TaxProf Blog

Editor: Paul L. Caron, Dean
Pepperdine University School of Law

Sunday, October 13, 2013

WSJ: How Twitter Insiders Cut Their Taxes

Twitter logoWall Street Journal:  How Twitter Insiders Cut Their Taxes, by Laura Saunders:

Twitter's elite aren't just planning the firm's initial public offering. They are protecting their estates.

The social-networking company's chairman, Jack Dorsey, is 36 years old, while Evan Williams, the largest individual shareholder, is 41, and Chief Executive Richard Costolo is 49. All three men have been making canny estate-planning moves, according to information from the IPO documents.

The moves could save Messrs. Dorsey, Williams and Costolo a total of at least $115 million, and perhaps far more, in federal estate tax at current rates, assuming a Twitter offering price of at least $28 a share. The current top federal estate-tax rate is 40%, and Twitter's home state of California has no state estate tax.

Those projected savings are less than the estimated $200 million skirted by six Facebook insiders who made estate-tax moves before last year's stock sale. Still, they help show how careful planning can benefit the truly wealthy—people with assets far in excess of the estate- and gift-tax exemption of $5.25 million per individual, or $10.5 million per couple. ...

Messrs. Dorsey, Williams and Costolo didn't respond to requests for comment. Estate planners say they feel comfortable interpreting the insiders' moves based on the language in the offering documents and their knowledge of the terrain. Here are the techniques—and how each one works.

  • Grantor-retained annuity trusts
  • Gift trusts
  • Single-member limited liability companies.

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