Most of the concepts and strategies you read in this tax
column are really answers to questions asked (or concerns,
problems or fears told to us) by readers who called our
office. Also tossed into the column is a large helping of
our years of experience consulting with our readers. About
three out of every four readers who call ask a variation of
this troublesome question, "What will estate planning do
for me, my family and my business?" The simple answer: The
"right plan" will accomplish all your goals. Actually the
right estate plan is a group of small plans that all
dovetail together. There are basically two types of plans:
a lifetime plan that should start now (in the next two or
three months), and a death plan (really your will and trust
documents) that can sit in a drawer until you get hit by
the final bus. By far the lifetime plan is the most
important of the two. Let me say it loud and clear: Never,
under any circumstances can your will and trust-no matter
how fancy or how long-accomplish your lifetime goals. Even
worse, standing alone, rarely can your will and trust
accomplish your estate planning (death) goals. Remember,
your death documents do absolutely nothing until after you
have drawn your last breath. Okay, so lifetime planning is
the way to go. The typical business owner (let's call him
Joe) will have three plans:
(1) a retirement plan,
(2) a business succession plan (who will run the company
when Joe slows down, because in practice Joe rarely totally
leaves the business until he goes to business heaven) and
(3) a business transfer plan (usually leaving the business
to Joe's business child or children) or a sales plan (to
key employees or an outside buyer if there are no kids or
employees to take over the business). Can you imagine any
of these three plans being effectively handled in death
documents? The various plans that we-as consultants-create
are in response to the goals that you-the client-list. To
help you get started on the first task of creating the
"right plans" the balance of this article focuses on the
ten most common goals we hear from clients in the real
world. Every one of these goals can be accomplished with
ease by employing the appropriate strategy [most often used
strategies given in brackets]. You'll easily recognize
which are part of a lifetime plan and which a death plan.
As you read, circle the goals that match your goals.
1. Maintain our lifestyle (Joe's and his wife Mary) for as
long a we live [intentionally defective trust, S
corporation, family limited partnership, retirement plan,
TIPs, which stands for transferable insurance policies].
2. Control my (Joe's) wealth-including my business-for as
long as I live [voting/nonvoting stock for business, family
limited partnership].
3. Maintain Mary's lifestyle for as long as she lives
[marital deduction, irrevocable life insurance trust, plus
all strategies as shown in 1 above].
4. Pass all of my wealth-every dime of it-to my family,
instead of losing it to the IRS [strategies as shown in the
other eleven items in this list].
5. Transfer my business to our business children…tax-free
[intentionally defective trust; never a sale].
6. Treat children (really non-business children) fairly
[family limited partnership, irrevocable life insurance
trust, subtrust, retirement plan rescue].
7. Avoid the huge (up to 80 percent) double tax on my
qualified retirement plan-like a profit-sharing plan,
401(k) or IRA-money [subtrust, retirement plan rescue].
8. Educate my children / grandchildren [Private retirement
plan].
9. Eliminate the capital gains tax [charitable remainder
trust].
10. Attract key employees and keep my key employees
[non-qualified deferred compensation plan].
11. An investment without risk that earns 8% (could be more
or less depending on person who calls). [TIPs, an
investment that has averaged 15.83% annual return for the
past 15 years. Offered by a public company that trades on
the NASDAQ. Must be an Accredited Investor, minimum
investment $50,000].
12. Establish a family foundation and make gifts to charity
without reducing the value of our wealth to be inherited by
our family [charitable lead trust and charitable remainder
trust].
The 12 goals listed above (followed by the tax strategies
that easily accomplish your goals) are actually a good road
map to help you get started on your own tax plans.
Want to learn more? Discover all the tax strategies and an
organized system that shows you how to quickly accomplish
all of your goals as you create your own lifetime plan and
estate plan.
----------------------------------------------------
Irv Blackman is a very experienced CPA and lawyer. He
founded Blackman & Kallick, the largest independent CPA
firm in Illinois, and is the founding Chairman of the Board
of New Century Bank of Chicago.
Website: http://www.taxsecretsofthewealthy.com .
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