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As far as I understand, he wouldn't avoid estate taxes. Whoever dies last would still own the LLC as an asset and the estate is taxed on the value of that asset

by jayess 11y ago

As far as I understand, he wouldn't avoid estate taxes. Whoever dies last would still own the LLC as an asset and the estate is taxed on the value of that asset. With their combined estate tax exemption, about $10.5 million, any value over that would be taxed at 40%. Unless he remains true to his word and he expects to spend it all before he dies. The only "avoidance" of taxes happening here is during the initial transaction of transferring the Facebook shares to the LLC's ownership. Of course as the LLC sells shares that have gained value, the capital gain would be taxed, as would any dividends or growth from any other investments the LLC makes.

amalag 11y ago
I don't want to be totally negative on Zuckerburg. Maybe he will do good with the money. However: An estate would not be taxed on the value of the LLC, the same way one he is not taxed on the value of his stock. It is taxed when sold. If he assigns family members as owners there would not be additional taxes when he passes away if the LLC's money continues to grow. >11. Limited Liability Company (LLC) and Family Limited Partnership (FLP) FLPs and LLCs let you reduce estate taxes by transferring assets like a family business, farm, real estate or stocks to your children now, and still keep some control. They can also protect the assets from future lawsuits and creditors. >Here's how they work. You and your spouse can set up an LLC or FLP and transfer assets to it. In exchange, you receive ownership interests. Though you have a fiduciary obligation to other owners, you control the LLC (as manager) or FLP (as general partner). You can give ownership interests to your children, which removes value from your taxable estate. These interests cannot be sold or transferred without your approval, and because there is no market for these interests, their value is often discounted. This lets you transfer the underlying assets to your children at a reduced value, without losing control. https://www.estateplanning.com/Understanding-Estate-Taxes/ https://www.estateplanning.com/Understanding-Estate-Taxes/
- harryh 11y ago
  If Zuck "transfers assets like a family business, farm, real estate or stocks to his children now" then this transfer would, presumably, be far far in excess of the $14,000 annual exemption and thus subject to taxation. This LLC is not an effective way to avoid estate taxes on the vast majority of his wealth.
- jstalin 11y ago
  That's not true. The estate would be taxed at 40% for any value of the LLC over about $10.5 million (today's estate-tax exemption). Family LLCs can work for reducing the estate tax if you transfer ownership interests during your lifetime at a reduced valuation, owing to the fact that the membership interests are not marketable, giving them a lower value than the market value of whatever the LLC holds. The only way you avoid the estate tax is if you transfer an asset to an irrevocable trust or your family members before the asset gains significant value. If you own, directly or indirectly, an asset that has significant value, it is taxed at death.
hvalika 11y ago
Just a slight clarification -- there is no "avoidance" going on here. This is merely "deferral." Transferring the shares of any company to another company is often a tax free transaction (provided some basic rules are met) under Section 351 of the tax code. (This is Tax 101).

by jayess 11y ago

amalag 11y ago

I don't want to be totally negative on Zuckerburg. Maybe he will do good with the money. However: An estate would not be taxed on the value of the LLC, the same way one he is not taxed on the value of his stock. It is taxed when sold. If he assigns family members as owners there would not be additional taxes when he passes away if the LLC's money continues to grow. >11. Limited Liability Company (LLC) and Family Limited Partnership (FLP) FLPs and LLCs let you reduce estate taxes by transferring assets like a family business, farm, real estate or stocks to your children now, and still keep some control. They can also protect the assets from future lawsuits and creditors. >Here's how they work. You and your spouse can set up an LLC or FLP and transfer assets to it. In exchange, you receive ownership interests. Though you have a fiduciary obligation to other owners, you control the LLC (as manager) or FLP (as general partner). You can give ownership interests to your children, which removes value from your taxable estate. These interests cannot be sold or transferred without your approval, and because there is no market for these interests, their value is often discounted. This lets you transfer the underlying assets to your children at a reduced value, without losing control. https://www.estateplanning.com/Understanding-Estate-Taxes/ https://www.estateplanning.com/Understanding-Estate-Taxes/

harryh 11y ago
If Zuck "transfers assets like a family business, farm, real estate or stocks to his children now" then this transfer would, presumably, be far far in excess of the $14,000 annual exemption and thus subject to taxation. This LLC is not an effective way to avoid estate taxes on the vast majority of his wealth.
jstalin 11y ago
That's not true. The estate would be taxed at 40% for any value of the LLC over about $10.5 million (today's estate-tax exemption). Family LLCs can work for reducing the estate tax if you transfer ownership interests during your lifetime at a reduced valuation, owing to the fact that the membership interests are not marketable, giving them a lower value than the market value of whatever the LLC holds. The only way you avoid the estate tax is if you transfer an asset to an irrevocable trust or your family members before the asset gains significant value. If you own, directly or indirectly, an asset that has significant value, it is taxed at death.

hvalika 11y ago

Just a slight clarification -- there is no "avoidance" going on here. This is merely "deferral." Transferring the shares of any company to another company is often a tax free transaction (provided some basic rules are met) under Section 351 of the tax code. (This is Tax 101).