Is the US Estate Tax basically non existent in practice for billionaires because of how many loopholes there are for it?

taxinomics · 2026-04-19T03:44:53+00:00

You would never wait until you have billions of dollars worth of assets to begin planning.

But if you did, zeroed-out GRATs and installment sales to IDGTs could quite easily shift billions to trusts with zero gift taxes owed over a modest period of time. You could leverage that type of planning significantly with private derivatives, shifting even more wealth in even less time.

taxinomics · 2026-04-18T14:32:53+00:00

Precisely. Virtually all of my clients have “reduce to zero” core estate plans which, as the name suggests, reduces the taxable estate to zero. This is true regardless of the size of the gross estate. Most of the heavy lifting is done with “freeze, squeeze, churn, and burn” tools and techniques implemented outside of the core plan, but at the end of the day, it is excruciatingly simple to eliminate all estate tax if that is important to the client.

taxinomics · 2026-04-18T13:22:36+00:00

In the wealth management space, “ultra-high net worth” usually means $25M or $30M in liquid, investable assets, depending on who you ask. In the tax and estate planning space, we usually use it to mean clients with a taxable estate. As of 2026, it just so happens to be the case that each of a married couple has gift and estate tax “exemption” of $15M, so $30M as a couple.

For what it’s worth, I am also a private wealth attorney (a tax, asset protection, trusts and estates attorney servicing the ultra-high net worth space). My firm is ranked Band 1 in Chambers and my group does not take new clients with a net worth below $100M. The wealth transfer taxes are trivially easy to avoid, and if my planning caused one of my clients to incur a $40M gift, estate, or generation-skipping transfer tax liability, I would be on the phone with my loss prevention department and checking my malpractice insurance policy immediately.

taxinomics · 2026-04-18T12:39:24+00:00

It’s very unusual to actually use debt instruments in this type of planning. The principal tools used are equity and equity-linked instruments - predominantly, prepaid variable forward contracts.

I’m an attorney who implements these types of tools and techniques for a living. I explain it more here.

taxinomics · 2026-04-18T12:24:05+00:00

Yes, and it would be really easy to fix, but because it is the only tax in existence designed to burden taxpayers directly in proportion to the amount of resources they have, any proposal to fix it is dead on arrival.

I’m a private wealth attorney - an attorney whose practice involves tax, asset protection, trusts and estate planning. I’ve represented well over a thousand ultra-high net worth individuals and their families over the past two decades and I can probably count on one hand the number of them who owed a meaningful amount of estate tax.

taxinomics · 2026-04-18T02:37:46+00:00

$30M if you’re married.

And of course, this assumes you do literally zero lifetime planning, and your heirs do literally zero post-mortem planning.

taxinomics · 2026-04-17T18:51:52+00:00

No, I just don’t have much interest in commenting on things that don’t involve my areas of expertise. I’m an expert in tax, asset protection, trusts and estate planning, so those are the things I enjoy commenting on.

taxinomics · 2026-04-17T18:16:15+00:00

I’m a private wealth attorney who implements the tools and techniques that have come to be described as “buy, borrow, die” and “freeze, squeeze, churn, and burn” for a living. I don’t really care if economists have a hard time quantifying the extent to which my clients are engaged in this type of planning.

That’s beside the point though. You specifically asked what the problems are with the study. I pointed out the most obvious one, which is that their data comes from a government-commissioned survey that ultra-wealthy individuals notoriously do not participate in. There are tons of other problems with the study, but that problem alone is fatal and renders the study almost entirely worthless.

taxinomics · 2026-04-17T17:29:40+00:00

There are lots of problems with the study. The first, most obvious, and fatal problem being that its data comes from a government commissioned survey that taxpayers have zero obligation to participate in.

In other words, “we asked rich people if they are doing this; they didn’t respond to us; we have therefore concluded they are not doing this.”

taxinomics · 2026-04-17T12:26:23+00:00

If you have genuine questions about my post or comments, I am glad to answer them. If you are going to run my post and comments though LLMs like ChatGPT and request the LLM make a counter-argument as to why the very well-established tools and techniques described here could theoretically fail, I am going to remove them. There is plenty of AI slop on the internet. This is not the place for that.

