'Honey Boo Boo', the most famous redneck, is now set up to be the richest when she hits 21 thanks to a trust fund set up by Mama June Shannon Thompson and President Barack Obama’s fiscal cliff deal.
The seven-year-old is the star of TLC’s show Here Comes Honey Boo Boo, along with the entire family. Mama June has asked TLC to deposit the family’s pay ($15,000 to $20,000 per episode) directly into the trust fund. This means that when Alana 'Honey Boo Boo' Thomson and her sisters Lauryn, 12, Jessica, 15, Anna, 18, and Anna's daughter Kaitlyn turn 21 they will receive a sizeable amount of money. Only if they need money for their education, or healthcare, can the girls access the money before then.
The fiscal deal stipulates the estate tax to be set at 40 percent with a $5 million exemption. That threshold will be indexed to inflation, as a concession to Republicans and some Democrats in rural areas like Sen. Max Baucus (D-Mt). It would take the family 25 episodes to earn $5 million and start paying taxes on that income.
The tax on capital gains and dividends will be permanently set at 20 percent for those with income above the $450,000/$400,000 threshold. It will remain at 15 percent for everyone else. (Clinton-era rates were 20 percent for capital gains and taxed dividends as ordinary income, with a top rate of 39.6 percent.) TLC showed 10 episodes during the first season in 2012.
Tax rates will permanently rise to Clinton-era levels (the top marginal tax rate was 39.6 percent) for families with income above $450,000 and individuals above $400,000. All income below the threshold will permanently be taxed at Bush-era rates. The family will avoid paying the 39.6 percent because the money will be in the trust.
High net-worth individuals often use trusts as a legal means of giving money to their children while incurring the least possible taxes.
Trusts avoid paying taxes in three ways: First, they can assign a low value to assets they donate to the trust. Second, when the trust sells assets at a profit, the donors can pay the relatively low capital gains taxes on behalf of the trust. By doing so, they leave more money in the trust, untouched by the much higher gift tax. Third, by paying those taxes, they can reduce the pile of wealth eventually subject to an estate tax when they die.
But tax and estate planning may not be what the family wants. “You're never gonna see me drive a Range Rover or a Mercedes. I'll drive one if someone else pays for it. Never gonna live above my means,” said Mama June.
Mama June says Sugar Bear, her companion, makes cash from his contractor job, which is how they pay the bills. The family’s only major purchase since suddenly becoming famous is a 2005 Ford Expedition.
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