Posted by tinselkitty on May 25, 2011
Many of y’all have voiced…ahem…concerns…ahem…about the nature of the so-called Zarin Family Trust. And, as y’all know very well by now, Tinselkitty is loathe to let questions go unanswered. Loathe, I say! Wanna know my conclusions? Huh, huh, do ya, huh?
Yeah, I knew you did. Nosy bitches, all of you! First, let me ease your fears and tell you that the Zarin Family Trust is indeed a real thing. It exists, it really exists! I know, we were all skeptical given the source, but I can assure you that this is no myth.
So what exactly is a Zarin Family Trust? Well, that is not an easy question to answer, so let’s start with the opposite question: What isn’t a Zarin Family Trust?
It is not a 501(c)(3) organization
It is not rated by Charity Navigator (your guide for intelligent giving)
It is not found by Charity Navigator’s 990 search
Where I think a lot of the confusion comes from, other than Jill’s mouth, of course, is the phrasing as it was uttered. By Jill. As uttered by Jill. Many times. We’ve all heard her say Zarin Family Trust over and over again, and most of the time, when she says it, she’s doing so in an atmosphere that encourages the viewer to associate it with dem dare charitable type hoohaws. You know, like at the charity auction on Celebrity Apprentice or how she said she was selling previously owned clothes for charity. For example, you had your chance to bid on the most awesomely appropriate Opposite Day hat ever, that one-of-a-kind masterpiece that says PEACE by the queen of chaos herself, Nene Leakes.
Notice that fourth paragraph under the Description – “The proceeds for this item benefit Zarin Family Trust”. We can all agree that this is classic charity-speak, right? Especially when it was listed for sale on charitybuzz.com (whose motto is “doGOOD liveWELL”). Double especially when their Charities page starts out like this –
All nonprofits are pressed for time and suffer with limited resources. With a commitment to white-glove service, charitybuzz assumes the most labor-intensive tasks of running an auction. Our strategic approach allows our partners to focus on achieving social good while we coordinate the fundraising details.
To help streamline the entire auction process, nonprofits are assigned a dedicated account specialist to guide the charity through the entire auction lifecycle. From pre-auction outreach to post-event follow-up, auction specialists ensure every decision maximizes potential revenue.
Weird, right, considering how we’ve already established that the Zarin Family Trust is not a non-profit?
Which leaves us with the question of what the Zarin Family Trust is. From what I can woogle, the Zarin Family Trust is a fund. Make sure you read that correctly.
The Zarin Family Trust is a fund.
Zarin Family Trust…fund.
See what I’m getting at here? Huh, huh, do ya, huh?
Specifically, it is a grantor trust. Depending upon where you clickity click, these little numbers are either really bad (the IRS lists it under their Abusive Trust Tax Evasion Schemes page) or really, really good (rich peeps and their wealth management teams). Before I go any further, I’m going to pause a moment and remind you that I am neither a tax or wealth management professional, nor do I play one on TV. I can woogle the crap out of anything but that doesn’t make me a subject matter expert, so you’ll have to form your own opinions on all of this. That being said, here is what I found on grantor trusts.
From Wikipedia –
Purposes of a trust
The purposes and uses of trusts historically had to do with management of property in absence of owner, mostly during medieval times when a lord left to fight in battle. Gradually, the device also found usefulness to control property “beyond the grave”, although the so-called Rule Against Perpetuities limited this power. See trust law#History. In modern times in the United States, trusts have several principal purposes.
Trusts are generally unique in that they can provide comprehensive asset management for multiple family generations over great spans of time, something which other estate planning devices cannot completely replicate. Trusts can hold title to a virtually inifinite number and type of disparate assets, from publicly traded securities, to illiquid closely-held business interests, to real estate, to even collectibles and tangible personal property. Unlike other methods of transferring title, the trust allows continued management of the assets, despite the infirmity or even death of the owner – allowing them to specify to successor trustees exactly how to manage the property and use it for the future beneficiaries. This can extend for multiple generations or even, in some jurisdictions, in perpetuity (as some states have permitted in some instances the creation of trusts that can last beyond the Rule Against Perpetuities).
