Where Billionaires Stash the Loot
The Getty Family’s Trust Issues
For the very rich, private wealth managers are in a separate class from other retainers, even from the trusted pilots, chefs, and attendants who maintain their life styles. Guarding the capital—the “corpus,” as it’s known in the business—puts you in contact with a family’s most closely held secrets. Managers handle delicate tasks; one professional in the Cayman Islands described the sensitivity of making a financial plan for an out-of-wedlock child that “has to be kept totally private from the wife.” Others specialize in keeping clients out of the news by minimizing public transactions. The most devoted liken themselves to clergy or consiglieri, and tend to get prime seats at the kids’ weddings and the patriarch’s deathbed.
Marlena Sonn entered the wealth-management industry in 2010, and found a niche working with what she called “progressive, ultra-high-net-worth millennials, women, inheritors, and family offices.” She sought to create a refuge from jargon and bro culture. “Women and young people are talked down to,” she told me. “A level of respect for people is refreshing.”
Sonn didn’t come from money. She was born in Queens, to parents from South Korea, who she says were determined to see her “fulfill the American Dream—go to Ivy League schools and become a doctor or a lawyer.” As a student at Barnard College, she was drawn to the punk and goth scenes and to progressive politics. After school, she moved to San Francisco, campaigned for a higher minimum wage, and planned on a career in activism. But in 2005, while working at a nonprofit, she developed an unexpected fascination with her retirement account. She took to listening to analyst calls with C.E.O.s, buying stocks on E-Trade, and watching exultantly as some of her picks spiked in value. Within a few years, she had left the nonprofit world for finance. “That was where the real levers of power were,” she said, adding, “My parents were so relieved.”
She started out at a small firm in lower Manhattan, working as a receptionist and studying at night to become a financial planner. Once she was certified, she signed up clients who wanted to “align their wealth with their values.” Her new role obligated her to master a shifting vocabulary of noblesse oblige. “They keep changing the name,” she said. “It went from ‘socially responsible investing’ to ‘E.S.G.’ ”—environmental, social, and governance. “Now it’s what we call ‘impact investing.’ ” What firms like hers offered was not charity; it was capitalism with progressive characteristics. “We would work out tax-efficient strategies to move clients out of legacy positions and into a new portfolio that was more simpatico with their conscience,” she said. For clients who had investments in “offender industries,” such as fossil fuels or private prisons, she could help them sell the stock and plant trees in the Amazon, structuring the trades to minimize the cost in taxes.
In the spring of 2013, a lawyer told her about a potential client who might benefit from Sonn’s expertise: a young woman in line to inherit part of an iconic American fortune. The lawyer was cagey about specifics, but eventually identified the prospect as Kendalle P. Getty, a granddaughter of the oil tycoon J. Paul Getty. In the nineteen-fifties, Getty was declared the richest living American.
Sonn and Kendalle met for dinner at a restaurant in Williamsburg and discussed her situation. Kendalle had become an heir in a roundabout way. Her father, Gordon Getty, a composer and a philanthropist in San Francisco, worth an estimated $2.1 billion, had four sons with his wife, Ann. Secretly, he also fathered three daughters in Los Angeles during an extramarital affair. In 1999, their mother asked a court to recognize them as legal descendants. When the story broke, Gordon was vacationing with his wife on a friend’s yacht in the Mediterranean; he released a statement acknowledging that he was the girls’ father, and proclaimed, “I love them very much.”
Gordon cut his daughters in on the Getty fortune using a trust fund—in essence, an imaginary legal lockbox that can shelter assets from taxes, creditors, and ex-spouses. Though trusts have been around since the Middle Ages, they have recently experienced a surge of innovation and popularity, as wealthy people pursue ever stronger ways to avoid publicity and taxes. The trust that Gordon created was named Pleiades, for a set of sisters in Greek myth who had dalliances with Olympian gods and were immortalized as stars in the night sky. It was arranged to grow until Gordon’s death, at which time the sisters would gain control of a pile of assets that Sonn estimated would be worth about a billion dollars.
Over dinner with Kendalle, Sonn felt “an instantaneous meeting of the minds.” Despite the differences in their backgrounds, the two women shared political views and an irreverent posture toward the money around them. Kendalle, a multimedia artist, identified herself on Instagram as a “bastard princess,” and advertised support for “environmental conservation, animal welfare, human rights, and reforming the way the justice system handles gendered violence, racial inequities and bias, and transphobia.” She seemed eager to pull money out of the petroleum investments that had built the Gettys’ wealth and repurpose it, in a spirit that Sonn likened to reparations.
Kendalle had a nest egg of about five million dollars, administered by Goldman Sachs. She moved a million of it to Sonn, who agreed to invest it for an annual fee of one per cent of the assets—a standard industry rate. Their relationship flourished. Kendalle soon transferred the rest of her assets to Sonn, and introduced her to one of her sisters, Alexandra S. Getty. Known as Sarah, she split her time between Los Angeles, New York, and Japan, and identified herself on social media as an “artist, webtoon creator, boxer, runner, and vegan.” Sarah hired Sonn, and within a year the sisters asked her to help run their trust fund, too. As her duties expanded, Sonn assisted Sarah with insurance and real estate. She helped Kendalle manage art projects, pay bills, and navigate family dynamics. The three bantered by texts punctuated with “LOL,” “Okee Dokee,” and “Love you.”
For nearly eight years, Sonn served the Getty sisters as an adviser and a confidante, until the relationship underwent a spectacular rupture. In a lawsuit filed last March, Kendalle’s lawyers accused Sonn of “unjust enrichment,” saying that she “coerced” her client into promising a bonus worth millions of dollars. In a countersuit, Sonn accused the Gettys and their advisers of retaliating for her opposition to a “dubious tax avoidance scheme” that could save them as much as $300 million. Robert Leberman, the administrator of the trust, and one of the defendants in Sonn’s suit, denied her allegations against the family. In a statement, he said that Sonn’s firing had been “non-retaliatory and warranted,” and that the suit was a “sad example of overreaching by someone now seeking to take advantage of a position of trust.”
