vehicles can help residents of Dallas, Texas, keep funds in the family.
Individuals of all income levels may be able to learn something about estate tax planning from the wealthy. According to experts, there is a tax loophole that was unintentionally created by legislators. Though the IRS and others have attempted to close the loophole, many members of Congress are reluctant to remove the tax break that has saved Americans billions in taxes.
The loophole can be accessed by a shelter method referred to as the Walton grantor retained annuity trust. For short, experts in the field call it the Walton GRAT. Essentially, the method involves moving money in and out of a series of trusts.
A casino magnate who is also one of the richest men in the world has used the tactic over the years to pass wealth on to his family. He’s passed close to $8 billion to heirs but has not paid the U.S. gift tax on those funds. The taxes would have totaled almost $3 billion.
The attorney that originally created the Walton GRAT states that the method has saved Americans $100 billion in taxes throughout the years. You don’t have to have a few million laying around to take advantage of the tax benefits afforded by shelters and trusts, however. Most individuals wouldn’t have to move money around Walton GRAT style, either, when including trusts in their estate tax planning.
Source: Bloomberg, “Accidental Tax Break Saves Wealthiest Americans $100 Billion” Zachary R. Mider, Dec. 17, 2013
