I find myself very fortunate to have worked on some very exciting and complex estate plans. We have great clients with complicated estates, and for a tax-geek like me, it is a lot of fun to be able to put in place complicated trusts and engage in interesting family transactions. This week, I was able to pull myself away from tax geek stuff in order to spend a few personal minutes surfing the internet (during lunch, of course). Many of you may have seen that it was discovered this week from tax records that the late Johnny Carson (late-night comedy show host and predecessor to Jay Leno) had transferred more than $150 Million to a private Foundation bearing his name. (CNN/Money) Two weeks ago there was an announcement that several billionaires in the U.S. had joined Bill Gates and Warren Buffett in pledging to give away a significant portion of their estates to charity. (The "giving pledge" list - AP News) Despite books, treatises, articles, and seminars providing instructions and examples of intriguing and sexy methods to reduce a taxable estate, there is actually a very easy way for a wealthy person to pass away with a zero-tax estate. The key ingredient is charity.
We have had clients choose this method for their final planning. Here’s how it typically works: the client selects a moderate sum to pass to their children or loved ones. (Last year for a married couple this could be up to $7 Million without paying tax). Then, the rest of the estate is directed to pass to charity. The charity can be a private family foundation, allowing the children, family members, or friends to become involved in family philanthropy after the parents’ death (Such as Johnny Carson and Bill Gates). Or, the charity could be an outside organization, such as a church, school, or welfare organization, etc. The result: zero estate tax. Fascinatingly easy.
-Attorney Jason Walker