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The Walton family’s fortune is more than $330 billion, which dwarfs that of Elon Musk ($237 billion).
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They owe part of their wealth to a wise decision made by Walmart founder Sam Walton over 70 years ago.
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Walton structured the company as a family partnership with 20% shares for his four young children.
According to the Bloomberg Billionaires Index, the Walton family is worth around $330 billion, significantly more than Elon Musk ($237 billion). Its members owe much of their incredible wealth to a clever move by Walmart founder Sam Walton over 70 years ago.
In 1953, when Walton’s future retail empire consisted of only a handful of stores, the entrepreneur followed his father-in-law’s advice and organized his business as a family partnership.
He gave each of his four children – Jim, Rob, Alice and the late John T. – 20% of the shares, while he and his wife Helen kept the remaining 20%.
Walton explained the main advantage of this structure in his autobiography “Sam Walton: Made in America”.
“The transfer of ownership occurred so long ago that we did not have to pay any significant gift or inheritance taxes on it,” he wrote.
“The principle behind it is simple: the best way to reduce inheritance tax is to give away your assets before they increase in value.”
In other words, Walton left 80% of Walmart to his children when the company was worth practically nothing. If they had inherited his stock, they would have had to pay billions of dollars in estate taxes when he died a billionaire nearly 40 years later in 1992.
Parking the family’s Walmart shares in the partnership and deciding together when to cash in the shares had other advantages. It meant the Waltons valued their wealth rather than “throwing it away to live the high life,” Walton wrote.
“It was neither lavish nor exorbitant, and that was part of the plan – to keep the family together while maintaining a sense of balance in our demands.”
It also ensured that the family retained control of Walmart and could prevent the company from being broken up and sold in pieces. This was “the best protection there is against the takeover hunters,” Walton wrote.
By giving the children a say in how the family fortune was spent when they were all under nine, they also learned to be financially prudent.
“Financially it was great, but there was another aspect: the relationship that developed between the children and the family. It developed their sense of responsibility for each other. That just can’t be beat,” Helen Walton wrote in the book.
A look into the future
It’s been more than seven decades since Walton opened his first general store in Bentonville, Arkansas, and founded the family partnership.
He could not have imagined that Walmart would one day have net sales of about $600 billion a year, employ 1.6 million Americans, or about 1 percent of the total U.S. workforce, and become one of the world’s largest companies, valued at about $600 billion.
And he wouldn’t have predicted that his three surviving children would one day each have a fortune of nearly $100 billion. But he would certainly be pleased that the bulk of their wealth is still tied up in their Walmart shares in the family trust.
Walton, who lived a modest life for a billionaire, was aware of the danger that future generations might squander the family fortune on obscene luxuries such as private islands.
“One of the real reasons I’m writing this book is that my grandchildren and great-grandchildren will read it in a few years and know one thing: If you start doing this nonsense, I’ll come back and haunt you. So don’t even think about it.”
Read the original article on Business Insider
