Facebook Founders Find Estate Planning Fix

Mark Zuckerberg and Dustin Moskovitz, the co-founders of Facebook and two of the world’s youngest billionaires, may seem too young to be thinking about estate planning. But in 2008, when they were both 24, they used an estate planning tool that is more familiar to people two or three times their age.

Not too long ago, the taxation and accounting world found a new star in Mark Zuckerberg, the wonderkid behind Facebook. Why? Because his unparalleled control over the company was about to create the biggest tax bill ever when the company went public and his stock became publically known.

Certainly, the taxation and accounting world can be rather morbid in that regard, but at least for Zuckerberg there is good news coming out of the woodwork. With or without taxes, he has saved a great deal of money through forethought and proper estate planning.

It is unique to meet anyone who begins their estate planning at age 25 but Mark Zuckerberg and his partner in business, Dustin Moskovitz, did just that. As reported in a recent article from Deborah Jacobs at Forbes, the pair had the foresight to set up their private stock with a certain kind of trust before the true boom in value. As a result, they locked in that lower value and locked out those incredible taxes. As Jacobs estimates in her article, the pair shifted more than $185 million into what’s often known as a zeroed-out GRAT. In somewhat more plain English, this Grantor Retained Annuity Trust in which the rate of appreciation exceeds the rate of interest, secures the excess amount (like all that created from going public) from taxation for the beneficiaries of the GRAT.

Sometimes the young do have something to teach their elders, and in this case the crew over at Facebook serves as an incredible example of what has been an incredible technique.

For more information on Zuckerberg and his partners check out the original article. Also, if you’re interested in learning more about GRATs, there’s no time like the present to investigate whether you should create your own.

Note: Not only is the GRAT most advantageous when an economy is set to rebound, but the process itself is in the sights of many new budget and taxation plans by the current administration. (Translation: This opportunity might not be around much longer!)


Reference: Forbes (March 7, 2012) “Facebook Billionaires Shifted More Than $200 Million Gift-Tax Free

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