A Facebook Billionaire in Singapore, and Estate Taxes

One popular version of the American dream is the opportunity to go to a great university, graduate, work hard, get rich and retire.

The “Facebook” entrepreneurs, Mark Zuckerberg’s collaborators, have turned this dream on its head. Go to college, meet people, get fabulously wealthy, think about whether to graduate.

Or another option is move to Singapore, and give up US citizenship so your kids don’t pay estate tax when you die. This last was chosen by Facebook co-founder Eduardo Saverin. It seems premature and a little morbid to be thinking about death taxes right out of college (and presumably he doesn’t even have kids yet) but last week his net worth hit approximately $3 billion. 35% of that is over a billion dollars. A potential billion dollar tax bill can motivate all kinds of unexpected behavior.

The New York Times discussed Mr. Saverin’s choices in a recent article:

American tax lawyers say they think Mr. Saverin’s exit had more to do with estate and gift taxes than income tax. If he remained an American citizen, he would not have had to pay the United States capital gains tax on his income until he sold his shares. Wealthy American shareholders often borrow against their shares and live tax-free off the unrealized appreciation for years.

When American citizens pass on their holdings to their heirs, however, those assets are subject to estate taxes, which are difficult to escape (as are gift taxes on assets given to relatives and heirs before death). So Mr. Saverin’s decision to leave could have been a wager that the cost of an exit tax now — 15 percent of whatever valuation he could get the Internal Revenue Service to agree to — would be far less than the 35 percent or more in estate tax his heirs would face on his holdings when he died.

 As to life in Singapore:

What has gotten attention, though, is his billionaire playboy lifestyle in glittering Singapore. Thanks to the interconnected world Mr. Saverin helped to create, the Internet is full of people sharing photos and stories of him embraced by statuesque women and drinking expensive Champagne. “It’s a misperception, especially the playboy,” he said. “I do have a Bentley. I do go out. I’d rather not go into personal details.”

 See the entire article in the New York Times.

 photo credit: williamcho