As it moved through the courts, Sonn’s complaint, which contained portions of family e-mails and texts, marked the rarest of indiscretions from a financier who serves the super-rich. Wealth managers like to say, “A submerged whale does not get harpooned.” In this case, one of their own was allowing one of America’s richest clans to heave into view.
The arc of an American fortune, it is often said, goes from “shirtsleeves to shirtsleeves in three generations.” Other cultures have similar admonitions. The Japanese version is bleak: “The third generation ruins the house.” The Germans dwell on the mechanics: “Acquire it, inherit it, destroy it.”
And yet, in recent times, the fortunes of many prominent American clans have soared. Between 1983 and 2020, the net worth of the Kochs, who prospered in fossil fuels and became right-wing mega-donors, grew twenty-five-fold, from $3.9 billion to $100 billion. The Mars-family fortune, which began in the candy business, grew by a factor of thirty-six, to $94 billion. The Waltons, of Walmart, expanded their fortune forty-four-fold, to $247 billion. The financial triumph of such clans helps explain how the imbalance of wealth in the United States has risen to levels unseen in a century. In 1978, the top 0.1 per cent of Americans owned about seven per cent of the nation’s wealth; today, according to the World Inequality Database, it owns eighteen per cent.
A century ago, American law handled the rare pleasure of a giant inheritance with suspicion. Instead of allowing money to cascade through generations, like a champagne tower, we siphoned off some of the flow through taxes on estates, gifts, and capital gains. As the Supreme Court Justice Oliver Wendell Holmes wrote in 1927, “Taxes are what we pay for civilized society.” But, since the late seventies, American politics has taken a more accommodating approach to dynastic fortunes—slashing rates, widening exemptions, and permitting a vast range of esoteric loopholes for wealthy taxpayers. According to Emmanuel Saez and Gabriel Zucman, economists at the University of California, Berkeley, the average tax rate on the top 0.01 per cent has fallen by more than half, to about thirty per cent, while rates for the bottom ninety per cent have climbed slightly, to an average of twenty-five per cent.
Some advisers to ultra-rich families describe the current era as a golden age of tax avoidance. Last May, Marvin Blum, a Texas lawyer and accountant, gave a seminar for fellow-accountants who were figuring out how to profit from the influx of wealth that needed protecting. Blum told his colleagues, “Conditions for leaving large sums have never been better,” noting that “Congress has not closed an estate-planning loophole in over thirty years.” In a report from 2021, the Treasury Department estimated that the top one per cent of taxpayers are responsible for twenty-eight per cent of the nation’s unpaid taxes, amounting to an annual shortfall of more than $160 billion.
When it comes to taxes, there have always been advantages in certain lines of work. If your money comes from complex investments, it is easier to avoid taxes than if your employer regularly reports your income to the Internal Revenue Service. The same is true of tips and cash, which is how many low-income workers receive their wages. But the wealthiest Americans have access to ever more creative dodges—most of them legal, some illegal, and some on the murky border in between.
That lucrative maneuvering is the realm of specialized attorneys, accountants, and money managers, many of whom work for family offices: in-house financial teams that typically include a dozen or so full-time attendants. Family offices, which have roots in nineteenth-century operations that served John D. Rockefeller and a handful of his peers, have proliferated in the past two decades, to at least ten thousand worldwide. They tend to have no public presence—Gordon Getty’s family office is known, inconspicuously, as Vallejo Investments—but by some estimates they control about six trillion dollars in assets, a larger sum than is managed by all the world’s hedge funds.
Critics of global inequality call this stratum of business the “wealth-defense industry,” and have pushed Congress to impose taxes, eliminate loopholes, and restore narrower limits on American inheritance. The cultural outrage has grown lately. A series of disclosures, beginning in 2016 with a leak from the law firm Mossack Fonseca, have revealed spectacular extremes of high-priced tax maneuvering—which, among other consequences, brought down the leader of Iceland and embarrassed the Prime Minister of the U.K. In that year’s Presidential election, Donald Trump bragged that he was “smart” for not paying taxes, provoking fury among opponents and agreement among supporters. By 2019, Senator Elizabeth Warren, of Massachusetts, was calling for people with fortunes of more than $50 million to give up two cents on every additional dollar—a formula repeated so often that crowds at her events began chanting, “Two cents! Two cents!”
Scholars of wealth and taxes say that the golden age of élite tax avoidance has contributed to the turbulence in American politics, by hardening social stratification; reducing public resources for education, health, and infrastructure; and eroding trust in America’s mythologies of fairness and opportunity. Edward McCaffery, a tax professor at the U.S.C. Gould School of Law, said, “Tax, which is supposed to be a cure, is in fact one of the problems. This is a pattern that recurs throughout history. Capital keeps getting more and more unequal, until there’s a crash.”
But Tom Handler, a Chicago tax lawyer who specializes in ultra-wealthy clients, told me that the political pressure on the one per cent has only generated more business for him and his peers. “Most of the high-net-worth client base, they’re running for cover,” he said. “So income-tax planning has gone up, estate-tax planning has gone up, asset protection has gone up.” Handler’s clients feel “vilified,” he said. “Other than the very liberal, highly educated, intellectual élite, they don’t feel guilty at all. They’re angry.”
For people born to the most elevated classes, the fight over a few points’ difference in tax rates can feel existential. Brooke Harrington, a Dartmouth sociology professor whose book “Capital Without Borders” examines the tools of tax avoidance, told me that families like the Kochs, the Waltons, and the Gettys have escaped the old adages about generational decline thanks to a “perpetual-motion machine of wealth creation.” Often, she said, “the advisers’ job is protecting the fortune from the family. Without clever wealth management and attorneys, the Getty fortune would’ve gone up in smoke.”
What the Vanderbilt name represented in the Gilded Age, or the names Musk and Bezos might in our time, Getty was to postwar America: a reigning symbol of what money can do. The family fortune began in 1903, when a couple of flinty, frugal Minnesotans named George and Sarah Getty struck oil in Oklahoma. The trade was so profitable that their son, J. Paul Getty, became a millionaire by the age of twenty-three—at which point he announced his retirement. He saw “no reason why I should exert myself further to make more,” he wrote, in a memoir called “My Life and Fortunes.” He would focus instead on “enjoying myself,” and in that pursuit he acquired Hollywood friends, such as Charlie Chaplin and Gloria Swanson, and abundant hangers-on.
