Hillary and Bill Clinton dodge 'death tax' by putting their New York home into trust - despite presidential candidate's efforts to make the wealthiest pay more
- Hillary and Bill Clinton have created residence trusts for their Chappaqua, New York home to legally evade the so-called 'death tax'
- The tactic is often only used among the top one per cent of the nation to reduce their estate tax bills and leave hefty gifts for their children
- The Clintons purchased the Chappaqua home for $1.7million in 1999, and it is now estimated to be worth $1.8million
- By moving the home into trusts, any increase in the property's value is outside the Clintons' estates, and therefore out of the IRS's reach
- The decision is common among multi-millionaires, as only estates worth more than $5.45million face an estate tax, which tops out at 40 per cent
- Throughout the current presidential campaign Hillary Clinton has been calling for estate tax reform that would raise taxes for wealthy Americans
- The tax would apply to estates exceeding $3.5million per person at a top rate of 45 per cent
Hillary and Bill Clinton have been using financial planning strategies to reduce their exposure to the so-called 'death tax' that she wants to raise, new documents have confirmed.
The couple have created residence trusts for their Chappaqua, New York, home, a tactic often only used among the wealthiest to reduce their estate tax bills and leave hefty gifts for their children.
Democratic candidate Hillary Clinton has been calling for estate tax reform, demanding taxes on high-income and wealthy Americans are raised.
But because of the trusts, the couple could avoid the higher taxes suggested in her reforms.
Hillary and Bill Clinton have created residence trusts believed to be holding their Chappaqua, New York, home in an attempt to reduce estate tax bills on the multi-million dollar houses
The Clintons created residence trusts in 2010, with one under Bill's name and one under Hillary's name. They believed to hold the family's Chappaqua, New York, home (pictured), which was purchased in 1999 for $1.7million and is now worth $1.8million
The couple also has a Washington, DC, home (pictured), which they bought in 2001 for $2.8million and is now worth more than $6million. The DC home is not in a trust
The Clintons created residence trusts in 2010, with one under Bill's name and one under Hillary's name, according to the presidential candidate's public financial disclosure report.
The trusts are believed to hold the couple's home in Chappaqua, New York. Their home on Embassy Row in Washington, DC, is not in a trust.
Because the couple has two residence trusts on the New York home, they can set different term lengths for each trust, and if one of them dies the other's trust wouldn't be affected.
The couple also have two life insurance trusts, which can help cover the costs of estate taxes.
All of the trusts were confirmed in financial declarations filed by Clinton last week.
They bought the Chappaqua home in 1999 for $1.7million, while the DC home was purchased for $2.8million in 2001.
The move to put the New York home in trusts is common among multi-millionaires, as only estates worth more than $5.45million face an estate tax, which tops out at 40 per cent.
By moving the home into trusts, any increases in the properties' value - also known as capital gains - are outside of the Clintons' estates, and therefore out of the IRS's reach when they die.
Although the house would not currently appear to be caught by estate tax itself, putting it in the trust prevents that becoming possible in the future - which is entirely possible if house prices rise, or equally if the estate tax ceiling is lowered, in line with Clinton's plans.
The move will also exclude most of the home's values from the IRS's calculation that will determine how much of their estate is taxable.
It would cut the amount Chelsea Clinton would pay estate tax on by $1.7 million - although she is still likely to face paying a substantial sum as her parents' net worth is estimated at $110 million by Fortune.
As an additional benefit if she is gifted the Chappaqua home, she would pay tax at the rate which applied when the trust was opened - regardless of whether her mother gets her way and increases it.
When the residence trusts' terms run up, the property will be transferred to a beneficiary, who is likely Bill and Hillary Clinton's daughter, Chelsea Clinton
Following the residence trust terms, the properties will be transferred to a beneficiary, who is most likely to be Chelsea Clinton. The terms of the trust do not have to be publicly disclosed.
Earlier this year, Hillary Clinton released an estate-tax plan that would raise taxes for high-income and wealthy Americans, according to the Wall Street Journal.
The tax would apply to estates exceeding $3.5million per person at a top rate of 45 per cent, rather than the current $5.45million per-person exemption and a top rate of 40 per cent.
As a result, each year the tax would affect 0.4 per cent of estates, rather than the 0.2 per cent the tax effects currently.
Though the Clintons' decision to put their home in trusts contradict's Hillary Clinton's tax plan, Don Williamson, director of the Kogod School of Business at American University, told Daily Mail Online that move was 'good estate planning'.
'Bill and Hillary take the house and they put it into a trust. In that trust they're allowed to stay and use the home for X number of years. Then, it belongs to Chelsea,' he said.
Williamson gave an example in which he suggested the Clintons put a $1million home into a residence trust for 20 years.
By moving their New York home into trusts, any increases in the properties' value - also known as capital gains - are outside of the Clintons' estates, and therefore out of the IRS's reach when they die. Pictured above, Bill and Hillary stand outside their Chappaqua home in 2000, shorty after purchasing it
'Estate plans say that when they give the house to a trust, it's put into a fair market value of say, $1million 20 years from now,' Williamson said.
He added: 'Discount [the home's] rate for 20 years, so the gift they have to report on their gift tax return would only be $200,000, rather than a million, and that house is only going up in value.
'The house might be worth $5million when Chelsea gets it. So Chelsea has received $5million at little wealth transfer value.'
The Clintons' Chappaqua home is currently valued at $1.8million, while the DC house has ballooned to more than $6million, according to Zillow.
After the house is transferred to the beneficiary - likely Chelsea - Bill and Hillary will either have to leave the house or pay rent to the owner of the estate.
For the asset to move completely out of the estate, the Clintons would have to completely outlive the terms of the trust.
Typical trusts last for approximately ten to 15 years to maximize the property value discount, according to Bloomberg.
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