• Discounts and special offers
  • Subscriber-only articles and interviews
  • Breaking news and trending topics

Already a subscriber?

By signing up, you accept Moneywise's Terms of Use, Subscription Agreement, and Privacy Policy.

Not interested ?

Philanthropy: Giving to avoid giving up

Cohn, who is 63, is at retirement’s gateway age and has an estimated net worth of more than $350 million, so no wonder he wants to keep his estate untouched. (He was also a lead sponsor of Road to 2092, a Harvard competition to save Social Security.) The good news for Cohn — and all of us — is that politicians, regulators and judges have watered down the estate tax since 2000.

Back then, the married couple threshold — the amount after which an estate would owe the government money — was $1.35 million, according to the non-profit Tax Foundation. In 2024, the IRS threshold is $27.2 million, a jump of more than 20 times.

That may sound like a pretty high hurdle for Uncle Sam to clear, but let’s say you own a successful small business. You could hit that threshold fast and so the need to protect that money.

One way the rich ditch estate taxes is through philanthropy, and it’s also a sure way to generate applause. Durot cites The Giving Pledge, which 104 American billionaires worth roughly $1.5 trillion have signed since 2010. Famous signatories like Bill Gates, Melinda French Gates and Warren Buffett have committed to giving away most of their fortunes.

Kiss Your Credit Card Debt Goodbye

Millions of Americans are struggling to crawl out of debt in the face of record-high interest rates. A personal loan offers lower interest rates and fixed payments, making it a smart choice to consolidate high-interest credit card debt. It helps save money, simplifies payments, and accelerates debt payoff. Credible is a free online service that shows you the best lending options to pay off your credit card debt fast — and save a ton in interest.

Explore better rates

Why the GRAT is great

Another popular method among the wealthy is the grantor retained annuity trust (GRAT). While the name reeks of jargon, it’s the smell of sweet success to those seeking to pass on their riches to family. It can be used as a holding pen where real estate, stock shares or other assets can appreciate without counting toward estate tax limits.

Mark Zuckerberg, who placed pre-IPO Facebook shares in a GRAT in 2008, had accumulated an estimated $37.3 million by 2012, Forbes reported. It may sound shady but it isn’t: The Facebook CEO’s paperwork “read like a playbook of how the ultra-rich and even the moderately wealthy can operate within the law to transfer vast sums and preserve assets–from the tax man and from creditors.”

Not a tax, but significant expenses to avoid one

Durot notes that the drawback to avoiding estate taxes, and not necessarily a cheap one, is that it takes lawyers, accountants and financial experts to put key strategies into action. That could be regarded as the rich transferring money to the rich, but many wealthy people view their efforts in philanthropy, for example, through a simple lens. Their favorite charities, they reason, will spend their money far more effectively than the government.

You don’t need to sit on an expensive throne to buy into that logic, whether you define that in terms of the seat of an ultra-wealthy magnate, or the squat of a Navy private.

Sponsored

Follow These Steps Once Your Portfolio Reaches $100K

If you've amassed a $100k+ portfolio, it's time to meet with a trusted advisor.Zoe Financial's elite network of fiduciary advisors offers personalized strategies to enhance your financial success. Experience exclusive investment opportunities and bespoke wealth management services. Trust Zoe Financial for unparalleled expertise and a commitment to your prosperity.

Lou Carlozo Freelance writer

Lou Carlozo is a freelance contributor to Moneywise.

Disclaimer

The content provided on Moneywise is information to help users become financially literate. It is neither tax nor legal advice, is not intended to be relied upon as a forecast, research or investment advice, and is not a recommendation, offer or solicitation to buy or sell any securities or to adopt any investment strategy. Tax, investment and all other decisions should be made, as appropriate, only with guidance from a qualified professional. We make no representation or warranty of any kind, either express or implied, with respect to the data provided, the timeliness thereof, the results to be obtained by the use thereof or any other matter.