His parents, devout Methodists, disapproved. They told him that a rich man must “keep his money working to justify its existence.” Paul dutifully returned to the family business, but when his father died, in 1930, the will contained a harsh surprise: the estate, some $15 million, had been bequeathed almost entirely to Sarah. Paul complained to his mother, who agreed to sell him her share of the company as a Christmas present. She codified the deal with a formal offer, noting that it would expire if “not accepted by you in writing on or before noon of 30 December.” But, even as they reached an agreement, she worried that her son might lose the fortune, so she locked up some of it in what accountants call a “spendthrift trust,” which gives the beneficiary limited access to the funds.
Her worries turned out to be misplaced. For Paul, the insult of the will had stirred a strain of suspicion and thrift that would develop into compulsion. Claus von Bülow, a top lieutenant at Getty Oil, later described Paul’s attitude: “Dad was going to eat his words.” (Von Bülow became famous himself when he was convicted of trying to kill his wife, Martha, an heiress to a utilities fortune; he was subsequently acquitted.) Paul put nearly all his energy and profits back into the company and the trust. His biggest bet, on the oil prospects of a region between Saudi Arabia and Kuwait, became a bonanza. Within fifty years, the trust had grown a thousandfold, to four billion dollars.
He vowed to create a “Getty dynasty,” but this was more a financial concept than a familial one. He had five divorces, and five sons, from whom he was so distant that he did not bother to attend their weddings. The alimony and child support he sent did not suggest the magnitude of his wealth. When, in 1957, Fortune crowned him the richest American, his sons were shocked. He was more interested in larger expressions of legacy. “I feel no qualms or reticence about likening the Getty Oil Company to an empire—and myself to a ‘Caesar,’ ” he wrote.
Even compared with other wealthy skinflints, Paul was strikingly parsimonious. He installed a pay phone at Sutton Place, his seventy-two-room mansion in the English countryside, to avoid paying for guests’ long-distance calls. His last wife, a singer named Teddy Getty, had to beseech him to pay for maternity clothes, pointing out that he could deduct them from his taxes, as an expense for her performing career. In one emphatic letter, she wrote, “SO HERE AGAIN YOU HAVE LOST NOTHING.” When their son, Timmy, was treated for a brain tumor, Paul declined to visit, and complained to Teddy that the doctors “grossly overcharged you.” He wrote, “Some doctors like to charge a rich person 20 times more than their regular fee.”
Getty took a similarly dim view of taxes. When he donated art works, he would value them at higher prices than he had paid and take a hefty deduction. He invited twelve hundred people to a mansion-warming party at Sutton Place and declared it a business expense. His tactics became so aggressive that President John F. Kennedy personally leaked details of Getty’s taxes to Newsweek, revealing that, in a recent year, Getty had paid a total of $504 in federal income tax. Getty was undeterred; in his 1965 book, “How to Be Rich,” he condemned an “insane hodgepodge of Federal, state, county and city levies that make life a fiscal nightmare for everyone.” Elsewhere, he derided government spending on “nonproductive and very frequently counterproductive socialistic schemes.”
Nothing exhibited his relationship to money more than his management of a family tragedy. In 1973, his sixteen-year-old grandson, John Paul Getty III, who had left school to be a painter in Rome, was kidnapped by Calabrian gangsters, who stashed him in the mountains and demanded $17 million for his safe return. The grandfather, by then known as Old Paul, suspected that it was a charade orchestrated by family members to extract money. He eventually relinquished that theory, but insisted he would never pay a ransom. “I have fourteen other grandchildren,” he told the press, “and if I pay one penny now, I’ll have fourteen kidnapped grandchildren.”
After three months, the kidnappers, growing impatient, cut off the boy’s right ear and mailed it to a newspaper, to broadcast their warning. They reduced their demand to about three million dollars, but threatened to cut off other body parts, too, if they got no reply. Ultimately, Old Paul consented to pay $2.2 million of the requested sum—the maximum, according to his biographer John Pearson, that advisers had told him was tax deductible. He made up the balance by loaning his son the money at four per cent interest.
When Old Paul died, in 1976, he was living in England but trying to avoid British taxes by claiming to be a resident of California—even though he had not been to California in a quarter century. After his death, members of the family feuded in court, and forced the sale of Getty Oil to Texaco. Eventually, four factions of the family agreed to divvy up the trust into portions of $750 million apiece, and to pay a tax bill of a billion dollars. One of the lawyers likened it to “an elaborate treaty negotiation among warring nations.”
Even the dismembered parts of the realm were vast. One son, Paul, Jr., instantly became the sixth-richest man in Britain, with interest payments alone earning him a million dollars a week. Most of Old Paul’s personal estate—his art, property, land—was insulated from taxes almost entirely, thanks to a final gesture to keep the money out of the government’s hands: he bequeathed it to a museum trust that would carry on his name forever.
The Getty Center, on a sun-drenched hilltop in the Santa Monica Mountains, is one of America’s most visited art museums. Its walls and walkways are made of pale travertine, mined from an ancient quarry east of Rome. It’s the same type of stone that you find in the Trevi Fountain and the Colosseum, a material, as the museum puts it, “historically associated with public architecture.” This is a telling bit of sleight of hand: public architecture belongs to the public, a concession that Old Paul Getty fought his whole life to avoid. On a nearby stretch of coastline, with panoramic views of the Pacific, its sister museum, the Getty Villa, occupies a re-created Roman country house that is more popular with the public than with architects. Joan Didion once described it as “a palpable contract between the very rich and the people who distrust them least.”