The third-party management of property for the benefit of another is especially valuable for persons who have some form of incapacity, infirmity or are simply unwise with the use of money. Many create trusts to protect family members from themselves. It is not unusual to see a will in which four children get funds free of trust or any other encumbrances from their father but a fifth child’s funds are all or mostly placed in trust. This is usually for good cause – drug abuse, demonstrated inability to hold onto money, fear of divorce, criminal activity, a wish to see the funds go to grandchildren rather than one’s own children, etc. Such trusts help to conserve assets for the longer term needs of such individuals and help to slow or eliminate the “wasting” of assets through unwise purchases or losses.
In addition, the trustees’ powers over the assets can be incredibly broad and flexible and do not require the supervisory eye of a court (and the attendant additional cost such oversight can create). Particularly in cases where a corporate trustee is used, the grantor and subsequent beneficiaries receive the benefits of a vast array of financial services – portfolio management, real estate and business management, bill paying, insurance claim processing, tax and legal assistance, and financial planning just to name a few.
Revocable living trusts were often touted and marketed as valuable solely because of their ability to “avoid probate” and the costs and complications that surrounded it. Although probate avoidance is certainly a consideration in the use of a “living trust”, there are many other estate planning techniques which also “avoid” probate. Typically however, such alternatives do not provide the kind of consolidated asset management that a trust can. Although trusts are certainly not for everyone in the context of estate planning, even persons with modest net worths often find the living trust an ideal planning tool.
Estate tax avoidance
Trusts are often created pursuant to an estate plan for wealthy individuals to avoid the onerous effects of the federal estate tax. Under current federal estate tax law, in 2008, individuals that own interests in any property (individually owned, jointly held, or otherwise) which exceeds a fair market value of $2 million is subject to the estate tax at death; in 2009, the amount is $3.5 million. In 2010 there is no federal estate tax unless Congress acts. An estate that exceeds that value will pay tax on that excess at a rate of 45% under current law. Naturally, this rate is a huge inducement among many with substantial wealth to use various estate planning devices to reduce or eliminate the effect of the tax for their family. Below is a brief summary of certain specific techniques that employ trusts as the vehicle for achieving such savings.
The credit shelter trust
The credit shelter trust is by far the most common device used to extend the $2 million applicable credit ($3.5 million in 2009) for married couples. In this technique, each spouse creates a trust and divides their assets (usually evenly) between the two trusts. The terms of the credit shelter trust provide that upon the first spouse’s death, the other is left an amount in trust for the benefit of the surviving spouse up to the current federal exemption equivalent to the federal estate tax. Thus an individual would leave, say, $2 million in trust for his wife (keep the $2 million out of her estate), give his widow the net income from his trust, and leave the remaining corpus to his children at her death. The Internal Revenue Code does not consider the assets in the first spouse’s trust includible in the surviving spouse’s estate at death for estate tax purposes, because the spouse’s rights to the principal of the “credit shelter” trust do not constitute full ownership of the trust assets. In essence, this allows the couple to now shelter $4 million in assets rather than just $2 million (at the death of the second spouse).
The “Credit Shelter Trust” can permit the surviving spouse to also access principal from the trust. However, the IRS generally limits this power to distribute principal only for the “health, education, maintenance or support” of the surviving spouse. This language is relatively broad in its practical application; however, the IRS has agreed it is a sufficient limitation to allow the “credit shelter” trust not to be counted in the estate of the second spouse when she dies.
An additional benefit of the “credit shelter” is that future appreciation of trust assets passes on to the future beneficiaries (i.e., children or grandchildren) free of the estate tax. So, for example, if the surviving spouse lived another 10 years and the assets inside the first spouse’s “credit shelter” grew to $4 million, the appreciation would pass to the children withoutestate tax on the increased value, since the estate tax value was “locked in” at the first spouse’s death.