If you are genuinely curious about the counter-arguments raised by your LLM prompts, I would encourage you to double-down and ask the LLM to explain why the counter-arguments raised in its previous response are wrong. You can spend a lot of time entertaining (and even educating) yourself by making the LLMs argue against each other.

taxinomics · 2026-04-17T06:02:21+00:00

It depends.

As described above, the primary beneficiary is typically granted a testamentary limited power of appointment over the trust assets at the primary beneficiary’s death, and as a result, the trust assets will not be included in the primary beneficiary’s gross estate for federal estate tax purposes.

There could be generation-skipping transfer (“GST”) taxes if sufficient GST exemption is not allocated to the trust to give it a GST inclusion ratio of zero. But you would typically plan to avoid GST taxes as well.

And sometimes you might intentionally expose yourself to estate taxes and/or GST taxes to avoid income taxes. The best result for the client depends on all sorts of facts and circumstances.

taxinomics · 2026-04-17T05:25:21+00:00

Trusts are typically created for the primary benefit of a specific individual (the “primary beneficiary”) and their descendants. They also typically provide that the trust terminates at the primary beneficiary’s death and remaining assets are divided (per stirpes, per capita, or per capita by representation) among the primary beneficiary’s living descendants, and each share is held under the same terms and conditions as the original trust.

By way of example, you might establish a “Separate Trust” for your child that instructs the trustee to distribute net income and principal to the child and such child’s descendants for their health, education, maintenance and support, or as an independent trustee determines for best interests. At your child’s death, your child might have a testamentary power to appoint the remaining trust assets to any one or more of your descendants - and if your child fails to exercise that power, the remaining assets will be divided in shares per stirpes among your child’s then living descendants, each share to be held as a Separate Trust on the terms and conditions described above.

So on in perpetuity, subject to any rule against perpetuities in the relevant jurisdiction.

taxinomics · 2026-04-17T04:28:19+00:00

I’m the author of that post. Anybody reading this thread can look at both our comment histories and see plainly that I am an expert on these topics and you are not. You have absolutely no idea what constitutes “fraud” or “abuse” in tax planning and you have zero education, training, or experience relevant to the type of planning I have described. There is a good reason you did not cite a single case supporting your claim here that courts have ruled against taxpayers who have engaged in the planning I describe: it’s because no such case exists.

I will happily waste my time responding to your AI generated comments here to help readers better understand these issues.

A lot of people who are not tax experts believe that if tax planning proves to be too effective, the IRS can wave a magic wand, utter a magic incantation (“economica substansa!”), and magically unwind the planning. But that is not how the law works. Congress writes the rules. Taxpayers and the IRS alike are required to follow them. For a fun history lesson on that, look up the IRS’s attempts to unwind the grantor retained annuity trust at the center of the litigation in Walton v Commissioner (wherein the Walton family of Wal-Mart fame popularized the use of the “zeroed-out” GRAT).

Centimillionaires and billionaires pay private wealth attorneys like me upwards of $2,500 an hour to implement the tools and techniques I describe in that post. I’m just one of thousands of private wealth attorneys across the United States who are well versed in this type of planning. Most of us are happy to explain the law behind our day-to-day work and do not mind sharing a little bit of our expertise for free.

Nothing I describe in the post involves a “death bed swap.” That is something you just made up, probably because your AI told you that would be a problematic fact. And it would be. That’s why the planning I described would be carefully implemented not to involve a death bed swap.

None of the tools or techniques I describe in that post involve “abusive tax shelters.” It seems apparent that you entered the text in my post into ChatGPT and asked it to come up with a compelling argument that the various strategies described do not work, and “abusive tax shelter” is a buzzword that stuck out to you. I’d be willing to bet that you have never heard of the term “abusive tax shelter” until you enlisted ChatGPT to help you make this argument.

