“Patagonia Founder Gives Away His Company” by Attorney Alex Pagnotta (Audio)
There are many different ways to gift money. You can gift $16,000 per person per year without having to file a gift tax return. If you gift more than that, then a gift tax return should be filed. This includes giving money or money’s worth to most friends and family.
You can also gift money by contributing to a trust. Perhaps you want to gift money to a 529 plan. Maybe you want to pay for a loved one’s education or medical bills. You may have charitable contributions in mind and decide to setup a charitable remainder trust. Or maybe you have a large life insurance policy and you want to take advantage of different gift and estate tax strategies. The point is that from an estate planning perspective, there are many different ways to gift.
The above strategies are some of the more complicated ways to gift money – but what is the simplest and purest gift? When we think of a gift, in the traditional sense, it is something that we give to others and expect nothing in return.
That is exactly what Yvon Chouinard, founder of Patagonia did with his company. Instead of selling the company, he, his wife, and two children transferred the ownership of Patagonia for the benefit of people actively working on saving the planet. Patagonia was valued at approximately 3 billion dollars. This was given away to try and help the entire world – the gift of all gifts. This move by Chouinard and his family resulted in two things:
- An irrevocable trust known as the “Patagonia Purpose Trust” was created so that the business is controlled by family and close advisors to make good on its commitment to social responsibility and giving away its profits
- The rest of the shares were donated to the Holdfast Collective to try and combat climate change. Since the Holdfast Collective can make political contributions, they do not qualify as a charity and thus there was no tax benefit for this to the family when they made the donation. Not only is there not a tax benefit, it is estimated that the family will actually pay around $17.5 million in taxes on the gift. This gift makes them one of the most charitable families in the country.
In the context of estate planning, we usually look at gifting to charities with an eye towards a tax break. The Patagonia family did not do this. Instead they leaned into the idea of paying tax to stick to their company principals of making the world a better place. This context can be difficult for some estate planners to grapple with – however, when it comes to making a gifting decision, you should always ask yourself the question, “What am I looking to accomplish?” For the Patagonia family, they were not concerned with taxes – they wanted to stick true to their company’s goals and values. Your gifting goals could be similar or different. Perhaps you want to make gifts that do have some tax advantages. Sinclair Prosser Gasior is dedicated to assisting you with your gifting needs in a way that is tailored suit your goals. Contact us today!
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