But this kind of prominence should not be mistaken for happiness. Through the years, Old Paul’s protectors have suggested that he was the greatest victim of his own stinginess. “The only person he was ever mean with was himself,” Robina Lund, a lover and a longtime aide, once said. In 1963, a BBC documentary called “The Solitary Billionaire” featured him dining alone at a seventy-foot banquet table and performing exercises in a three-piece suit, hoisting a barbell over his head, beside a wall decorated with a Renoir. “The money is the root of the problem with the Gettys,” Gordon’s confidant William Newsom once said, according to Russell Miller’s book “The House of Getty.” “It is a ludicrous, preposterous amount of money, enough to make you wonder if anybody in the world should have that much. It taints everything.”
Marlena Sonn thought that she could help the Getty sisters expunge that taint, she told me one morning in November. We had met in a conference room of a co-working space in a converted pencil factory in Brooklyn. In a black-and-white dress and chunky glasses, with salt-and-pepper hair falling to her shoulders, she betrayed little sign of the erstwhile punk and activist. I wondered whether, working for the Gettys, she imagined herself as a sleeper cell, there to dismantle the system. “No,” she said. “I thought we could reform it.”
In the past century, the Gettys, like many American clans, have moved from a business of bare-knuckle extraction into more genteel labors; younger branches of the family extend into acting, conservation, and influence work. In 2021, Ivy Love Getty, an artist-model and a great-granddaughter of the oil tycoon, was married in San Francisco in a ceremony officiated by the House Speaker Nancy Pelosi.
But, Sarah Getty told me recently, her “crazy family history” and abrupt transformation into an heir gave her little preparation for managing a fortune. “In exchange for the love I didn’t receive in my life, I got money,” she said. “So, at first, I always felt misery and guilt, and I didn’t know what to do with it.” Sonn was twice her age, capable and solicitous. “Our relationship was very much like mother-daughter, because my mother wasn’t very present in my life,” she said. Sonn called her “babe,” and they “would do things for fun, not just for work,” Sarah said.
Sonn had been in the job less than two years when she caught a glimpse of how complex the inner workings of the family might be. In March, 2015, Kendalle and Sarah’s half brother Andrew Getty died at his home in the Hollywood Hills—suffering, the Los Angeles County coroner’s office found, from methamphetamine intoxication, heart disease, and bleeding linked to an ulcer. Sonn flew to San Francisco, to help handle the fallout. Andrew’s death, she said, required a reshuffling of more than $200 million, as his share of a trust was redistributed among his siblings.
Sonn assisted Kendalle and Sarah as they navigated the complications of their new wealth. To oversee the Pleiades Trust, Gordon’s family office had helped establish a corporate entity for each of the sisters, named for their initials: ASG Investments and KPG Investments. The sisters were the presidents, and Sonn became vice-president. Four times a year, Kendalle and Sarah received a dense book of several hundred pages, detailing investment decisions. “What do we do with this five million, and what do we do with that five million?” Sonn recalled. “They were asked to make decisions pretty much on the spot.”
For the next several years, Sonn consulted on investment strategies, interviewed money managers, and sometimes voted in Sarah’s stead. One of her primary duties was monitoring the important matter of location. Sonn said that she was also enlisted in “maintaining the appearance” that Kendalle and Sarah neither resided nor transacted trust business in California, in order to minimize their exposure to state income tax, which ranges up to thirteen per cent. Across the family fortune, she said, “that’s a lot of tax on billions of dollars.” While their grandfather had sought to duck taxes by claiming California residency, Sonn was helping the granddaughters attempt that maneuver in reverse. Among other tactics, she helped Kendalle and Sarah buy real estate in New York, which could fortify their claim to dividing residency across multiple states. And she kept track of the time that each spent in California. “For Sarah, she was in Japan, then she was in New York, then she’s in California. For Kendalle, she was back and forth between L.A. and New York, and also travelling. So there’s this game of counting their days,” she said.
The delicate arbitrage of state taxes is governed less by the constraints of the physical world than by the dream palace of accounting innovation. The original Getty trusts were established in California, but advisers had moved Gordon’s to Nevada in 1995. In an effort to spur the local economy, Nevada had taken to promoting itself as the “Delaware of the West,” with no taxes on income, inheritances, or capital gains. The financial upside bordered on the supernatural. Consider a typical Nevada trust scenario: as a planner at a family office, you put the maximum sum allowed, tax-free, into a trust; under current laws, that’s a meaty $12.9 million. By simply entering a long-term trust, that sum becomes immune to the forty-per-cent tax that applies to ordinary assets at the turn of every generation. After seventy-five years, your $12.9 million will balloon to approximately $502 million, according to calculations by the Northern Trust Institute, a wealth-management firm based in Chicago. That’s more than quadruple the growth it would experience outside the trust.
To enjoy the financial advantages of Nevada, the Gettys did not have to move there. The Pleiades Trust was officially administered from a small office complex a block from the Reno-Tahoe airport: Airport Gardens, which shared a parking lot with a private investigator and a hobby shop selling electric trains. In all the years Sonn worked with Kendalle and Sarah, they had never, as far as she was aware, set foot in Airport Gardens.
One particular ritual was sacrosanct: four times a year, to maintain the claim that their trust was not run from California, they boarded jets to some locale beyond the state border, before casting their official votes on investment decisions. “It would be a different place every quarter,” Sonn said. “New York, Seattle. Once a year, it would be in Nevada, usually in Las Vegas, because none of the family members wanted to go to Reno.” Buried in the details of California law was a statute that said that, as long as they could make the case that they never did the “major portion” of their business in California, they might each be able to dodge tens of millions of dollars in taxes on the inheritance.
The question of how much to leave your kids has been with us since the Ice Age. At a site called Sungir, east of Moscow, which holds the remains of hunter-foragers from at least thirty thousand years ago, archeologists found children with spears, art, and furs adorned with thousands of beads, painstakingly carved from mammoth tusks. Researchers calculate that shaping each bead took as long as forty-five minutes, so the kids’ finery represented years’ worth of labor by someone else—a prehistoric trust fund.
For the one in five American households that receive any family money at all, it can fortify a sense of identity and solidarity. And, in normal quantities, it narrows inequality, by helping low-income families pay for homes and education. (The average American bequest today is around forty-six thousand dollars, according to the Survey of Consumer Finances.) But, when inheritance patterns reach extremes, they wreak social and political havoc. In ancient Greece, the Spartans developed rules that consolidated property into a narrow class of heirs, while the growing population of people left behind were reclassified as hypomeiones—inferiors. By the third century B.C.E., tensions between the groups had pushed Spartan politics into violent convulsions over land, debt, and power.
