With a big enough spread between the actual performance and the IRS rate, a Jackie O. trust can theoretically save so much tax that it leaves a family richer than if it hadn’t given a dime to charity.
Alice’s mother, Helen, chose an auspicious time to set up her first four Jackie O. trusts in January 2003. The IRS rate of 3.6 percent was the lowest since 1970, and Treasury yields rose the next month.
Happy Returns
Those trusts can only save taxes if they beat that 3.6 percent rate. From 2007 to 2011 -- the years for which the IRS provided public copies of the trusts’ tax returns -- they did so handily.
The trusts returned about 14 percent a year before taxes during that period, according to a Bloomberg analysis of IRS filings. That growth means the four Helen Walton trusts have been accumulating assets faster than they give them away. As of 2011, they held a combined $2 billion, up from $1.4 billion in 2007.
Barring a stark reversal of fortune, at least that much money will probably pass to Helen Walton’s heirs.
Jackie O. trusts “are primarily charitable planning tools whose only general guarantee is that 100 percent of the assets, plus an assumed return approved by the IRS, will be distributed to charity,” family spokesman Morgan said in a statement. He declined to answer detailed questions about the trusts.
Generation Shift
Because assets are locked up for decades, such trusts are attractive only to the wealthiest families, said John Anzivino, a principal at Kaufman Rossin & Co. in Miami.
“You have to be someone who’s willing to say, ’I don’t need this extra money,’” Anzivino said. “‘At the same time, we hope to shift it down a generation, without tax.’”