Unfortunately, the “credit shelter trust” generally only works for married couples since (a) the tax code provides the opportunity to shift assets between married persons for an unlimited amount by means of the unlimited marital deduction; and (b) unmarried persons attempting to do the same would be impacted by the “gift tax” during life. However, the mechanism is often useful in multiple marriage situations to allow for the use of income by the spouse while also conserving principal for the children later after the “stepparent” passes away.
Charitable remainder / Lead trusts
Trusts are often created as a way to contribute to a charity and retain certain benefits for oneself or another family member. A common technique is to create a charitable remainder unitrust (“CRUT”). Typically, this irrevocable trusts are funded with assets which often are highly appreciated, meaning their cost basis for capital gains tax purposes is very low relative to their current fair market value. This can be real estate, highly appreciated stock or a business interest with a low (or zero) tax basis.
Once the trust is funded, typically the asset is sold and invested in a more diversified investment portfolio that can provide income or liquid securities to provide an “annuity” to one or two individual persons, based on a set percentage provided for under the trust instrument and under IRS regulations. The annuity can be set for a certain term of years or can last for the lifetime of individual beneficiary(ies). Then, after the annuity term expires, the principal of the trust goes outright to a charity or charities the grantor named in the trust document.
If the trust meets the requirements of the IRS regulations, the grantor of the trust will receive a charitable income tax deduction for the calculated future value of the gift. Moreover, when he transfers the property into the CRUT irrevocably, the value of that property is out of his estate for estate tax purposes as well, even if he himself receive the individual annuity interest in the trust. In many cases, when properly structured, the CRUT can provide enough tax benefits to beneficiaries through the use of the annuity interest to justify the “giving away” of the asset to charity. However, this “giving away” of assets often causes many to forgo this technique, preferring to leave the assets directly to children regardless of the potential tax consequences it may create.
Grantor retained annuity trusts
Trusts may be created to get funds to the next generation where there is significant wealth and federal exclusionary gifts have already been used up. A common such vehicle is called the grantor retained annuity trust (GRAT). Federal tax law specifically allows for this vehicle. Here the grantor places an asset in the trust – one he expects will grow rapidly during the term of the trust. The document then requires the trustee to pay to the settlor a specific sum of money (the annuity) at certain intervals during the life of the trust. If there are assets in the trust at the end of the term, those assets go without estate or gift tax to the remaindermen. Here’s a typical case: settlor owns large block of low cost basis stock in a publicly traded company. He does not wish to sell the stock and pay capital gains tax. He also has estate tax problems since his net worth when he dies is likely to be $10 million or more. His attorney drafts a GRAT in which he places $2 million of the single company’s stock. The document calls for the smallest legal interest rate (published monthly by the Federal Government), which is then paid through the term of the trust. Upon the termination of the trust, the annuity has been paid back to the grantor and the remaining corpus is delivered to the remaindermen (typically children) without tax. Money has now passed from the grantor to his/her children without gift or estate tax. There has been no capital gains tax.
Irrevocable life insurance trust
view section in Wiki http://en.wikipedia.org/wiki/ILIT
Government benefit protection
Trusts may be created to protect an individual’s welfare or other state benefits. These are typically called “special needs trusts.” Typically, an individual has Medicaid and Social SecuritySupplemental Security Income (SSI) coming in. For such individual to then be given access to funds in excess of, usually, $2,000 (“countable” assets), risks immediate termination of his government benefits. To assure the individual a life of some ease beyond what he can afford from Social Security checks, a family member will place several hundred thousand dollars into a special needs trust for the little extras in life: dinner out, a birthday party, some new clothes, et alia. Such trusts require the expertise of a member of the “elder law” bar and must be administered with great care. It is best to have a family member as a co- or sole trustee. Given the small size of these trusts, they are typically not profitable for a corporate trustee.
From the Death and Taxes blog –
Basically, the term “grantor trust” relates to the taxation of a trust’s income. Who pays the tax? If a trust is a grantor trust, then the grantor pays the tax (otherwise, the trust and/or its beneficiaries must have to pay the tax).