The concept of a trust—the holding of property for the benefit of another—developed in the fourteenth century, among English landowners who were called up to the Crusades. To avoid transferring assets to their wives, since women were restricted from owning land, they entrusted control temporarily to male friends and relatives. Trusts proved immensely popular. “Nobles figured out very quickly that it was a great way to dodge taxes,” Harrington, the Dartmouth sociologist, said. “Property taxes were due only if the owner of a property died, so, if you kept playing hot potato with the deed, effectively the owner never died.” In 1682, to curb gaming of the law, England’s Lord Nottingham established a “rule against perpetuities,” which set the maximum length of a trust at the life span of the beneficiary plus twenty-one years.
That term limit endured for centuries, not only in England but eventually in the United States, where a resistance to inherited nobility was among the founding ideals. Thomas Jefferson believed that steep inheritance taxes would encourage an “aristocracy of virtue and talent,” which he regarded as “essential to a well ordered republic.” Thomas Paine wanted taxes on the largest estates to approach “the point of prohibition.” Even some of America’s greatest entrepreneurs saw inheritances as a handicap—a “misguided affection,” as Andrew Carnegie put it. William K. Vanderbilt, a descendant of Cornelius, observed, evidently from experience, that inherited wealth was “as certain a death to ambition as cocaine is to morality.”
Theodore Roosevelt took steps toward a progressive tax on inheritances, in the belief that a “man of great wealth owes a peculiar obligation to the State, because he derives special advantages from the mere existence of government.” A ten-per-cent estate tax went into effect in 1916; the Great Depression and the New Deal fuelled calls for higher levies, and by 1941 the top rate had climbed to seventy-seven per cent, where it remained for decades.
Ever since then, Americans have groped for a balance between the instinct to bequeath and the dangers of excess. Running for President in 1972, George McGovern proposed that nobody should be allowed to receive more than half a million dollars in inheritance and gifts. People hated the idea. His spokesman, Richard Dougherty, identified the concern: “Every slob in the street thinks that if he hits the lottery big, he may be able to leave half a million to his family.”
In the nineteen-nineties, conservatives, pressing to eliminate the estate tax, condemned it as a “death tax,” and insisted that it imperilled family farms. The evidence was always elusive; in the early two-thousands, Neil Harl, a prominent economist at Iowa State University, searched for family farms that had been killed by the tax, and concluded, “It’s a myth.” But the effort never really had much to do with farmers; according to a 2006 study by the nonprofit groups Public Citizen and United for a Fair Economy, it was financed by eighteen ultra-wealthy dynasties, including the founding families of Gallo wine and Campbell’s soup.
The campaign succeeded spectacularly. In 1976, about 139,000 American households were eligible for the estate tax; by 2020, it had been punctured by so many exemptions that only 1,275 households nationwide had to pay. Gary Cohn, Trump’s economic adviser who helped engineer the most recent loosening of the provision, was heard to tell members of Congress, “Only morons pay the estate tax.”
So how, exactly, do the well-to-do find a way around taxes? There are functional concerns and ethical ones. The line between avoidance and evasion is not mysterious. It’s perfectly legal to avoid taxes by honestly reporting losses and deducting expenses, and it’s perfectly illegal to evade them with lies (by understating income or bartering to avoid sales, among many other techniques). The more intriguing terrain is where most Americans dwell, between avoidance and acquiescence. Researchers who study I.R.S. data chart our behavior on a continuum, from “flagrantly defiant” (people who cheat even at great risk) through “strategic” (calculators of costs and benefits) to “conflicted” (moral agonists) and “pathologically honest” (bless their hearts).
The simplest way to avoid income taxes is to avoid “income.” If you run a company, alert the press that your salary is a dollar a year; then, for walking-around money, summon your banker to provide a “portfolio loan,” which uses your stock as collateral. Because it’s a loan, you’ll owe no taxes on the cash. Better yet, if you cling to your winning stocks until you die, the moment that your soul departs your body it will take your capital-gains obligations with it. Whatever taxes you would have had to pay on the rising value of the stock vanish into a loophole known as the “stepped-up basis”—or, as admirers call it, the “angel of death.”
A vestige of a time when paper records made it difficult to pinpoint how much an asset had grown, the angel-of-death loophole endures today as a giveaway to the rich, estimated to cost the Treasury as much as $54 billion a year. If Jeff Bezos died tomorrow, a hundred billion dollars of gains on his Amazon stock would go untaxed. This tidy routine—skip the income, live off loans, and avoid capital gains until you go—can run forever. McCaffery, of U.S.C., calls it “buy, borrow, die.”
The wealth-management industry prefers a gentler vocabulary; it makes fewer mentions of money and taxes than of creating “meaningful legacies” and of fending off “wealth attrition” and “dilution.” In 2021, ProPublica deployed leaked tax data to investigate some of the most meaningful legacies of recent years: $205 million for the son of the opioid-maker Mortimer Sackler; $570 million in trust income for William Wrigley, Jr., the great-grandson of the chewing-gum magnate. If you’re strategic enough, even less iconic brands can produce a dynasty. Just ask the princely tribes endowed by Family Dollar, Public Storage, and Hot Pockets microwave pastries.
Managers like to hail the forethought of “first-generation wealth creators” and “patriarchs and matriarchs.” But the industry’s most important concept involves no venture at all; it is simply endurance. When Chuck Collins, a great-grandson of the meatpacker Oscar Mayer, told a fellow-heir that he planned to give away the corpus in his trust, she invoked the goose that lays the golden egg. “You don’t barbecue the goose,” she said. In 2014, not long after the French economist Thomas Piketty warned of the reëmergence of “hereditary aristocracy,” a trade magazine for the wealth-management industry carried an illustration of a medieval knight, bearing a sword and a mace, guarding overflowing bags of cash. The caption read, “Armour for your assets.” Like any combatants, wealth managers gather intelligence: a tax lawyer told me that his firm had used the Freedom of Information Act to obtain a copy of an internal I.R.S. handbook, which lists the thresholds that agents use to determine if a discount is suspiciously large.
