Steven Mnuchin, Donald Trump’s nominee to lead the U.S. Treasury Department, may be taking advantage of a loophole that allows the nation’s richest families to shield their wealth from estate taxes for generations into the future.
Mnuchin placed assets worth at least $32.9 million into the Steven Mnuchin Dynasty Trust I, according to a disclosure to federal ethics officials made public Wednesday, as well as securities filings by a company where he used to work. The assets include corporate stock and interests in a Willem de Kooning painting and a three-engine corporate jet.
Dynasty trusts are designed to foil the estate tax, which in its current form takes a 40 percent bite of a person’s fortune at death. Because the first $5.5 million of wealth is exempt from the tax, and there are ample opportunities to avoid it, in 2013 only one in 555 estates paid anything at all.
Structured properly, dynasty trusts comply with the law and are common among the wealthiest Americans, tax professionals say. Tara Bradshaw, a spokeswoman for Mnuchin, declined to comment.
Later Generations
Even among people wealthy enough to feel the estate tax’s sting, only an elite few have need of dynasty trusts. They’re typically designed to convey wealth not to one’s children and grandchildren, but to later generations, according to Jerome Hesch, a tax lawyer in Miami and the director of the Notre Dame Tax & Estate Planning Institute.
Such trusts aren’t much use to “most people who are middle class -- and I define middle class to be under $20 million,” Hesch said. “Twenty million, when you dissipate it among your children and grandchildren, it’s probably already going to be consumed.”
Mnuchin’s net worth is about $620 million, after a trading career at Goldman Sachs Group Inc. and profitable investments in Hollywood movies and a California bank, according to the Bloomberg Billionaires Index. The 54-year-old is twice divorced and has three children from his second marriage, the oldest of whom is 14.
President Barack Obama’s administration has repeatedly called on Congress to close the loophole allowing dynasty trusts, made possible when some states overturned centuries-old trust law to enable federal tax avoidance. Trump, who succeeds Obama on Jan. 20, has called for the elimination of the estate tax altogether, making tax planning like Mnuchin’s obsolete. As Treasury secretary, Mnuchin would be in charge of the administration’s tax policy.
‘Death Tax’