Bill and Hillary Clinton have long supported an estate tax to prevent the U.S. from being dominated by inherited wealth. That doesn't mean they want to pay it.
To reduce the tax pinch, the Clintons are using financial planning strategies befitting the top 1% of U.S. households in wealth. These moves, common among multimillionaires, will help shield some of their estate from the tax that now tops out at 40% of assets upon death.
The Clintons created residence trusts in 2010 and shifted ownership of their New York house into them in 2011, according to federal financial disclosures and local property records.
Among the tax advantages of such trusts is that any appreciation in the house's value can happen outside their taxable estate. The move could save the Clintons hundreds of thousands of dollars in estate taxes, said David Scott Sloan, a partner at Holland & Knight LLP in Boston.
"The goal is really be thoughtful and try to build up the nontaxable estate, and that's really what this is," Sloan said. "You're creating things that are going to be on the nontaxable side of the balance sheet when they die."
The Clintons' finances are receiving attention as Hillary Clinton tours the country promoting her book, "Hard Choices." She said in an interview on ABC television that the couple was "dead broke" and in debt when they left the White House in early 2001. After being criticized for her comments, she told ABC's "Good Morning America" that she understood the financial struggles of Americans.
Capping Exemption
Having lost the Democratic presidential nomination to Barack Obama in 2008, Hillary Clinton is now deciding whether to run again in 2016.
In her last campaign, Clinton supported making wealthier people pay more estate tax by capping the per-person exemption at $3.5 million and setting the top rate at 45 percent, a policy Obama still supports. Congress decided to go in the other direction and Obama went along as part of a broader compromise. The per-person exemption is now $5.34 million.
"The estate tax has been historically part of our very fundamental belief that we should have a meritocracy," Hillary Clinton said at a December 2007 appearance with billionaire investor Warren Buffett, who supports estate taxes and is using charitable donations to reduce his eventual bill.
Without the estate tax, Hillary Clinton said, the country could become "dominated by inherited wealth."
Nick Merrill, a spokesman for Hillary Clinton, said in an e-mail that the couple's finances are an "open book." He didn't answer additional questions about their finances or her current views on the estate tax.
Two estate-planning advisers are listed on the Westchester County documents, Linda Hirschson of Greenberg Traurig LLP in New York and Rorrie Gregorio of Marcum LLP in New York. Both specialize in estate and tax planning for high net-worth families; neither returned a call for comment.
The Clintons have consistently supported higher taxes on the income and estates of the wealthiest Americans, even as their paid speeches and book royalties moved them into the echelons of the nation's top earners over the past decade.
At the end of 2012, the Clintons were worth $5.2 million to $25.5 million, according to financial disclosures that Hillary Clinton filed in 2013 as she was leaving her position as secretary of state.
That total excludes the value of their homes in Washington and in Chappaqua, New York, any savings since 2012 and gifts already made to their daughter, Chelsea, who is expecting their first grandchild later this year.
Accounts Suggest Clintons' Net Worth is $50 Million
Under federal disclosure rules for administration officials, the Clintons provided their net worth in a broad range. Most of the assets reported were in a single cash account at JPMorgan Chase & Co. (JPM) that held between $5 million and $25 million. As of 2010, they had two JPMorgan accounts, indicating a net worth of as much as $50 million.
Since she left the government last year, Hillary Clinton, 66, has been giving speeches for hundreds of thousands of dollars each. Bill Clinton, 67, also makes paid speeches and appearances, receiving $200,000 each in October 2012 from Vanguard Group Inc. and Deutsche Bank AG, according to Hillary Clinton's disclosures.
As president in 2000, Bill Clinton vetoed a proposal to repeal the estate tax, though he backed less significant changes to cushion family-owned businesses and farms against the potential effects of the tax.
"If you're serious about wanting to deal with the problems that estate tax presents, let's get after it and solve them," he said on Aug. 31, 2000. "But we have to proceed on grounds of fiscal responsibility and fairness."
His successor, George W. Bush, signed a law that narrowed the estate tax and eliminated it for 2010 only. That law was set to expire on Dec. 31, 2010. Unless Congress acted, the rate was scheduled to rise and the exemption was scheduled to drop.
At the end of 2010, Congress set the lifetime exemption from the gift tax for each individual at $5 million, up from $1 million. Lawmakers also unified that exemption with the estate tax, so that gifts made while alive counted toward the estate-tax exemption at death.
