How the billionaire Walmart clan are using their charity to avoid paying estate taxes on an 150 billion dollar fortune and pass it on to future heirs
- America's richest family is using a tax loophole to ensure that large chunks of their wealth can be passed on tax free to their heirs
- The Waltons have a combined wealth in excess of $150 billion
- They use 'Jackie O.' trusts to give to charity but also to pass money on to future generations without paying tax
- The Walton Family Foundation has given more than $1 billion to setup the Crystal Bridges Museum of American Art in Bentonville, Arkansas
By Daily Mail Reporter
PUBLISHED: 15:17 EST, 12 September 2013 | UPDATED: 15:35 EST, 12 September 2013
America’s richest family – the Waltons – is using a tax loophole related to charitable giving to ensure that large chunks of their enormous wealth can be passed on tax free to their heirs.
The dynasty behind the Walmart retail chain has a combined wealth estimated at more than $150 billion and retains a 48 percent stake in the world’s second largest publicly listed company.
Since 2003, charitable trusts setup in the names of two deceased family members have donated more than $9 billion to their charitable arm - the Walton Family Foundation.
Keeping it on the family: Jim Walton, left, Alice Walton, and Rob Walton have given considerable amounts to charity but those same trusts are helping keep their fortune tax free for future generations
However according to tax experts these massive donations will also benefit future generations of the family by ensuring that they inherit a tax free fortune.
The world’s largest retailer was started by Sam Walton in 1950 when he opened ‘Walton's 5 & 10’ store in Bentonville, Arkansas.
In 1953 the business was still very much in its infancy, the Walmart brand didn’t launch til the early 1960s, but Sam Walton decided to divide the business in order to avoid a potential estate tax bill.
He have each of his four children - Sam, John, Alice and Jim - received 20 percent, while he and his wife Helen kept the remaining 20 percent.
Walmart is the world's largest retailer and the Waltons retain a 48 percent stake in what is also the world¿s second largest publicly listed company
Family portrait: This photograph of Sam Walton and his family is displayed at the Walmart museum, in Bentonville, Arkansas
His oldest child, Sam, was only nine-years-old at the time, but the unusual decision was a calculated move he revealed in his autobiography, ‘Made in America.’
‘The best way to reduce paying estate taxes is to give your assets away before they appreciate,’ he wrote.
Although he liked to cultivate an image as an ‘ordinary fella,’ Walton had shown great foresight about estate planning, which his family members are continuing to show today.
The Walton Family is the richest family in the world. Sam Walton’s children have consistently been in the top ten of the Forbes 400 since 2001, although Christy Walton took her husband John's place after his death in 2005.
According to court records and Internal Revenue Service filings obtained by Bloomberg, the family is using a number of complex tax avoidance practices to maintain their wealth and avoid paying large inheritance taxes.
One practice in particular relates to placing large sums of money in charitable trusts so they bypass estate tax laws.
Christy Walton, left, is the heir of John who died in 2005, while Alice, right, is an avid art collector
The Walmart dynasty: Sam and Helen Walton had four children, three of whom are still alive and amongst the rich people in the U.S.
The trusts are often referred to ‘Jackie O.’ trusts after Jacqueline Kennedy Onassis, the former First Lady who died in 1994 and whose will requested the creation of one in her name.
According to IRS data seen by Bloomberg, the Waltons are by far the biggest users of these ‘Jackie O’ trusts, which are increasingly being used by the very wealthy to safeguard their money.
Wealthy families held a record $20.9 billion in Jackie O. trusts in 2011, almost twice the amount they held in 2000.
Although it can be claimed that the money put into ‘Jackie O.’ trusts is ostensibly for charity, they have another desirable feature and if the assets appreciate substantially over the years, then they can pass money tax free to heirs.
The Walton family’s main charitable arm - the Walton Family Foundation - is funded mostly through 21 of these trusts.
Wal-Mart Stores family members Jim Walton (left), Alice Walton and Chairman of the Board of Directors Rob Walton recite the Walmart cheer at the annual shareholders meeting for Walmart in Fayetteville, Arkansas on June 7, 2013
Helen Walton established 16 such trusts before her death in 2007, while the other five trusts are in the name of her son John, who died in an ultra-light plane crash in 2005.
The 21 trusts hold more than $9 billion, some of which has been used to help pay for Walton Family Foundation projects such as the Crystal Bridges Museum of American Art in Bentonville.
It was opened by Alice Walton, 63, in 2011 and houses her art collection in a wooded ravine next to her childhood home.
She is a former money manager who founded and ran her own financial firm, Llama Co., and now lives on a ranch in Texas known as the Rocking W., where she raises award-winning cutting horses and collects art.
Alice has spent as much as $35 million on some of the art work in the gallery.
Walmart heiress Alice Walton founded Crystal Bridges in 2011 in a wooded ravine next to her childhood home, it has been bankrolled by more than $1 billion in donations from her family
Protester call for better jobs and higher wages during a marches against Walmart on Thursday, Sept. 5, 2013, in Los Angeles
Bankrolled by more than $1 billion in donations from her family, the gallery has attracted tourists to the local area and provided jobs, but is also help to preserve the family’s fortune for generations to come.
The Waltons’ example highlights how billionaires – and their accountants – can deftly bypass estate laws intended to ensure that the nation’s wealthiest contribute their fair share to government as well as provide for their heirs.
Last year only $14 billion was raised through estate and gift taxes. That equates to just one percent of the $1.2 trillion passed down in America each year.
‘I hate to say it, but the very rich pay very little in gift and estate tax,’ said Jerome Hesch, a lawyer at Berger Singerman who reviewed some of the Walton family’s trust filings for Bloomberg.
‘At the Waltons’ numbers, the savings are unbelievable.’
A family spokesman, Lance Morgan, said in a statement that ‘any charitable or estate planning practices employed by the Walton family are broadly available and commonly used.’
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