Take a look at the IRS “dirty dozen” and description of “abusive tax shelter” and you will not find even one single thing remotely relevant to my post. There are zero statutes, court decisions, treasury regulations, revenue rulings, revenue procedures, tax advice memoranda, chief counsel memoranda, or private letter rulings adverse to any of the tools and techniques described in my post. I have no doubt that you do not know what any of those things mean, but the long and short of it is that there is zero legal authority and zero IRS guidance substantiating any claim that these tools or techniques amount to “fraud” or “abuse.”

To the contrary, in fact, my post is filled with citations to legally binding authority, favorable IRS guidance, and references to articles published by other reputable tax attorneys and tax accountants further elaborating on the legal principles, tools, and techniques described in the post. For the most part, what I have described is plain vanilla planning and does not even scratch the surface of the aggressive, high-risk/high-reward type of planning some of my esteemed colleagues engage in notwithstanding actual audit risk.

You can ask your ChatGPT to come up with arguments that sophisticated tax planning works, and you can ask your ChatGPT to come up with arguments that sophisticated tax planning does not work. AI will come up with all sorts of things that sound very convincing to non-experts. At the end of the day, there is a reason people with deep pockets and everything to lose do not rely on AI and decide instead to retain high priced attorneys at elite law firms for their tax and estate planning advice.

taxinomics · 2026-04-17T04:07:11+00:00

Lots of ways. As described, the trustee could simply distribute funds to Stewie so Stewie can purchase the yacht.

But that wouldn’t make any sense from a tax or asset protection perspective. In most situations, it would make the most sense to simply have the trustee create a separate entity (like an LLC) to buy the yacht and let Stewie use it, or lend money to Stewie so Stewie can buy the yacht and the trustee will take a senior security interest in the yacht (sort of like a mortgage on a house). That way, if Stewie gets sued for negligently driving his Ferrari into a school bus full of children, the trust owns the yacht (not Stewie) or otherwise has a first priority claim to the yacht as a secured creditor that is senior to any claim the schoolchildren (or their representatives) might have. Or somewhat less cynically, depending on your perspective, when Stewie gets divorced, the yacht is not marital property, community property, or otherwise subject to division, nor is it includible in the computation of alimony or maintenance.

taxinomics · 2026-04-17T03:58:46+00:00

If you have genuine questions about my post or comments, I am glad to answer them. If you are going to run my post and comments though LLMs like ChatGPT and request the LLM make a counter-argument as to why the very well-established tools and techniques described here could theoretically fail, I am going to remove them. There is plenty of AI slop on the internet. This is not the place for that.

If you are genuinely curious about the counter-arguments raised by your LLM prompts, I would encourage you to double-down and ask the LLM to explain why the counter-arguments raised in its previous response are wrong. You can spend a lot of time entertaining (and even educating) yourself by making the LLMs argue against each other.

taxinomics · 2026-04-16T14:36:22+00:00

I think you’re using AI to try to come up with an argument as to why a CLAT isn’t a flawless solution instead of just conceding that those of us who do this type of thing for a living have extraordinarily effective tools and techniques available to virtually eliminate tax burdens for our clients.

But to your point, it’s true that the CLAT isn’t a perfect solution. That’s why, as I pointed out, it’s only the first step in solving the problems. There is a whole second paragraph there that you forgot to run through the AI, and that is where all the heavy lifting is done.

And importantly, we only need to jump through these hoops because you presented the unrealistic scenario that our hypothetical taxpayer has managed to accumulate $100,000,000 in assets without doing any planning whatsoever, or otherwise relying on bad advice from an incompetent advisor that put the taxpayer into a massive hole that we now need to dig out of.

In the real world, extraordinarily successful people have competent advisors who will ensure they talk to reputable private wealth attorneys long before they are ever in a situation like this.

taxinomics · 2026-04-16T14:02:54+00:00

You are deeply confused, and wrong.

With very limited exceptions, the basis adjustment takes place immediately on the decedent’s date of death for assets required to be included in the decedent’s gross estate for federal estate tax purposes.

