Founders Protecting Facebook Riches
Mark Zuckerberg and Dustin Moskovitz are 2 boys who remain in belongings of some amazing wealth. The Facebook creators are in a position where they have to search for methods to maintain significant funds beyond their own lives. There can be significant tax consequences that accompany gift offering and asset transfers after death, so cautious planning is key.
Forbes has actually run a story just recently explaining how these two people took steps back in 2008 to move resources in a tax effective way. They apparently used the zeroed out GRAT strategy.
A GRAT is a grantor retained annuity trust. As the name recommends, the grantor keeps interest in the trust by getting annuity payments throughout the trust term, however he or she also names a beneficiary. This beneficiary would assume any rest that is left in the trust after its term expires.
Funding the trust is considered to be an act of taxable present giving, and the Internal Revenue Service represent awaited interest incomes using 120% of the federal midterm rate. The principal value plus this projected interest equals the taxable value of the trust.
“Zeroing it out” relates to the grantor taking the whole of this taxable worth throughout the term through the annuity payments. Since she or he retains all of the interest, no gift tax applies.
But if you money the trust with considerable securities (like Facebook shares prior to a preliminary public offering) that go beyond the applied interest price quote, there will be assets staying in the trust after its term expires. These resources will become the property of the recipient with no tax being levied on the transfer.
Even if you are not in the enviable position of the Facebook founders, you might be able to gain from the creation of a grantor kept annuity trust. To explore the possibilities, make a consultation to take a seat and discuss your distinct circumstance with a certified and experienced San Jose estate planning attorney.