Keeping a Little Known Estate Tax Avoidance Strategy Under the Hoodie

Today, Mark “The Hoodie” Zuckerberg took over Wall Street. Unless you’ve been living under a rock, you’re aware that Facebook’s Initial Public Offering (IPO) hit the stock market earlier this morning. Personally, I couldn’t tell an IPO from an IRA or an IOU so I’ll spare you the Wall Street color commentary. But what I have found interesting in the Hoodieverse is the decided lack of investigative reporting surrounding the public offering. It’s almost as if reporters and journalists think, “It’s Facebook. Let’s just grin and Like it.” Honestly, I’d probably be of the same mindset if I didn’t regularly read the online financial publications. And, in doing so, I came across a perfectly legal strategy that many Facebook executives are leveraging to avoid paying estate taxes. Again, it’s all on the up and up — but that doesn’t mean it is right.

Here’s the skinny: Mark Zuckerberg and several other Facebook big wigs are utilizing something called a grantor-retained annuity trust (GRAT) to sidestep paying hundreds of millions of dollars in estate and gift taxes. These trusts, or GRATs, are essentially the BFFs of millionaires savvy enough to understand complex tax law. That’s all well and good – for them. For the rest of us, GRATs are a gigantic black hole sucking potential tax revenues out of the economy, revenues that could fund spending programs often left on the chopping block by congressional leaders hawkish about balancing the budget.

Legal maneuvers like GRATs are yet another shining example of how the same rules don’t apply among all tax classes. This is not about punishing the rich. If I were loaded, I would be hard-pressed not to take advantage of such legal wealth protections. But I’m not loaded. Neither is 99% of the population.

Whether it’s the Hoodie and his GRAT, capital gains strategies to maintain a substantial portion of income, or leveraging charitable contributions, there are several tax loopholes that should be adjusted or eradicated to level the playing field for all tax-paying Americans.


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