The grantor trust rules can be found here in the Internal Revenue Code (the “Code”).
Estate planners use the grantor trust rules to take advantage of inconsistencies in the Code. In this case, the inconsistency is that you can set up a trust that is owned by you for income tax purposes (you pay the income tax) but not owned by you for estate tax purposes (the trust assets aren’t includable in your estate).
Why would you want to do this? Because being viewed as the owner of a trust you set up means that you can pay the trust’s income tax without such payments being considered an additional gift to the trust.
Near as I can tell, a grantor trust is something that Jill Zarin would flove, Flove, FLOVE! It’s a wonderful little beast where you can park your assets, drastically reduce your tax burden and still be able to access the wealth. Win, win, winny win win.
Now, none of this is to say that the Zarin Family Trust is solely for personal gain. There is a Zarin Family Trust listed in the donor records for the New York Community Trust, although that list is from way back in 2009. A cynical blogger might note that the 2009 annual report included information from both 2008 and 2009 so we can’t even be sure that the ZFT continued donations after the economic collapse. A super cynical blogger might further note that said blogger couldn’t find any more recent activity with the NY Community Trust, even though the Zarin Family Trust has certainly been pimped out like a $2.00 hooker lately.
So maybe all of the money Jill rakes in with her various and sundry “charitable” auctions that benefit the Zarin Family Trust does indeed go to real charities. Maybe Jill is actually out there, in the trenches, working to make life easier for the millions who have been dealt a crap hand.
Or, maybe Jill’s just using the Zarin Family Trust as a way to manipulate both her image and your money out your wallet and into hers. *cough-used-clothes-on-eBay-that-she-said-over-and-over-were-being-sold-for-charity-but-now-include-no-such-wording-or-any-indication-of-being-sold-for-a-greater-good-cough*
Given Jill’s penchant for ONLY doing for others when she has something to gain, that cynical blogger from above has to think that if she really was being Super Charity Wife, it wouldn’t be so hard to find evidence. Has anyone ever known Jill to do anything nice without fanfare, a press release, some neon arrows pointing her way and a gospel choir backing her up?
Full disclosure – Tinselkitty did not bother to contact Jill Zarin, Jill Zarin’s PR Army or any of the Gingerettes in order to get any sort of confirmation, denial or
spin other side of the story. Jill has already decided to block me, so I figure it’s her loss if she doesn’t want to hear what I have to say. I am sure her [Google alert: Jill Zarin] will plop this sucker right in her inbox mere moments after it is posted. If Jill Zarin wants to contact this blog, I promise to publish her statement in full. Besides, one of her minions named Abigail just visited yesterday to leave a pro-Jill comment so shame on them if they miss this big-ass post.
In the meantime, for those who choose to actually support charitable organizations, I highly recommend Charity Navigator for all your research needs. I am particularly fond of their 7 Questions to Ask Charities Before Donating. Since Jill hasn’t been very transparent with her alleged charitable foundation, Imma gonna answer these questions based on what I’ve been able to find out about the Zarin Family Trust. Again, should Jill choose to respond, I will be happy to post her answers in full.
- What is the charity’s commitment to reporting results?
Um, there is none?
- How does the charity demonstrate the demand for its services?
Do you mean how much is Jill yapping about it, because I suppose that’s a lot
- Does the charity report its activities (what it does)?
Well, Jill is always telling us she’s doing all these wonderful things, I just can’t find any evidence of it other than fashion shows which may or may not recoup costs
- Does the charity report it outputs (immediate results)?
Jill reports lots of results but their accuracy is up for debate
- Does the charity report its outcomes (medium- and longer-term results)?
Again, self-reported by the Jillster
- What is the quality of evidence for reported results?
- Does the charity adjust and improve in light of its results?
She says she does but so far I see nothing but same old same old (although the soundtrack of “I’m nice, I’ve learned, I know who I am and I own it” is new and nonstop)
Finally, let me leave you with some TV Time 101, Tinselkitty and ImaJustSaying ass covering: ALLEGEDLY!