Harold Hamm executed one of the largest wealth transfers in U.S. history last week, handing each of his five children a stake worth about $2.3 billion in Continental Resources Inc., the shale drilling company he founded more than 50 years ago.

Like other ultra-rich Americans, Hamm’s massive gift, years in the making, is likely to be passed down largely tax-free.

Hamm, 76, seems to have relied on two of the most common loopholes for avoiding the U.S.’s 40% estate-and-gift tax levy as he shifted the majority of his fortune. The key to these techniques, both perfectly legal, is to carefully structure transactions so they benefit heirs but aren’t technically gifts at all. Democrats had proposed shutting down the strategies in prior versions of President Joe Biden’s economic agenda, which is now stalled in Congress.

Despite the transfers, Hamm has assured investors that he retains control of Continental because his children aren’t allowed to sell shares until his death.

“I have said for a long time Continental is a company built to last,” Hamm said in a statement. “This process has been going on for over a decade with two primary objectives of proper succession planning and long-term continuity of the company.”

Wildcat Way
In a move befitting a wildcatter like Hamm, the gifts appear to have been turbocharged by canny timing. Hamm began his current estate plan in 2015, after the price of oil had plunged and Continental shares were in a slump. In mid-2020, when the pandemic dealt a devastating blow to the oil industry and U.S. interest rates plumbed record lows, Hamm restructured the transactions to boost the advantage to his heirs. At one point in 2020, his fortune had shrunk to $2.4 billion, down almost 90% from its peak.

Hamm and his family are now worth about $18 billion, according to the Bloomberg Billionaires Index. Filings show Hamm used an LLC and more than a dozen different trusts to complete the transfers.

“While it could seem exotic to many taxpayers, using multiple transactions and trusts to avoid estate tax is very common among high-wealth families,” said Tabetha Peavey, an attorney adviser at the Tax Law Center at New York University, who previously worked on estate planning.

Massive transfers of publicly-traded stock between family members aren’t uncommon among the billionaire class. A Bloomberg News investigation last year found Nike Inc. founder Phil Knight used a variety of techniques to move billions of dollars to his family tax-free. Zoom Video Communications Inc. Chief Executive Officer Eric Yuan transferred $6 billion worth of shares to unspecified beneficiaries for “estate planning” reasons last March. Late casino mogul Sheldon Adelson shuffled shares of Las Vegas Sands Corp. in and out of more than 30 trusts to pass along at least $7.9 billion to family members. Cosmetics heiress Jane Lauder became an overnight billionaire in 2013 when she received L’Oreal SA shares worth more than half a billion dollars.

In Hamm’s case, the transfer plan has a similar flavor to his career, which has been defined by a tolerance for risk and tumult. By making deals near the bottom of the oil market, Hamm gave his children the chance to profit from any recovery.

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