US shale oil king transfers billions of dollars to his children

 US shale oil king transfers billions of dollars to his children

Harold Hamm has just made one of the largest asset transfers in American history, when he divided his shares in Continental Resources among his five children.

Each of Hamm's children will receive a $2.3 billion stake in the shale oil company he founded more than 50 years ago. Hamm reassured investors that he retained control of Continental, as his children were not allowed to sell shares until his death.

"I've said it many times. Continental is a company built to last," he said in the announcement. "The transition has been going on for over a decade, with two main goals in mind: to grow. reasonable succession plan and ensure long-term continuity for the company".

US shale oil king Harold Hamm. Photo: Reuters

US shale oil king Harold Hamm. Photo: Reuters

Like many other super-rich people in the US, Hamm's huge gift could be given without paying a single penny in taxes. The 76-year-old billionaire appears to have taken advantage of two common loopholes to evade inheritance and gift taxes of up to 40% in the US. The key is to carefully structure the transactions, in a legal way, of course, to both benefit the heirs and not be considered a gift.

Many Democrats have proposed filling these holes in US President Joe Biden's economic plan. However, this plan is still stuck in Parliament.

According to experts, Hamm put the assets into a limited liability company and divided among the children's funds in the form of loans. According to the regulations of the US Taxation Department, intra-family loans will have to pay interest, or else will be counted as gifts and taxed as inheritance.

Documents indicate Hamm made a loan with his children's funds, with principal amounting to $761 million each, on July 1, 2020. This time is to take advantage of interest rates at record lows. To date, shares of Continental have increased by nearly 250%, bringing the value of each son's shares to more than $2 billion.

The documents also show Hamm using a limited liability company and dozens of different trusts to make the asset transfers. "The use of multiple transactions and funds to evade wealth taxes is very common with wealthy families," said Tabetha Peavey, a solicitor at New York University's Tax Law Center. In Hamm's case, the fact that he executes trades when the oil market is near a bottom means that he gives his children the opportunity to profit whenever the market recovers.

Hamm began its 2015 delivery plan, after oil prices crashed and Continental stock was in free fall. By mid-2020, when the pandemic hit the oil industry hard and interest rates in the US fell to a record low, Hamm restructured transactions to increase the advantage for his children. In 2020, his fortune once fell to $2.4 billion, down nearly 90% from the peak. According to the Bloomberg Billionaires Index, Hamm currently owns $18 billion.

Hamm is the youngest of 13 children in a poor neighborhood in Oklahoma. He entered the energy industry at the age of 18 with a $1,000 loan, providing services at oil fields. He entered shale oil exploration four years later, with the company that later became Continental.

Rapid expansion is key to Hamm's success. Over two decades, he purchased 1,214 square kilometers of land at the Bakken mine in North Dakota. The area used to produce very little oil before, but later horizontal drilling and hydraulic fracturing technology helped Hamm become a pioneer, making the state the third largest oil producer in the United States in 2012.