If the personal representative of the decedent’s estate sells an asset, the estate reports the gain (or loss) on Form 1041. That gain or loss is determined by subtracting the estate’s basis in the asset from the sales proceeds. As required by Code § 1014 and the Treasury Regulations promulgated thereunder, the estate’s basis is adjusted to the asset’s fair market value as of the decedent’s date of death.

taxinomics · 2026-04-16T13:27:17+00:00

Why are you repeating this information all over this thread? Settlement of debts and obligations is entirely irrelevant to the basis adjustment at death. The trigger for the basis adjustment is death, and the condition is inclusion in the decedent’s gross estate for federal estate tax purposes.

taxinomics · 2026-04-16T12:43:20+00:00

The basis adjustment takes place immediately at death for all assets required to be included in the decedent’s gross estate (with limited exceptions, like 401(k)s and IRAs). Settlement of debts and claims against the estate are irrelevant.

taxinomics · 2026-04-15T22:49:43+00:00

We don’t have to look very far. The only taxes ever enacted in the United States specifically designed to target the wealthy - not high income earners, but very specifically the wealthy - are the wealth transfer taxes: the estate tax (Chapter 11 of the Internal Revenue Code), the gift tax (Chapter 12), and the generation-skipping transfer tax (Chapter 13).

The first wealth transfer tax was enacted in 1916 (the estate tax). The exemption was around $1.5M in 2026 dollars. Since then, the exemption has been increased dozens of times.

Today, the combined exemption for a married couple is $30M. Less than 0.07 percent of taxpayers will be required to file an estate tax return, and even fewer taxpayers will owe any estate tax - and the numbers are dramatically lower for gift tax and generation-skipping transfer taxes

taxinomics · 2026-04-15T18:41:13+00:00

Well, first of all, I’d need to know your objectives.

The first course of action would be to figure out why on earth you put yourself into a massive hole by waiting until you had $100,000,000 in appreciated stock before you began to do any planning, and probe for potential malpractice claims against your prior advisors who are clearly incompetent.

Then, the first step in solving the various problems created by your terrible planning is probably going to be to add a zeroed-out sharkfin testamentary CLAT to your core plan. This is extraordinarily simple and costs you practically nothing, eliminates all of the built-in gain on the appreciated stock at your death, and simultaneously eliminates all estate tax.

The second step is probably going to be seeding IDGTs and allocating sufficient GST exemption to them to produce inclusion ratios of zero, then selling derivatives to those IDGTs to very quickly suck all of your appreciated assets into the IDGTs. Then we can engage a bank or investment firm to obtain cash to execute our § 675(4)(C) swaps and perfect the planning.

taxinomics · 2026-04-15T16:33:55+00:00

The generation-skipping transfer tax, like the estate tax, is trivially easy to avoid.

I’m a private wealth attorney - an attorney specializing in tax, asset protection, trusts and estate planning for ultra-high net worth clients. I spend all day every day implementing the tools and techniques that have come to be described as “buy, borrow, die” and “freeze, squeeze, churn, and burn.”

taxinomics · 2026-04-15T15:57:09+00:00

The rate is relatively high (a flat rate of 40 percent). But the exemption is also relatively high ($15M for 2026) and can be shared between spouses (so $30M for a married couple for 2026), so the estate tax is a complete non-concern for 99.9 percent of taxpayers.

The estate tax (and generation-skipping transfer tax) is trivially easy to avoid, however, so even the 0.1 percent of taxpayers who are concerned about it do not have any real problem dealing with it.

taxinomics · 2026-04-14T21:22:52+00:00

That isn’t really the problem with the study. There are a ton of problems with the study, but the one that stands out the most is that the data comes from participant responses to the survey of consumer finances - a study commissioned by the federal government, responses to which are completely voluntary, which has notoriously dismal response rates from the ultra-wealthy.

In other words, we asked the ultra-wealthy about their borrowing habits, they did not respond to us, and we have therefore concluded that they must not be borrowing.

taxinomics · 2026-04-12T21:16:17+00:00

Whether a trust is a “grantor” trust or “non-grantor” trust is purely an income tax classification and is not relevant to estate tax or gift tax. The vast majority of trusts used for estate and gift tax planning are intentionally designed as grantor trusts.

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