An extensive dive into the sheltering structures of a Nvidia CEO Jensen Huang offers a primer on how to save on estate taxes in the U.S.
In December, the New York Times published a deep dive into tools used by the Huang family to nurture wealth—and more specifically to protect wealth from estate taxes. As noted in the article, the techniques used by Mr. Huang to create generational wealth are not specific to him but are tools used by the high asset taxpayers with an interest in reducing their tax burden.
Through the strategic application of these techniques, the article notes Mr. Huang is on target to save approximately $8 billion on his eventual estate tax bills. Mr. Huang graduated from Stanford University and launched Nvidia in 1993. Varying estimates place him as either the ninth or tenth wealthiest individual in the world.
Cautious and creative wealth management is used around the world by the wealthy and ultrawealthy to protect and grow their largess. Following are some points that assist the Huang family—and continue to help other high-asset taxpayers guard their portfolio:
- Creative use of novel tax concepts and legal rulings: Avoiding excessive taxation is not the same as evading it. For taxpayers with a deep bench of financial and tax professionals, legitimate tax tools can be used to protect wealth and promote its growth.
- Limitations of the IRS: For more than a decade the IRS was underfunded and bootstrapped regarding resources and technology. This meant the IRS was unable to engage in large-scale campaigns to pursue, identify, and enforce payment of tax liabilities and break up abusive tax schemes. Wealthy taxpayers did not see significant enforcement action until the agency was funded again through the Inflation Reduction Act. We wrote recently about efforts in 2024 that resulted in the IRS collecting more than $1 billion in overdue taxes from high-asset earners. That compliance effort is likely to be scaled back or eliminated by the incoming administration in the coming year, a much-hoped-for move by wealthy Americans.
- Use of specific transactions: The NYT article regarding Mr. Huang mentions specific tools used by high-income taxpayers. One of those is a grantor annuity trust or GRAT. Basically, a GRAT is a type of trust that allows the transfer of wealth to beneficiaries without expending all of the federally allowed lifetime exclusions for gifts and estate taxes. Another trust mentioned is the Intentional Defective Grantor Trust (IDGT). An IDGT is “defective” because it removes assets assigned to the trust from the estate of the grantor—but it also allows the grantor (not the estate or beneficiaries) to pay income taxes attributed to those assets.
A successful entrepreneur, Mr. Huang continues to build and maintain generational wealth for his family. If you have questions about techniques and tools to legally reduce your estate tax profile or overall tax burden, speak with an experienced tax attorney for guidance.
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