To understand the quietest corners of the tax-avoidance world, I called Bob Lord, a lawyer in Arizona whose tax practice once helped clients find loopholes. Lord, who was born in 1956 and raised in Maryland, entered the business in the nineteen-eighties, just as the drive for deregulation was triggering an obscure but seismic change in state law. In 1983, South Dakota became the first U.S. state to abolish the ancient “rule against perpetuities,” clearing the way for what became known as “dynasty trusts,” which can shield assets from inheritance taxes for centuries. Other states raced to catch up. Nevada set its limit at three hundred and sixty-five years, Alaska at a thousand. South Dakota barred any limit at all, akin to feudal England. “We had this crazy competition where states are trying to outdo each other in giving cushy tax situations,” Lord said. “They think that by attracting rich people and their businesses they’re going to do better than taxing those rich people.”
Lord was struck by how much the distribution of wealth had changed in his lifetime. “I played a lot of golf as a kid,” he said. “My parents belonged to Woodmont, the premier Jewish club. And I remember these tremendously wealthy people—they would drive a Mercedes, maybe fly first class—but they didn’t have the kind of wealth people have today.” Eventually, he found it impossible to abide the inequality that his advice helped create: “We have this insanely rich country, but we have people living horribly because of a terrible distribution of wealth.” In 2013, he started analyzing tax issues for the Institute for Policy Studies, a liberal think tank, and he is now a senior adviser to the Patriotic Millionaires, a group of wealthy advocates for more stringent taxes on themselves. “If we hadn’t allowed all of this avoidance to take place over the last four or five decades, where would we be now?” he said. “I worry about what’s going to happen two or three decades from now if nothing is done. We will have families with wealth in the trillions.”
To have any hope of joining the trillionaire club, an aspiring family should avail itself of levers installed out of reach of lesser Americans. Owning Thoroughbreds can allow you to write off millions in pleasant investment losses each year. The same goes for auto racing and cattle ranching. And don’t forget the private-jet loophole created by Trump’s tax law, which allowed family offices to soak up “excess business losses” by upgrading the Gulfstream.
But perhaps nothing has contributed more to the latest revival of dynastic fortunes than a spate of innovation around trusts, known by such recondite acronyms as SLATs, CRUTs, and BDITs. (The opacity is no accident. The late U.S. senator Carl Levin, a critic of finance abuses, accused the industry of deflecting attention with MEGOs—“My Eyes Glaze Over” schemes.) The most coveted are GRATs, or grantor-retained annuity trusts. The recipe requires only two steps: have your lawyer set up a trust on paper with your heirs as beneficiaries, and fill it with assets that you strongly suspect will rise in value—say, the stock of your company about to go public. As soon as the assets grow faster than interest rates, voilà! Your heirs receive almost all the difference, and it’s tax-free. It doesn’t count as a gift, because the trust is, technically, an annuity, which pays you back over two or three years. Best of all, there’s nothing to stop you from setting up a new GRAT every month. Sheldon Adelson, the late casino owner, sometimes had at least ten at once; in one three-year period, according to Bloomberg, he used them to escape $2.8 billion in taxes. The benefits of the GRAT are obvious, Handler, the tax lawyer, told me: it’s cheap, simple, and easy to repeat. “Even unsophisticated clients can understand that one.”
Like many tax-avoidance strategies, the GRAT was dreamed up in a law firm and released into the wild to see if it could survive the courts. In 2000, the I.R.S. challenged its use by the former wife of the brother of the Walmart founder, Sam Walton—and lost. “The tax court’s decision just blew this loophole wide open,” Lord said. “For twenty-two years, everyone has known you can do this. You’ve got a tax-court decision that basically blesses it, and Congress hasn’t done anything about it.” In honor of its first patron, the tactic is often called a Walton GRAT.
The ethics around avoiding taxes are themselves a form of inheritance. “Families just grow up in it,” McCaffery said. “The patriarch never paid much in taxes. And you’re just in a world in which, four times a year, you’re going to Nevada or wherever.”
For half a century, Gordon Getty has lived in a grand yellow Italianate mansion in Pacific Heights, with sweeping views of the Golden Gate Bridge and Alcatraz. Over the years, he and Ann, a publisher and a decorator, expanded their living space, buying the house next door (to make room for his work at the piano) and then the house next door to that. They hosted charity events, opera stars, and fund-raisers for politicians, including Kamala Harris and Gavin Newsom. (Newsom’s father, William, one of Gordon’s friends since high school, managed the family trust for years.)
Sonn became accustomed to the rhythms of life in the Getty orbit: the talk of political allies, the family’s trips on their Boeing 727, known as “the Jetty.” And yet, by 2018, after four years of crisscrossing the country to attend to the Gettys’ finances, elements of the job were making her increasingly uncomfortable. For one thing, she said, her employers had refused to contribute to her health insurance or her payroll taxes, to avoid the appearance of operating in New York, where she lived. For another, helping to manage a family’s most sensitive financial deliberations could be an emotional process; these are “blood-sucking” jobs, as one finance professional put it. Sarah Getty told me, “My anxiety mind will take over sometimes and be, like, Should I spend less? Should I spend more? Am I being selfish right now? I didn’t need that massage chair.” (She added, “I didn’t get a massage chair, don’t worry. But I thought about it.”) For Sarah, it complicated matters that Sonn “was also representing Kendalle, who I don’t always get along with.”
There were disputes about the dispensation of funds. Sarah supported animal-advocacy groups, such as the World Wildlife Fund, but Sonn advised her instead to donate to the Amazon Basin, to protect the landscape and its Indigenous people from environmental harm. “I care about those things as well, don’t get me wrong,” Sarah told me. “It’s just the fact that she picked it, and I felt manipulated.” There was also friction over Sonn’s compensation. She had started at a base salary of $180,000, along with her fees as an investment adviser, and though her salary eventually more than doubled, she discovered that some other suppliers of advisory services to Getty trusts had collected at least $1 million a year. She complained to Kendalle and Sarah, who agreed to pay her a hefty bonus when the trust fund opened, a percentage that she calculated would come to about $4 million.
