Jensen Huang, the 61-year-old co-founder and CEO of Nvidia, is the 10th wealthiest individual in the US with a net worth of $127 billion. When an estate reaches such an extraordinary valuation, federal estate taxes claim 40% of the total – potentially exceeding $50 billion. But, Huang’s financial strategies indicate that he is set to pass on much of his wealth with minimal tax liability, avoiding an estimated $8 billion in taxes, according to securities and tax filings reviewed by The New York Times (NYT).
Huang’s strategies aren’t one-of-a-kind but show how the ultra-wealthy often find ways to avoid estate tax. First introduced in 1916 to limit inherited wealth, the estate tax has become less effective due to changes in laws and clever loopholes used by the rich. It has contributed little to federal tax revenue since the early 2000s. If the tax had kept up with the growth of the ultra-wealthy, it could have brought in about $120 billion last year. Instead, it generated only a small portion of that amount.
Daniel Hemel, a tax law professor at NYU, says that about $200 billion is passed on every year without paying estate taxes, thanks to trusts and smart financial plans. These strategies are not just clever loopholes. They are often recommended by expensive legal and financial experts who use complex tax rules, court decisions and IRS guidelines.
“You have an army of well-trained, brilliant people who sit there all day long, charging $1,000 an hour, thinking up ways to beat this tax,” Jack Bogdanski, a professor at Lewis & Clark Law School and an author, was quoted as saying by the NYT.
Huang’s tax strategy has drawn attention for its sophistication. In 2012, he set up an irrevocable trust with 5.84 lakh shares of Nvidia, valued at $7 million at that time. This step was part of a larger scheme, known within financial circles as “I Dig It,” which was first validated by the IRS in 1995. This type of trust avoids both estate and gift taxes, providing a shield for assets that appreciate after being transferred.
“From an estate-tax-planning perspective, it’s a grand slam. He’s done a magnificent job,” said Jonathan Blattmachr, a trusts and estates lawyer.
By 2023, the value of Huang’s trust holdings ballooned to over $3 billion. Without such a strategy, heirs would be subject to a tax bill exceeding $1 billion.
In 2016, Huang and his wife, Lori, further reduced their tax burden by establishing grantor-retained annuity trusts (GRATs). This technique allows assets to be transferred to beneficiaries free of estate tax if their value appreciates beyond the amount repaid to the grantor. The shares in these trusts have since surged, now worth over $15 billion.
Huang has also taken advantage of his charitable foundation, the Jen Hsun & Lori Huang Foundation, through substantial donations of Nvidia shares. Such contributions provide immediate tax deductions and help reduce income and estate taxes. (NDTV)
