- America’s wealthiest family dynasties have held onto and grown their fortunes for decades.
- A new report from the Institute for Policy Studies dives into how they amass and keep their fortunes.
- The methods range from strategic charitable giving to forming family offices and special trusts.
- See more stories on Insider’s business page.
America’s richest family dynasties had a lucrative pandemic year.
The top 10 richest saw their net worths grew by a median 25%, while family dynasties’ wealth grew at a rate 10 times greater than that of a typical family, according to a new report from the left-leaning Institute for Policy Studies (IPS).
The thing is many of these are true dynasties, with wealth dating back much further than relatively recent upstart billionaires like Mark Zuckerberg and Elon Musk. Thirteen of the top 20 wealthiest families were in the top 20 in 1983.
“Dynastically wealthy families remain wealthy for the long haul,” the report’s authors write. “The ranks of America’s dynastic fortunes have remained largely unchanged for decades, and are becoming increasingly persistent over time.”
The methods by which America’s wealthiest individuals hang onto their wealthy – without paying much in taxes -have become increasingly clear in the past few weeks. A bombshell ProPublica report showed just how little America’s billionaires paid in taxes proportional to their wealth; all of those methods are legal – and have been known by experts for years – but the exposure of the numbers themselves could kickstart tax reform.
Titled “Silver Spoon Oligarchs,” the report looks at at the top 50 dynastically wealthy families from Forbes’ inaugural ranking of America’s wealthiest clans, published in December 2020, as well as data from the Federal Reserve‘s Survey of Consumer Finance.
The IPS report breaks down the main ways family dynasties ensure their wealth lasts for so long, and here are three of the most notable ones.
(1) Fight against tax increases by pouring money into PACs and lobbying
The report notes that taxes on America’s wealthiest have sunk over the past few decades as wealth ballooned at the top. In fact, today’s wealthy Americans pay just one-sixth the rate of their 1953 counterparts.
Family dynasties may have held onto their own coffers through everything like funding lobbying efforts, donating money to candidates who are anti-tax, or even setting up their own corporate PACs.
“In-house PACs ensure that corporations are in an excellent position to influence public policy in ways that are favorable to them,” the report said.
(2) Give just the right amount to charity
There’s also an art to charitable giving, according to the IPS report: “Today’s family dynasties understand that if they want to remain at the top, they must not give too many of their assets to charity.”
The dynasties need to strike the right balance between giving and retaining their assets (presumably so they can continue to grow). For instance, the report notes that only four members from Forbes’ top 50 families have signed on to the Giving Pledge, where billionaires pledge to give away half of their wealth to charity either during their lifetimes or at death.
And, as Insider’s Mattathias Schwartz reported, some of the signatories of that pledge are moving slowly in disbursing that money. One mechanism that the wealthiest use for donations are donor-advised funds (DAFs); as Schwartz reported, philanthropists who utilize those funds can put assets in there, immediately see a tax write-off, and then actually disburse the funds in it whenever they want.
As the IPS report says, dynastic families funneling giving “through closely-held private family foundations
provides them with not only an immediate tax deduction, but also the ability to maintain family control over those charitable assets into perpetuity.”
(3) Set up trusts and family offices
Dynastic families are increasingly setting up family offices to maintain and build their wealth, and shore it up for generations to come. According to the IPS report, about half of the nearly 10,000 family offices around the world were founded in the last 15 years.
Family offices are infamously secretive entities devoted to handling wealth. They’ve drawn attention in recent months after the fall of Archegos Capital Management – which reportedly lost $8 billion – as it was technically structured as a family office, according to Insider’s Harry Robertson. As Insider’s Hayley Cuccinello and Rebecca Ungarino reported, family offices were gearing up for new regulations following Archegos.
Another mechanism the wealthiest use are dynasty trusts. Those are long-term trusts, as Insider’s Hillary Hoffower reported, and they have transfer taxes at their creation – essentially meaning they never incur estate or gift taxes when beneficiaries receive money from the trust.
“Because the super-wealthy are avoiding or reducing their taxes, they are shifting the obligations to pay for society’s investments onto lower and middle-income households,” the IPS authors write. “Dynasty trusts also entrench existing levels of wealth inequality and facilitate the formation of dynastic concentrations of hereditary wealth and power.”