Another debate was far more sensitive: Sonn suspected that members of the Getty family might be violating California tax laws. By getting on the plane four times a year to vote elsewhere, and keeping the back office in Reno, they had justified putting off the payment of an estimated $116 million in California taxes on the sisters’ trust, according to Sonn. Employing a similar approach with at least two other family funds, they had, by Sonn’s estimate, deferred a combined $300 million in payments. In truth, she said, they often worked on the Pleiades Trust while in California; in 2016, for instance, she had visited Gordon’s house in Pacific Heights to help interview a battery of prospective financial advisers. “All of the candidates flew into San Francisco,” she said.
At first, she thought that some members of the family might agree with her. In a 2018 e-mail, Nicolette Getty, the third sister, described the expense and the logistics of the quarterly ritual as “distasteful.” She wrote, “The trusts should become California trusts and pay the California tax that we rightfully owe.” But advisers in Gordon’s family office apparently disagreed, and by the following spring Nicolette was expressing a similar view. “We can live in California for now if we want to, without penalty, as long as we move out of state for a year before we are ready to access the trust principal,” she wrote, in an e-mail to her siblings and others. She elaborated on the idea in a message days later, arguing that “those of us living in [California] at the time of dad’s death would then make plans to move out of state for 1-2 years.” (In theory, relocating could allow an heir to escape tens of millions of dollars in California’s “throwback” tax, which vanishes if you move away for long enough.)
But moving away for “1-2 years” to avoid California taxes struck Sonn as a dubious charade. By the onset of the pandemic, in 2020, Kendalle and Sarah had resettled in California, and though Sonn had prospered by facilitating their juggling of geography, she now concluded that the tax strategy was becoming untenable. At one point, she texted Kendalle that “emails, texts and phone conversations go back and forth all the time inside CA, and all of those are traceable to CA, pandemic or not. We’ve interviewed Trust consultants at your Dad’s house. I don’t think we’re being in integrity re: the spirit of the law.” She added, “I’m compelled to tell you the truth here, even though it’s an ugly shitshow and not of either of our makings.”
Kendalle replied with one word: “Zoinks.”
Eventually, Sonn wore out her welcome. In January, 2021, Sarah fired her from ASG Investments, but she offered to work out a severance package, signing off, “I love you.” Sonn asked for a payout of about $2.5 million plus a year’s salary. “That seems fair,” Sarah replied. But days later Sarah sent a blistering criticism, in which she said that an employment lawyer was “appalled” by Sonn’s proposed terms. “I now don’t trust you in any regard,” she wrote. By the end of the year, Kendalle had fired Sonn, too. She had agreed to give her $2.5 million, in installments, but she stopped after the first payment; she said the family office had discouraged her from sending more.
The following spring, Kendalle and KPG Investments filed suit in Nevada state court, alleging that Sonn had breached her fiduciary duties and deceived her client into agreeing to the bonus. In May, Sonn filed suit in the Eastern District of New York against her former clients and employers, as well as others involved. According to the Los Angeles Times, the Gettys’ battle with their former financial adviser could “serve as a roadmap for California tax investigators, should they choose to follow the route.”
The legal survival of a multimillion-dollar tax dodge can hinge on minutiae. Auditors have been known to examine not only what state you claimed to call home but also where you swiped your gym card, the locations of your social-media posts, and where you keep your most treasured belongings—an examination known in the industry as the “Teddy-bear test.” To gauge what investigators might think of the approach laid out in Sonn’s suit, I interviewed five tax lawyers. They said the final tax bill would likely rest on subtle facts—for instance, how much trust business was done in California, or whether the beneficiaries moved away with plans to return.
Darien Shanske, a law professor at U.C. Davis, characterized the Gettys’ approach as “aggressive, obnoxious tax planning,” saying, “They are at the limit, or perhaps beyond the limit.” But the family’s larger strategy, he told me, might be simply to take their chances with California’s version of the I.R.S., the Franchise Tax Board. The F.T.B., like many agencies, has a finite capacity for complex cases, especially when faced with a well-resourced litigant. “They’re probably guessing that, in the unlikely event that the F.T.B. challenges them, it may well lose, thanks to their preparatory work—or that, faced with this work and the legal uncertainties, it’ll just decide to settle.” Leberman, the trust administrator, told me that the “major portion” of work was kept “outside the State of California,” and that the family intends to “fulfill any and all tax obligations.” In Shanske’s view, this is a slender pledge; fulfilling narrowly conceived legal obligations, while avoiding taxes in a state so closely associated with the Getty family, undermines their claim to social responsibility. “There’s a price schedule that we set amongst ourselves as a polity,” he said. “And they decided they want to pay less.”
Spend enough time around wealth managers and their clients and you can start to see the whole story of American power and suffering as a function of the simple arithmetic of compounding—of money making money, of lobbyists layering on new exemptions each decade, of the cultural amnesia that makes ideas about wealth come to seem normal, honorable, inevitable. In private moments, even Old Paul Getty marvelled at his drive to accumulate. “I don’t know why I continue to be active in business,” he wrote in his diary in 1952, four decades after he first tried to retire. “Force of habit, I suppose.”
What motivates those who already have so much to strategize so hard to have a little more? Greed is not always about money for money’s sake. For some, it’s power. (“The prize of the general is not a bigger tent but command,” Oliver Wendell Holmes said.) For others, cheating on your taxes is a nihilistic triumph. (“That makes me smart.”) For more than a few, it’s about fear. Luke Weil, an heir to a gambling-industry fortune, once told a documentarian that the prospect of losing his inheritance haunted him like the threat of “losing a parent or a sibling.”
The deepest motive may be even more primal, an innate appetite for status. “If you measure the blood levels of the chimp on top of the hierarchy, they tend to have high serotonin and testosterone levels, which are mood-enhancing,” Harrington, the sociologist, said. Putting that in human terms, she continued, “If you don’t preserve the wealth enough so that the intermarriage and education and status-maintenance activities continue, then you’re also letting the institution crumble.” Perpetuity, after all, is priceless. “The fortune is the monument you build to yourself,” she said. (For those who are truly mortality-avoidant, there is the personal-revival trust, a fund geared to clients who plan to be cryogenically frozen and want to be assured of coming back in comfort.)
