Wealthy families held a record $20.9 billion in Jackie O. trusts in 2011, the last year for which IRS figures are available, almost twice the amount they held in 2000.
Leon Hess, the late oil magnate and New York Jets owner, created one at his death in 1999 that’s now worth $682 million. Hedge-fund billionaire David Tepper’s trusts are worth $155 million. Elaine Marshall’s Jackie O. trusts are worth $169 million, and the Johnson family’s is worth $91 million. Representatives of all these donors or their families declined to comment or didn’t return calls.
‘Unique Opportunity’
The historically low U.S. interest rates since 2009 are making Jackie O. trusts more popular and spurring tax planners to develop variations designed to squeeze out even more tax savings.
“This time in history is probably going to go down as a unique opportunity” to “transfer assets out of an estate at the lowest cost,” said Charles J. McLucas, president of Charitable Trust Administrators Inc. in Tustin, California.
The interest rates have prompted calls for reform even by some estate planners who set up Jackie O. trusts and the non- profit groups that benefit from them. One alternative floated at a Senate Finance Committee hearing in 2008 was to value the donation when the trusts actually give the money to charity, rather than guessing at the amount beforehand.
Back in 1989, when Congress chose Treasury yields for the trust calculation, the move effectively raised the rate from 10 percent to more than 11 percent, diminishing the potential to use the trusts to avoid taxes.
“Nobody in 1989 ever envisioned we would be in a zero interest-rate environment,” said Hesch, the Miami tax lawyer. “Once something is in the statute, and is a benefit to taxpayers, it is extremely difficult to get it out.”
Being Charitable
Helen Walton took pride in her charitable giving. “It’s not what you gather, but what you scatter that tells what kind of life you have lived,” she used to say, a phrase memorialized on the walls of the company’s Sam’s Club stores. She did much of that giving through her Jackie O. trusts.