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Facebook Founders Find Estate Planning Fix

Mark Zuckerberg and Dustin Moskovitz, the co-founders of Facebook and two of the world’s youngest billionaires, may seem too young to be thinking about estate planning. But in 2008, when they were both 24, they used an estate planning tool that is more familiar to people two or three times their age.

Not too long ago the taxation and accounting world had a new star in Mark Zuckerberg, the wunderkind behind Facebook. Why? Because his unparalleled control over the company was about to create the biggest tax bill ever when the company went public and his stock became publically valued.

Indeed, the taxation and accounting world can be rather morbid in that regard, but at least for Zuckerberg there is some good news that has come out of the woodwork. Tax or no taxes, he has saved a great deal through forethought and proper estate planning.

Certainly it’s unique to meet anyone who begins their estate planning at age 25 but Mark Zuckerberg and his partner in business, Dustin Moskovitz, did just that. As reported in a recent article from Deborah Jacobs at Forbes, the pair had the foresight to set up their private stock up with a certain form of trust before the true boom in value. As a result, they locked in that lower value and locked out those incredible taxes.

As Jacobs estimates in her article, the pair shifted more than $185 million into what’s often known as a zeroed-out GRAT. In somewhat more plain English this device was a Grantor Retained Annuity Trust in which the rate of appreciation exceeds the rate of interest, thereby securing the excess amount (like all that created from going public) from taxation for the beneficiaries of the GRAT.

Sometimes the young do have something to teach their elders, and in this case the crew over at Facebook serves as an incredible example of what has been an incredible technique.

For more information and math on Zuckerberg and his partners check out the original article. Also, if you’re interested in learning more about GRATs, then there’s no time like the present to investigate whether you should create your own.

Note: Not only is the GRAT most advantageous when an economy is set to rebound, but the process itself is in the sights of many new budget and taxation plans by the current administration. (Translation: This opportunity might not be around much longer!)

You can learn more about estate tax planning in the Estate Tax Planning Practice Center on our website. Be sure to sign up for our free e-newsletter to stay abreast of issues like these that could affect you, your loved ones and your estate planning.

Reference: Forbes (March 7, 2012) “Facebook Billionaires Shifted More Than $200 Million Gift-Tax Free

 

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Update to our Process

The unprecedented coronavirus pandemic has taken our entire country by surprise. We understand how difficult this time is for America’s businesses and families.  However, we believe it is vitally important that we make every effort possible to continue to offer solutions that avoid disrupting our important partnership with you, your family and friends.  As you know, estate planning is not something that should wait for a more convenient time, therefore the opportunity to address your important goals both during and after this crisis should not wait.  To that end, we have added the option of a ‘virtual consultation’ to our office process.  You will now have a choice of either meeting with us in our office or in the comfort of your own home.