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If I Had a Dollar for Every Tweet

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Shutterstock/Anthony Correia

Shutterstock/Anthony Correia

Nobody needs a little birdie to tell them that Twitter went public recently. According to PrivCo, Twitter’s initial public offering created 1,600 new millionaires. All that new money is also a financial boon for the state of California to the tune of approximately $479 million in taxes. The IRS may get close to two billion dollars as well.

The IPO on November 7, 2013, was a festive day for the company. The offices in San Francisco opened early and Twitter employees watched the events unfold on TV while enjoying tasty treats. Company chef, Lance Holton, (aka @birdfeeder) made cronuts, which are a much sought after combination of a croissant and a donut.

Twitter executives are a shrewd bunch, so it’s definitely not been all cute birds and pastry. According to a Wall Street Journal article, based on information gathered from IPO documents, estate plans were put into place to help preserve their assets. Grantor-retained annuity trusts, gift trusts and single-member limited liability companies (LLCs) were some of the mechanisms said to be used.

According to estate-planning expert Andrew Katzenstein,”The trick is to transfer assets when they aren’t worth a lot, so that when they are, you don’t have to pay a tax of 40% or more for the privilege of leaving it to heirs.”

The article further goes on to say that based on the name of a trust, Twitter co-founder Evan Williams might be part of Red Sox Nation. Apparently 564,000 of his Twitter shares are in the Green Monster Trust. Also more than 44 million shares are said to be held in a single-member LLC called Obvious LLC. John Ramsbacher, a California lawyer specializing in pre-IPO planning, explains the benefits of the LLC.

“[I]f Mr. Williams simply gave $1 million worth of Twitter shares to his children, the transfer could incur gift taxes of $400,000. But if the shares are in his LLC and he gives them an interest in that, the gift might be worth only $650,000, with taxes of $260,000. That is because the LLC shares aren’t easily traded and the recipient doesn’t control the LLC.”

“[T]he Green Monster Trust could use a promissory note to buy discounted interests in the LLC. That would put even more Twitter stock into the trust at less than market value, further minimizing gift taxes. In some cases, the only cash payment required for years is the annual interest on the note.”

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November 26th, 2013 at 8:00 am

Posted in Estate Planning,Legal News

Tagged with ,