Facebook Founders Use Trusts to Maximize Funds to Beneficiaries

Posted By Steven Adler || 8-Mar-2012

If anyone on the planet wouldn't need to worry about money right now, it's the founders of Facebook. The social media site's poster boy, Mark Zuckerberg, has an estimated net worth somewhere north of $17 billion, making him one of the three dozen or so wealthiest people on the planet.

Having immense wealth now, however, hasn't lulled Zuckerberg and other Facebook executives into neglecting the future. The youthful CEO used a strategy with a special kind of trust that will enable him to shift millions of dollars to his trust beneficiaries tax-free.

The maneuver was mentioned, though not highlighted, in the company's recent initial stock offering announcement. With the trust instruments set up, Zuckerberg and some of his fellow executives put pre-IPO stock into the trusts and after the company goes public, the trusts will likely skyrocket in value.

After a period of 5 to 15 years, the property remaining in the trust can go to a beneficiary tax-free. Right now, Zuckerberg has no children, but the beneficiary named now might be a successor trust or even nieces, nephews or his parents, for example.

While some people might be skeptical of such a move, it is perfectly legal under tax law, though there have been calls to take it off the books. While most people working on estate planning for themselves won't have stock in a giant company they founded to work with, there are still important lessons to be learned about planning early and decisively for one's financial future, and the future of those who come next -- even if they aren't yet born.

Source: Forbes, "Facebook Billionaires Shifted More Than $200 Million Gift-Tax Free," Deborah L. Jacobs, Mar. 7, 2012

Categories: Trust Administration