How Wal-Mart Made OneFamily Filthy Rich

Sam Walton’s Amazing Foresight• Sam Walton founded Wal-Mart in 1962.

• Even before he launched Wal-Mart, Walton ran a “five and dime.”

• He transferred 80% of the stock in his company to his children around the time he launched it.

• Much of the family’s wealth is tied up in a family holding company called “Walton Enterprises.”

When Wal-Mart got big, Walton’s kids profited

Walton Enterprises essentially controls Wal-Mart.

• Not surprisingly, Walton Enterprises owns a lot of Wal-Mart stock -- 1.6 billion shares of it.

• With 3.2 billion Wal-Mart shares outstanding, Walton Enterprises owns about half of Wal-Mart.

• That’s about $122 billion worth of Wal-Mart stock -- and enough to essentially control the company.

Why did he do give so much of it to his kids?

“The best way to reduce paying estate taxes is to give away your assets before they appreciate.”--Sam Walton, Made in America

Walton gifted those shares to his kids before Wal-Mart got huge, so his gift was low in value at the time.

How gifts like that work

If you start a new company, it’s likely worth very little.• You invest some capital.• You have some assets and liabilities.• You may or may not have early earnings.

Your gift is typically valued at its worth on the day you give it. For a new company, that number can be small.

If you’re giving stock, the recipient typically gets your original cost basis as part of the gift.

Turning a gift into a multibillion-dollar legacy

When Walton started Wal-Mart, there was no guarantee it would become the giant it is today.

His children benefitted when the company grew, and they held on to their appreciating shares.

Because Walton had already handed over most of his stake in Wal-Mart early in its existence, after he passed, those gifted shares were not in his estate.

As a result, massive family wealth

Where the Walton money sits now:• Christy Walton (and family): $37.8 billion• Jim Walton: $35.4 billion• S. Robson Walton: $35 billion• Alice Walton: $35 billion• Ann Walton Kroenke: $4.9 billion• Nancy Walton Laurie: $4.2 billion

Data from Forbes, as of June 22, 2014.

What could have gone wrong?Just because it worked for the Waltons doesn’t mean it will always work out that well.• If Wal-Mart had failed or floundered, Walton’s gift to his

kids could have wound up worthless.

• If Walton’s kids had sold or squandered their stakes, they may have lost most or all of the wealth.

• If the family squabbled instead of worked well together, the money could have been lost to lawyers, and Sam Walton could have been too distracted by the fights to build Wal-Mart into the titan it is today.

What this means to you• The Waltons effectively control Wal-Mart.• That limits the influence of other shareholders.• It makes a hostile takeover of Wal-Mart virtually

impossible.

• If you have a business that may get big...• Consider your legacy planning early, while it’s still small.• Don’t forget the human factors, too.

Per Warren Buffett, a good inheritance from a person of means is "enough money so that they would feel they could do anything, but not so much that they could do nothing."

How will Wal-Mart get Paid in the Future?