Mark Zuckerberg previously demonstrated an awareness of California family law by waiting until just after Facebook went public to get married. I’m wondering if his new non-charity charity shows a sophisticated approach to estate tax avoidance.
The letter to our daughter works pretty well as comedy, e.g., “Medicine has only been a real science…” (emphasis added). It also works pretty well as a dictionary example of “optimism”, with Zuckerberg imagining that a $1 billion annual budget is going to move the needle (NIH spent $31 billion in 2010, according to Wikipedia, and the drug companies keep telling us that they are spending some of their Irish dough on research). Apparently he and his wife think that the folks behind “Why Most Published Research Findings Are False” can’t waste another $1 billion/year.
The letter is a significant addition to the literature of comparative American victimhood: “Can we truly empower everyone — women, children, underrepresented minorities, immigrants and the unconnected?” (we were talking about this line at the airport and it evoked the question “So which is worse? Having a pussy or not being able to download porn at home?”)
I’m wondering if these small delights are distractions from the main point: working around the estate tax. The non-charity charity is apparently organized as an LLC. Let’s suppose that Baby Max owns shares in this LLC. If she acquires them today, before any Facebook stock or proceeds from selling Facebook stock are transferred in, she hasn’t received anything of value and has no tax liability. The LLC can invest its assets however it wants to, e.g., it could buy shares in an Ireland-based pharma company or fund a startup medical device firm in Singapore or China. If those investments prove more productive than Zuckerberg’s adventure in the Newark public school system, Grown-up Max will own a stake in something worth tens of billions of dollars.
What do readers think? Is this all about doing good or more about avoiding the world’s fourth-highest estate tax rates (actually we are higher than #4 if you add in estate taxes imposed by states)? Can it truly be this simple to say goodbye to $18 billion in federal estate taxes (plus potentially additional state estate taxes, depending on where the happy parents choose to live out their golden years)? (The links below suggest that a “family LLC” can substantially reduce but not entirely eliminate estate tax.)
- “Using an LLC for Estate Planning”: “In a family LLC, the parents maintain management of the LLC, with children or grandchildren holding shares in the LLC’s assets, yet not having management or voting rights. … After you have established your family LLC according to your state’s legal process, you can begin transferring assets. … Here’s where the tax benefits really come into play – if you are the acting manager of the LLC, and your children are non-managing members, then the value of units transferred to them can be discounted quite steeply, often up to 40% of their market value. This discount is based on the fact that without management rights, LLC units become less marketable.”
- “Limited Liability Company – Cutting Edge Estate Planning”