Jensen Huang, 61, co-founder and CEO of Nvidia, is the 10th richest individual in the United States with a net worth of $127 billion. When an estate reaches such an outlandish valuation, federal estate taxes charge 40% of the total value, which can exceed $50 billion. But Mr. Hwang’s financial strategy allowed him to inherit much of his wealth with minimal tax liability and avoid an estimated $8 billion in taxes, according to securities and tax returns reviewed by the New York Times. It shows that you intend to do so.
Mr. Hwang’s strategy is not unique, but it illustrates how the ultra-wealthy often find ways to avoid inheritance taxes. Inheritance taxes, first introduced in 1916 to limit inherited wealth, have become less effective due to changes in the law and clever loopholes exploited by the wealthy. It has contributed little to federal tax revenue since the early 2000s. If taxes had kept up with the growth of the ultra-rich, they could have brought in about $120 billion in income last year. Instead, only a small portion of that amount was produced.
Daniel Hemel, a tax law professor at New York University, says that thanks to trusts and smart financial planning, about $200 billion is donated each year without paying estate taxes. These strategies are more than just clever loopholes. These are often recommended by expensive legal and financial experts who use complex tax laws, court rulings, and IRS guidelines.
Jack Bogdanski, a professor and author at Lewis & Clark Law School, said, “Good, well-trained people can sit there all day and charge $1,000 an hour and figure out how to overcome this tax.” I’m thinking about it.” As the NYT said.
Mr. Hwang’s tax strategies are attracting attention for their ingenuity. In 2012, he established an irrevocable trust that owned 5.84 billion Nvidia shares worth $7 million at the time. The measure is part of a larger program known in financial circles as “I Dig It,” and was first tested by the IRS in 1995. This type of trust avoids both estate and gift taxes and provides a shield that increases in value after the assets appreciate. Transferred.
“From an estate tax planning standpoint, this is a big deal. He did a great job,” said trust and estate attorney Jonathan Bratmacher.
By 2023, Hwang’s trust holdings had grown to more than $3 billion. Without such a strategy, heirs could face a tax bill of more than $1 billion.
In 2016, Mr. Huang and his wife, Lori, further reduced their tax burden by establishing a Grantor Retained Annuity Trust (GRAT). This technique allows assets to be transferred to beneficiaries without inheritance tax if their value increases beyond the amount repaid to the donor. Shares in these trusts have since skyrocketed and are now worth more than $15 billion.
Mr. Huang also leverages his philanthropic foundation, the Jen Sun & Lori Huang Foundation, through a significant gift of NVIDIA stock. Such donations provide an immediate tax deduction and help reduce income and inheritance taxes.
