Monday, January 2, 2023

A Powerful New Tool Transforms How Billionaires Give Fortunes Away

Estate planning501(c)(4) organizations are a tool that can be utilized to give the ultra-wealthy control over their business, political influence, taxes, and charitable giving. Yvon Chouinard, the founder of Patagonia, famously utilized a 501(c)(4) last year when he announced his family was transferring their ownership of the company into a specially designed trust.

C4s offer a tax-advantaged way to exert influence through unlimited spending opportunities, like on political campaigns, and circumvents the traditional rules around giving that have been in place for more than 50 years. There is greater flexibility in creating a C4, which dates back to 2015 when a tweak in the tax code made it possible to transfer assets into this type of structure that was not subject to the 40% US gift tax. 

Looking at the C4 the Chouinard family created, a Patagonia spokesperson acknowledged the tax benefit by telling reporters “The point of the structure was never about tax efficiency… It was to release more money to fight the climate and environmental crisis.” While there are looser rules around C4s, they are still subject to the basic guardrails and are subject to the threat that Congress could eventually change the rules. 

For more information see Ben Steverman “A Powerful New Tool Transforms How Billionaires Give Fortunes Away”, Bloomberg, November 29, 2022.

Special thanks to Lewis Saret (Attorney, Washington, D.C.) for bringing this article to my attention.

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