According to a new report by ProPublica, more than half of the richest people in the United States use grantee retention annuity trusts (Grantor Retained Annuity Trusts,GRAT) and other trusts to evade estate taxes.
In its report, ProPublica listed the names of some of the super-rich who used this way to avoid taxes, including Apple IncThe widow of the late former CEO Steve Jobs, Lauren Powell, Jobs, Blackstone Group IncSchwarzman, chairman of the group; Charles Koch, chairman and CEO of Koch Industries; and Michael Bloomberg, former mayor of New York.
The report is part of a series of ProPublica reports that outline tax strategies available to the richest 0.1 per cent of the US based on the confidential tax information they receive. ProPublica said the information was sent to the news organization on its own initiative by a source it did not know its identity. An IRS official said the matter had been referred to federal investigators.
The ProPublica report comes at a time of heated debate in Congress over measures to address the estate tax. GRAT has become an increasingly popular tax avoidance method for wealthy Americans. The structure of this approach is that the appreciation of trust assets can be left to heirs without paying American estate and gift taxes.
Citing tax records and interviews with her lawyer, ProPublica described in detail how Lauren Jobs used GRAT to transfer about $500m to her "children, friends and other family". The news agency estimates that she avoided at least $200 million in estate and gift taxes.
Larry Sonsini, a lawyer for Lauren Jobs, told ProPublica that she adopted the plan to give her children enough cash to pay estate taxes when she died and to inherit property, including real estate, art and a yacht. If they do not receive $500 million through the trust fund, her children will have to sell the shares she intends to donate to charity to pay her estate tax. Lauren Jobs has a net worth of $22.6 billion, according to the Bloomberg Billionaires Index.
In a statement to ProPublica, Lauren Jobs said she supported "reforms that make the tax code fairer".
A spokesman for Blackstone Group Inc chairman Schwarzman told ProPublica that Schwarzman was "one of the largest individual taxpayers in the United States and fully complies with all tax regulations." The Bloomberg and Koch brothers declined to comment.