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Related: Editorials & Other Articles, Issue Forums, Alliance Forums, Region ForumsWhy Billionaires Love to Park Their Dynastic Wealth in Places Like South Dakota. 'Dynasty Trusts'
https://www.commondreams.org/views/2021/10/01/why-billionaires-love-park-their-dynastic-wealth-places-south-dakotaIf you want to understand how U.S. billionaires are able to pay so little taxes, as exposed by this June 2021 ProPublica report, look to the Mount Rushmore state.
Lawmakers should act at the federal level to shut down or discourage the formation of dynasty trusts and GRATs for the purposes of tax avoidance and dynastic succession.
One tool that wealth advisors to the rich deploy is called a "dynasty trust."
A dynasty trust is a form of trust that is designed to sequester wealth for longer than ordinary trustssometimes for centuries or forever. These trusts are often formed in U.S. statessuch as South Dakotathat have suspended or altered their state "rule against perpetuities," legislation that previously limited the lifespan of a trust. (For the full wonky version see this background brief that I co-authored about dynasty trusts.)
In the 1980s, South Dakota changed its laws to attract wealthy people looking to park their money in trusts (they did the same thing to attract the credit card industry). A few other states followed suit, such as Wyoming and Alaska. Today, a private trust industry flourishes in the South Dakota, helping billionaires hoard their wealth.
Over the last several decades, South Dakota's trust industry has attracted dynastically wealthy families to form "dynasty trusts" including the Chicago Pritzker family (Hyatt hotels), the Minnesota Carlsons (Radisson Hotels), the Wrigley family (heirs of chewing gum magnate William Wrigley), and others.
In my book, The Wealth Hoarders: How Billionaires Spend Millions to Hide Trillions, I describe how the wealth defense industry deploys dynasty trusts to enable ultra-high net worth individualsthose with $30 million or moreto systematically avoid wealth transfer taxesthat is, estate, gift, and generation-skipping taxes. A recent exposé by ProPublica revealed how the super-wealthy also deploy "Granter Retained Annuity Trusts" (GRATs) and other loopholes to shield their wealth. Billionaires will often deploy both methods to aggressively avoid taxes.
Because the super-wealthy are avoiding or reducing their taxes, they are shifting the obligations to pay for society's investments onto lower and middle-income households. Dynasty trusts also entrench existing levels of wealth inequality and facilitate the formation of dynastic concentrations of hereditary wealth and power. . . .
Phoenix61
(16,993 posts)Im familiar with regular trusts that end when the person who formed them dies. The income of the trust is taxed at 30% if the assests arent distributed to the beneficiaries.
DFW
(54,293 posts)Is the author obsessed with billionaires (614 in the USA as of a year ago) or with people with 3% of a billion (his "high wealth" individuals)? it wasn't clear from the excerpt.
Whose definition is "high wealth," anyway? I know a guy in Texas who helped some young company get off the ground with his advice and expertise, and was given 12% of its stock as a reward for his efforts. It took off, eventually got sold for some huge sum thirty years later, and after taxes, he actually DID end up with a little over $30 million for his share. Somehow, I don't think setting up some trust in South Dakota ever occurred to him. He was busy working on some foundation giving most of it away to education (secular!) around the country. I refuse to bring my blood pressure to a boil over everyone who lucks out and makes themselves a small fortune. It's not like they all somehow suddenly turn into Koch clones.
Firestorm49
(4,030 posts)more so the effect of tax avoidance to the detriment of the general population.