To reduce the tax pinch, the Clintons are using financial planning strategies befitting the top 1 percent of U.S. households in wealth. These moves, common among multimillionaires, will help shield some of their estate from the tax that now tops out at 40 percent of assets upon death.
The Clintons created residence trusts in 2010 and shifted ownership of their
Among the tax advantages of such trusts is that any appreciation in the house’s value can happen outside their taxable estate. The move could save the Clintons hundreds of thousands of dollars in estate taxes, said
“The goal is really be thoughtful and try to build up the nontaxable estate, and that’s really what this is,” Sloan said. “You’re creating things that are going to be on the nontaxable side of the balance sheet when they die.”
The Clintons’ finances are receiving attention as
Capping ExemptionHaving lost the Democratic presidential nomination to
In her last campaign, Clinton supported making wealthier people pay more estate tax by capping the per-person exemption at
“The estate tax has been historically part of our very fundamental belief that we should have a meritocracy,”
‘Inherited Wealth’Without the estate tax,
Two estate-planning advisers are listed on the
The Clintons have consistently supported higher taxes on the income and estates of the wealthiest Americans, even as their paid speeches and book royalties moved them into the echelons of the nation’s top earners over the past decade.
At the end of 2012, the Clintons were worth
That total excludes the value of their homes in
Net WorthUnder federal disclosure rules for administration officials, the Clintons provided their net worth in a broad range. Most of the assets reported were in a single cash account at
Since she left the government last year,
As president in 2000,
‘Solve Them’“If you’re serious about wanting to deal with the problems that estate tax presents, let’s get after it and solve them,” he said on
At the end of 2010,
Those rules were scheduled to expire at the end of 2012, offering what looked like a one-time chance to use up the exemption with gifts—even if tax policy later swung in the other direction.
Into Trusts In 2011 and 2012, many high-net-worth families moved money out of estates and into trusts to take advantage of the more favorable rules.
U.S. taxpayers reported making
By making gifts during their lifetime, people take advantage of their estate-tax exemptions in an orderly way, using techniques to stuff as many assets as possible into the nontaxable portion of the estate.
That appears to be what the Clintons did, Sloan said, using a structure known as a qualified personal residence trust that allows them to discount the value of their house for estate tax purposes.
‘Reduce’ Value“You try to do things that can reduce the value of what you’ve given,” he said.
According to county property records, the Clintons split their ownership of the house into separate 50 percent shares, and then placed those shares into trusts.
That maneuver has multiple potential benefits, starting with the fact that any appreciation in the house’s value will now happen outside the estate.
Tax ReturnsIt’s impossible to know what value the Clintons claimed for the house without seeing their gift-tax return. They last released tax returns during Hillary Clinton’s presidential campaign.
They bought the house for
Residence trusts have a set term after which the property is transferred to a beneficiary. Following that, the Clintons could pay rent to the new owner to continue living in the house, which is another way to move assets outside of the estate.
For the asset to move completely outside the estate, the Clintons would have to outlive the term of the trust. Such trusts typically last for 10 to 15 years to maximize the discount applied to the property’s value.
Creating two separate trusts allows the Clintons to spread risk. They can set different lengths for each trust and if one of them dies, the other’s trust wouldn’t be affected.
Also in 2010, the Clintons created a life insurance trust. That can help defray the cost of estate taxes, Sloan said. They have had a separate life insurance trust since 1996, according to the disclosure records.
These moves are “pretty standard” planning for people who know they will be subject to the estate tax, said
“If you’re the Clintons and you live in a fishbowl,” he said, “you’re not going to push the envelope in doing cutting- edge planning.”
|Copyright:||(c) 2014 Accounting Today. All rights Reserved.|
|Source:||Source Media, Inc.|