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How to Hide a Fortune During a Pandemic

The Planning Tools of the Wealth Dynasty Protection Racket

People participate in a "March on Billionaires" event on July 17, 2020 in New York City.  (Photo by Spencer Platt/Getty Images)

People participate in a "March on Billionaires" event on July 17, 2020 in New York City.  (Photo by Spencer Platt/Getty Images)

While some folks are volunteering at the local food bank, the super-wealthy are working to hide their money from future taxation. 

It is no secret that the Covid-19 pandemic has been very good to the billionaire class.  The richest dozen billionaires now have a combined wealth of over $1 trillion.  And since March 18, the beginning of the pandemic lock down, the collective wealth of the U.S. billionaire class has increased over $700 billion.

The pandemic, however, has also provided cover for aggressive estate tax avoidance.  There is now an orgy of wealth hiding taking place, as wealth planners for the richest 0.1 percent accelerate the planning tools they created over the last two decades to place trillions outside the reach of the estate and gift tax.

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IPS Associate Fellow Bob Lord has written a primer to the tools that wealth managers are using to facilitating this wealth vanishing act.  His policy brief, “Covid-19, A Perfect Storm for Estate Tax Avoidance,” provides a readable overview to the deployment of two planning devices: the Intentionally Defective Grantor Trust, or IDGT, and the Granter Retained Annuity Trust, or GRAT.  Lord explains their workings in his policy brief.

Wealthy families use these planning tools to place billions if not trillions in wealth into “dynasty trusts” and reduce or eliminate their estate and gift tax obligations.    According to Lord, it is too late to capture these funds.  But one remedy is to put in place an inheritance tax to levy funds as they flow to heirs and beneficiaries of the trusts.

An inheritance tax, such as the one proposed by New York University Law Professor Lily Bachelder, could not be circumvented by trusts designed to avoid estate taxation.  As funds flow to recipients, an inheritance tax could serve as a fix and dynasty prevention mechanism.

Chuck Collins

Chuck Collins

Chuck Collins is a senior scholar at the Institute for Policy Studies where he co-edits Inequality.org, and is author of the new book, "Born on Third Base: A One Percenter Makes the Case for Tackling Inequality, Bringing Wealth Home, and Committing to the Common Good."  He is co-founder of Wealth for the Common Good, recently merged with the Patriotic Millionaires. He is co-author of "99 to 1: The Moral Measure of the Economy" and, with Bill Gates Sr., of "Wealth and Our Commonwealth: Why America Should Tax Accumulated Fortunes."

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