America’s richest family – the Waltons – is using a tax loophole related to charitable giving to ensure that large chunks of their enormous wealth can be passed on tax free to their heirs.
The dynasty behind the Walmart retail chain has a combined wealth estimated at more than $150 billion and retains a 48 percent stake in the world’s second largest publicly listed company.
Since 2003, charitable trusts setup in the names of two deceased family members have donated more than $9 billion to their charitable arm - the Walton Family Foundation.
However according to tax experts these massive donations will also benefit future generations of the family by ensuring that they inherit a tax free fortune.
The world’s largest retailer was started by Sam Walton in 1950 when he opened ‘Walton's 5 & 10’ store in Bentonville, Arkansas.
In 1953 the business was still very much in its infancy, the Walmart brand didn’t launch til the early 1960s, but Sam Walton decided to divide the business in order to avoid a potential estate tax bill.
He have each of his four children - Rob, John, Alice and Jim - received 20 percent, while he and his wife Helen kept the remaining 20 percent.
His oldest child, Sam, was only nine-years-old at the time, but the unusual decision was a calculated move he revealed in his autobiography, ‘Made in America.’
‘The best way to reduce paying estate taxes is to give your assets away before they appreciate,’ he wrote.
Although he liked to cultivate an image as an ‘ordinary fella,’ Walton had shown great foresight about estate planning, which his family members are continuing to show today.
The Walton Family is the richest family in the world. Sam Walton’s children have consistently been in the top ten of the Forbes 400 since 2001, although Christy Walton took her husband John's place after his death in 2005.
The current Bloomberg Billionaires Index has Christy with a fortune of $36.5 billion, making her the 9th richest person in the world, Jim has a fortune of $35.2 billion and is 10th, Rob has $34.3 billion and is 11th, while Alice has $33.6 billion and is the 12th richest person in the world.
According to court records and Internal Revenue Service filings obtained by Bloomberg, the family is using a number of complex tax avoidance practices to maintain their wealth and avoid paying large inheritance taxes.
One practice in particular relates to placing large sums of money in charitable trusts so they bypass estate tax laws.
The trusts are often referred to ‘Jackie O.’ trusts after Jacqueline Kennedy Onassis, the former First Lady who died in 1994 and whose will requested the creation of one in her name.
According to IRS data seen by Bloomberg, the Waltons are by far the biggest users of these ‘Jackie O’ trusts, which are increasingly being used by the very wealthy to safeguard their money.
Wealthy families held a record $20.9 billion in Jackie O. trusts in 2011, almost twice the amount they held in 2000.
Although it can be claimed that the money put into ‘Jackie O.’ trusts is ostensibly for charity, they have another desirable feature and if the assets appreciate substantially over the years, then they can pass money tax free to heirs.
Because assets must be locked up for several decades, such trusts are attractive only to the wealthiest families.
‘You have to be someone who’s willing to say, “I don’t need this extra money,’” John Anzivino, a principal at Kaufman Rossin & Co. told Bloomberg. “‘At the same time, we hope to shift it down a generation, without tax.’”
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