But I’ll go back to the trusts and foundations, ’cause I really wanna get across something not about trust and foundations, but how the rich are using money in a way that you can’t comprehend because you look at everything that they’re doing through your own set of eyes and your own experience.
So, how many of you have heard of the Bill and Melinda Gates Family Foundation? Yeah, most of you. What did they do? Well the media was all over the fact that they gave one billion dollars away to charity. Did they? Well yes and no. See, when I say to you donate some money you think about handing out cash or writing a check out of your checking account. But that’s not the way that they do it.
So Bill Gates started Microsoft and that company became worth billions upon billions of dollars. But when you start a company, especially a corporation, you’re given stock in that company, and that stock is worth nothing ’cause your company’s worth nothing.
And over the years Bill’s stock became worth billions. So what Bill actually did is Bill took Microsoft stock, and he gave it to the Bill and Melinda Gates Family Foundation. So there’s no taxable event, he didn’t have to sell the stock and take his money and put it over there ’cause if he had sold the stock he would have had what’s known as capital gains taxes, which could have pushed a significant amount of money, he had a billion dollars.
So Bill actually gives the stock to the family foundation. So what do you think Bill got on his tax return for giving away a billion dollars worth of stock? A one billion dollar tax deduction. Okay? A one billion dollar tax deduction, and he gave away stock that cost him nothing when he first got it.
He of course worked his butt off and made it worth billions, granted. But when he gave it away it cost him nothing, and he got a one billion dollar tax deduction. Now in Bill’s tax bracket that could’ve easily been a 500 million dollar tax write off, okay.
The other side of that is when you set up these trusts and these foundations properly, and I do mean properly. There’s about 89 different ones that can be set up in the United States. Many of them are statutory, some are federal. When you set them up properly, they have certain provisions in them that allow you to still control the money.
So the foundation has the billion dollars, but who’s in control of the foundation? Bill and Melinda Gates. And because they’re in control of it, or their family or somebody in their family’s control of it, they haven’t lost control of the billion dollars, and they got a tax deduction, and they’re doing good with it.
See, anything I’m gonna say here is not trying to negate the fact that they did an incredible charitable work. But I want you to know that when you think about somebody giving that kinda money away, you think they gave it away, lost control of it, paid taxes on it upfront, and all of that. That’s not the way that it works for them.
So Warren Buffett comes along and says, “I wanna piece of that.” So Warren Buffett says, “I’ll give ya a billion dollars.” Matter of fact, Warren Buffett is still giving a billion every year to the Bill and Melinda Gates Family Foundation. Do you think he’s writing a check for a billion dollars? No, I see a lot of heads are shaking no. No what he’s doing, he’s giving a billion dollars worth of Berkshire Hathaway stock that cost him nothing, it’s depreciating and he’s taking a tax deduction for it every year.
See this is the way that you would never understand from your perspective that the way it works, a different playing field, and a different set of rules