On July 8, 2014, Forbes reports:
If America had an aristocracy, the most titled bloodline would certainly be the Kennedys. In the past half century, one Kennedy after another has occupied nearly every political position America has to offer, including the roles of congressman, senator, ambassador, mayor, SEC chairman, state representative, city councilman, and, of course, President.
The sustaining force behind the Kennedys reign is hardly a secret. Thanks to Joseph P. Kennedy, who made a fortune from insider trading only to later chair the SEC, the family is fabulously rich. But exactly how much is America’s first family worth? Forbes pegs the extended family’s fortune at $1 billion.
Protected by a labyrinth of trusts, as well as tax strategies that would make Joseph P. Kennedy proud, the Kennedy fortune now spans approximately 30 family members, and includes the surnames Shriver, Lawford and the Smith. At nearly $175 million as of 2013, Caroline Kennedy is the richest descendant by far, but more modestly endowed relatives, such as Robert Shriver, who is running for Los Angeles County Supervisor, still possess assets in the tens of millions, according to public financial disclosures required of government officials.
The bulk of the family’s wealth is held in dozens of trusts, which range in value from tens of thousands to as much as $25 million. Nearly all are managed by Joseph P. Kennedy Enterprises, a family office located in New York City with assets dating back to 1927, according to Christopher Kennedy, a member of the Kennedy family who sits on the office’s board.
Unlike the office’s heyday under JFK’s confidant Stephen Smith, when “there was actually stock picking going on inside the office walls,” the task of investing the family trusts today is handled by outside organizations, Kennedy said. While the family has a final say in where the assets are allocated, day-to-day oversight has been tasked to an advisory board of six experts, including Andy Golden, who manages Princeton University’s endowment.
Joseph P. Kennedy’s choice to place his fortune in trusts is possibly the single most critical reason why the family wealth is still around today. The most obvious benefit was to protect the fortune from the prying fingers of ne’er-do-well heirs, said Laurence Leamer, who wrote three Kennedy biographies. Trusts often prevent beneficiaries from tapping more than 10 percent of principal, said Rick Kruse, principal at Kruse and Crawford, which offers estate management advice.
The trusts also protect the family assets from another set of prying fingers: Uncle Sam’s. By holding assets in so called “dynasty trusts,” which are passed from heir to heir for decades, if not longer, the Kennedy family fortune is largely insulated from the estate tax, Kruse said. Handled correctly, a dynasty trust could potentially maintain an un-taxable fortune indefinitely. The oldest Kennedy trust on record dates back to 1936.
Like politics, tax savvy seems to run in the Kennedy family. The most recent example is the 1998 sale of the family’s most valuable asset: the iconic Merchandise Mart, a towering retail space on the Chicago River that was once thought to be the largest building in the world. Thanks to a carefully crafted deal with Vornado Realty VNO +0.47%, the Kennedy family deferred – or possibly avoided completely – capital gains tax on nearly half the value of the sale.
The Kennedys did this using an obscure investment tool called an “operating partnership unit.” Similar to equity, partnership units offered the Kennedys an ownership stake in Vornado Realty, generating a robust stream of dividends. Of the $303 million the family pocketed from the sale, $116 million came in the form of this investment instrument, according to SEC filings.
This alone isn’t a bad deal, being that the Kennedy’s have collected as much as $170 million in dividends since 1998, according to Forbes. The secret sauce, however, is that accepting partnership units in lieu of cash defers capital gains tax, as well as taxes on historical depreciation, for as long as the units are not cashed out, said Tony McEahern, head of wealth planning for Wells Fargo WFC -0.62% Private Bank. In fact, if the partnership units were placed into trusts, capital gains taxes could potentially be deferred forever.
“This is definitely a tax-advantaged strategy,” said Rich Moore, managing director of equity research at RBC Capital Markets.
Christopher Kennedy declined to comment on how the sale’s proceeds were handled. However, public documents reveal that Caroline Kennedy, Robert Shriver, and Maria Shriver each collect income from assets dubbed Vornado Realty Trust and Vornado Realty Inc., which are valued at up to $7.5 million.
“We are a very public family with a very private investment philosophy,” Kennedy said.
This article reveals the hypocrisy of the wealthy class who will not share the financial benefits of OWNERSHIP of wealth-creating, income-producing capital assets, but instead, as in the case of the political elite Kennedy clan, ONLY promote job creation, but NEVER OWNERSHIP creation. The wealthy ownership class are knowledgeable about using tax-shielded trusts to protect their accumulated fortunes over years and decades, past down as inheritance.
Such trust and financial asset accumulation constantly concentrate ownership among the 1 percent who are the wealth ownership class. But because this is not well understood, what we as a society have been doing is to continually focus ONLY on job creation while the REAL wealth is represented by the OWNERSHIP of non-human capital assets. With continual tectonic shifts in the technologies of production we are shifting the work burden from people labor to real physical capital while distributing the earning capacity of physical capital’s work (via capital ownership of stock in corporations) to non-owners through jobs, minimum wage, and welfare. Such policies do not function effectively.
In a democratic growth economy, based on binary economics, the ownership of capital would be spread more broadly as the economy grows, without taking anything away from the 1 to 10 percent who now own 50 to 90 percent of the corporate wealth. Instead, the ownership pie would desirably get much bigger and their percentage of the total ownership would decrease, as ownership gets broader and broader, benefiting EVERY citizen, including the traditionally disenfranchised poor and working and middle class. Thus, productive capital income would be distributed more broadly and the demand for products and services would be distributed more broadly from the earnings of capital and create more “customers with money,” result in the sustentation of consumer demand, which will promote economic growth. That also means that society can profitably employ unused productive capacity and invest in more productive capacity to service the demands of a growth economy.
As a substitute for inheritance and gift taxes, a transfer tax should be imposed on the recipients whose holdings exceeded $1 million, thus encouraging the super-rich to spread out their monopoly-sized estates to all members of their family, friends, servants and workers who helped create their fortunes, teachers, health workers, police, other public servants, military veterans, artists, the poor and the disabled.
Americans need to WAKE UP and support and rally for a peaceful and more just Second American Revolution to unite all Americans, based on a moral recognition that freedom and political democracy must be based on a foundation of universal principles of economic justice and economic empowerment.
The path to a more just Second American Revolution is spelled out in the national Platform of the Unite America Party at http://www.cesj.org/wp-content/uploads/2014/05/UAP-Platform.pdf. The full document was posted on the blogs of HuffingtonPost (http://www.huffingtonpost.com/gary-reber/platform-of-the-unite-ame_b_5474077.html), Nation of Change (http://www.nationofchange.org/platform-unite-america-party-1402409962), and OpEd News (http://www.opednews.com/articles/Platform-of-the-Unite-Amer-by-Gary-Reber-Party-Leadership_Party-Platforms-DNC_Party-Platforms-GOP-RNC_Party-Politics-Democratic-140630-60.html).
Someone hasn’t heard of Pareto distributions