In their current condition, taxes on American wealth are, effectively, on the honor system, with opt-outs for the flagrantly defiant. Could it be different? In recent years, the highest-profile ideas have been wealth taxes, such as Senator Warren’s proposal for a two-per-cent annual levy on fortunes greater than $50 million, and an extra one per cent above a billion. Critics say that the idea fails to distinguish trustafarians from entrepreneurs, and that people will cheat—though we don’t usually abandon speed limits just because speeders will speed.
Other ideas have received less attention. In 2021, Democrats proposed to narrow the angel-of-death loophole, expand the estate tax, impose a billionaires’ income tax, and eliminate some of the most popular trusts, including the GRAT. But lobbyists mobilized, reviving some of the same arguments that gutted the estate tax, and by Christmas the exemptions had been saved. “Closing the loopholes is not rocket science,” Lord, the Arizona lawyer, said. “All you need is a couple of bought-off senators.”
Still, the perversities of the tax code have become so glaring that even some of their most devoted protectors suspect that change is coming. Blum, the Texas lawyer, lamented in the seminar last year that Congress had “shined a spotlight on many of the best tools in our toolbox that we use to avoid estate tax.” He warned, “Now that the general public is aware, there is a growing outcry to shut down these benefits. This is a wake-up call that, sooner or later, the tax landscape will likely drastically change.”
Many of the ideas for reform converge around the need to prevent the re-feudalization of American wealth—the Spartan scenario, which early Americans fought so hard to prevent. For the moment, restoring real taxes on what we leave behind could be more politically viable than levying a wealth tax. Instead of colliding with American myths about the pursuit of success, such taxes could tap into Americans’ ambivalence about inherited riches. Some proponents suggest a federal rule against perpetuities, to impose a universal ban on dynasty trusts. Others suggest stronger financial incentives for whistle-blowers. “Governments have limited budgets, the stuff is complicated, and the advisers know what’s going on,” McCaffery said. “They know where the bodies are buried.”
In one of my conversations with Sonn, I asked why more people from her rarefied wing of financial services didn’t speak out. “Anybody who is within the industry, and has been there a long time, has accepted certain tenets,” she said. “Climate change is an ‘externality.’ Social injustice, and the various social crises that we’re experiencing right now, would be considered ‘externalities.’ And they’re actually mandated by corporate law to say, ‘You cannot think about the externalities. You have to think about the profit first.’ ”
Sonn told me she didn’t know anyone else in finance who had publicly criticized a client or the underlying assumptions of the business. “There’s an unspoken omertà,” she said. People “become engaged in the wrongdoing themselves. So they’re able to enforce a certain kind of culture of silence around bad behavior.” Sonn had started out in wealth management determined to help people find “tax-efficient” ways of clearing their conscience but had come to see an ethical flaw in that ambition. “The financial-services industry lives between the letter of the law and the spirit of the law,” she said. “That’s what tax efficiency is.”
Sarah Getty insisted that the sisters had acted in accordance with their family’s values. “Everything we were trying to do was lawful,” she said. “I’m not against paying taxes at all, because I think they’re very important, especially if they go in the right things. I would want the right government to be in control, though, because, if the wrong government is in control, then they go to all the stuff I don’t support. I’m very against military and guns and weapons, and very pro-planet.” Like many others I spoke to while reporting on Sonn’s dispute with the Gettys, Sarah described a feeling of captivity to industries and laws that enriched her but tried her conscience. Nicolette told me, “This Nevada trust arrangement was made before I became a trustee or was included in the trust or Getty matters at all.” She went on, “I’ll admit that for a time I did consider the option of moving out of California in order to avoid the tax, because it is quite substantial.” But, she said, she abandoned the idea, and expects to pay about $30 million in taxes on her share of the trust. “I’m one who thinks the tax burden needs to be higher on the wealthy such as myself and my family,” she said. Her sister Kendalle, who declined to comment for this article, is fond of retweeting posts by Bernie Sanders: “Billionaires get richer & pay less in taxes while millions are unemployed, kids go hungry, veterans sleep on the street. We must stand up to the billionaire class and create an economy for all, not just a few.”
Sarah has experienced the dispute as a personal betrayal. “I’ve learned that you can’t even trust the people you hire,” she told me. Sonn, too, seemed bruised by the experience. In her suit, she accused her former patrons of threatening to ruin her professional reputation if she went ahead with the case. If the case eventually settles, it isn’t clear what she might win or lose. In some places, whistle-blowers who allege tax fraud can receive financial rewards from the state, but there is no such provision in California. And there isn’t much of a market for a disgruntled wealth manager.
“My career in finance is over,” Sonn said. I asked what her parents made of that. She gave a wan laugh and said, “I fulfilled a lot of their intergenerational ambitions.” She had reached the heights of wealth management, optimized her position, and sued in pursuit of millions. Viewed from a certain angle, it was a capitalist fairy tale. When the Pleiades Trust opens, each of the sisters can expect to receive at least $300 million, minus whatever taxes their office does not succeed in avoiding. Sonn, whether or not she obtains the rest of her payout, will have made millions of dollars from her association with the Gettys. One wealth manager told me that it would have been unusual for Sonn to spend eight years as “a slave to these prima-donna girls, without the expectation that there’s something at the end of the rainbow.”
Sonn said she had come to believe that, unless wealthy Americans made some sacrifices to undo the stagnation of social mobility, stories like hers would become impossible: “My parents came here imagining that they could build a better life, and I am a product of that. And I think that some of what we’re experiencing is that window has been closing for the last ten or twenty years.”
But, despite the dispute, Sonn blamed her former clients less than their enablers in finance and politics. Loopholes, like dynasties, do not survive without good help. Why didn’t reform work? I asked. She thought for a moment and said, “The system will always do whatever it can to preserve itself.” ♦
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