re: Wall Street Journal lamenting taxes aren't higher on billionaires

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I already addressed it earlier in the thread. And the AI did address it tangentially when it referred to “But-Borrow-Die”.

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Wrong. You don’t know what you don’t know. Quit digging. They will pay an estate tax unless they give their entire estate to charity. Nothing you posted has even suggested otherwise.

It really gets funny going down that route because if we want to get in the weeds, not only do they pay the estate tax on those shares/assets, it is based on the fmv of the entire amount of the shares. However, depending on how they were issued, the company or the employee would have had to pay income tax on those shares as well when they were issued. So, not only is income tax being paid, the estate tax will tax amounts that have already been taxed . Or they go the irrevocable route and the capital gains will be taxed on those shares.

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It also fails to recognize that these assets do in fact have to be sold to cover debt payments or reorganization often.

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Show me the math. You are full of shite.

Example:
An individual with a net worth of 10 billion dollars put most of it in trusts when he was only worth $50 million. The increase in value in the trusts is NOT subject to inheritance taxes. So if he and his spouse put $28 million in trust - that being most of the part of his estate that he expects to appreciate (usually his stock in a startup that is his second business) - then he will never pay capital gains, even on sales of stock within the trust.

His heirs will pay zero dollars and zero cents on everything that accumulates in that trust. When those heirs sell shares of it they will pay simple capital gains.

Now 10 years later when the shares in that trust are worth $10 billion he develops a $10 million per year lifestyle. So he borrows $10 mm in year one. In year two he borrows $10.7 MM (interest and inflation is 0.7). In year three he borrows about $12 mm. He keeps doing that every year. Without doing the math, over 30 years he might average $20 mm per year. That’s $600 million. That is easily secured by a $10 billion trust.

Then he dies (and his wife). The heirs take the $10 billion trust, tax free, and they pay off the $600 million, leaving $9.4 billion. The guy earned $10 billion, lived a $10 million per year lifestyle, and never paid a dollar of income, capital gains, nor did his heirs pay inheritance taxes. All perfectly legal.

Now, in reality, it doesn’t happen so dramatically. Each year his family office will sweep up any capital losses and sell them to offset an equal amount of shares sold that had appreciated, thus netting out the capital gains. So still no taxes paid, but the sum of those shares sold will lower the amount needed to borrow.

I’m familiar with your pattern of arguing by now. You’ll just say, “You obviously don’t understand anything because you’re a moron.” But let’s just skip all of that and you show me your math.

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Example:
An individual with a net worth of 10 billion dollars put most of it in trusts when he was only worth $50 million. The increase in value in the trusts is NOT subject to inheritance taxes. So if he and his spouse put $28 million in trust - that being most of the part of his estate that he expects to appreciate (usually his stock in a startup that is his second business) - then he will never pay capital gains, even on sales of stock within the trust.

His heirs will pay zero dollars and zero cents on everything that accumulates in that trust. When those heirs sell shares of it they will pay simple capital gains.

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Great, thank you for confirming what i've already posted multiple times. Though, you still are failing to clarify the type of trust, which very much changes how things work, i'm going to assume you are referring to an irrevocable trust. From a few pages back:

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Not really. You either pay the estate taxes and shares are transferred at a stepped up basis, which for the generationally wealthy makes little sense, or you put the assets in an irrevocable trust that removes them from estate tax calculations, but the shares receive no stepped up basis and capital gains tax will be due when sold.

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You bring up another variable into this though, that I don't think you thought about. Generally, the lender isn't going to allow someone to put the shares that they now have as collateral for the loan, into an irrevocable trust after the loan has been executed. Likewise, the hoops to get shares that are in an irrevocable trust to be granted to be used as collateral for a loan for someone that isn't the beneficiary is tedious and not normally done. Not say it is never done, but generally it is not. So, the shares that are being used for collateral most often are going to be included in estate taxes in these type of scenarios, or the loan will be paid off beforehand, using a number of taxable funding options, then the shares are put into the irrevocable trust.

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What kind of trust will remove the assets from his estate but still allow access so that he is worth 10 billion?

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Technically he’s not worth that; the trust is. But he has use of it. If the trust owns a home he can use it it as a vacation home. Same with jets, etc.

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Technically he’s not worth that; the trust is. But he has use of it. If the trust owns a home he can use it it as a vacation home. Same with jets, etc.

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If the IRS determines that a grantor had incidence of ownership of assets inside of an irrevocable trust, they will be includible in the estate for estate tax purposes. Everything you described is considered an incidence of ownership. That’s estate tax 101. Dude. It’s no big deal to not be familiar with all of the rules. Just accept you were opining with hubris from a place of complete ignorance.

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But the money is in trust, so technically he is not worth that. The money is in trust. But you know very well that can be used by him and his wife.

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I’ll ask again. What kind of trust allows them to out in more than their lifetime exemption and allows them to have access to the assets without them being included in the estate?


Hint: there isn’t one. The closest you can get is SLAT.

It’s ok to not know the ins and outs. It just doesn’t work the way you are describing.

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Well, you are definitely correct. I’ve been through the process once and a half. You’ve probably done it dozens of times, maybe hundreds.

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I’m happy to go through the math as you asked, but your premise makes no sense. I’ll ask a third time. What type of trust would allow someone to move 50 million out of their estate (when the lifetime exemption was 11), yet still have access to the assets when they are worth 10 billion?