STORY TOOLS

• E-mail story
• Comments
• iPod friendly
• Printer friendly

More Business

• Goodland is back in business
• Business Buzz: October 7
• TAX SECRETS: Multiple owners, multiple problems?

Share and Enjoy [?]

I’m frustrated. It’s a good bet many of the readers of this column are frustrated too. And for the same reason. Actually, we have the same goals: eliminate the estate tax.

To learn how to accomplish the goal, I’ll read (or listen to) anything that offers a way to reduce the potential estate tax bite. So do most readers of this column; that’s what they tell me when they call.

Then why the frustration? Because whether an article, or tape or an entire book, the authors usually offer only one hint, one strategy or one technique, which at best will only reduce the estate tax, instead of eliminate it. Worse yet, almost all professional estate planners strive for estate tax reduction rather than making zero estate taxes the target.

Yet, for years this column has been preaching three basic truths: (1) you can pass all your wealth (every dime of it) to your family intact, with all taxes – if any – paid in full; (2) you can control your assets – including your business – for as long as you live; and (3) you can use a tax-free environment to create wealth so you can increase the amount of wealth your family (typically your children and grandchildren) gets after you are gone, instead of losing any of your wealth to the IRS.

A properly designed estate plan usually takes advantage of all three of the basic truths.

Typically, each article in this column attempts to explain one strategy at a time. Instead this article gives a list of when you use the most common strategies we actually use in practice to accomplish the three “basic truths.” Use the list as a roadmap to plan your own estate or review your existing estate plan.

Pass all your wealth intact – Truth 1

1. You own a residence. Use a qualified personal residence trust (QPRT) to transfer the residence to your heirs.

2. You own a business. Use an intentionally defective trust (IDT) to transfer your business (tax-free) to the children in the business.

3. You own other assets: real estate, stocks or bonds, interest in partnerships or other investment property. Use a family limited partnership (FLIP) to hold title to all these assets and transfer interests in the FLIP to your heirs.

Keeping control of your assets – Truth 2

Business owners, whether male or female, have one common trait – they want to keep control of their assets, (including their businesses) for as long as they live.

The Rockefellers showed the way years ago. They owned nothing, but controlled everything by using trusts. Today, because of the complex tax laws, we need a variety of ways to do what the oil barons did: control what you want for as long as you want, but own little or no value for tax purposes.

1. We make you trustee where the tax laws permit, for example, for a QPRT and IDT.

2. We use voting stock (51 percent or more) for your business corporations so you maintain absolute control while gifting (typically with an IDT) the non-voting stock to your business kids.

3. You control all investment assets in a FLIP by keeping as little as one percent of the partnership as the general partner (equivalent to voting stock), while giving away the limited partnership interests (like non-voting stock) to the children and grandchildren.

Create wealth in a tax-free environment – Truth #3

There are only two tax-free environments in the tax law that you can use to create huge amounts (even into million of dollars) of wealth: (a) Life insurance and (b) charitable trusts, in particular a charitable remainder trust (CRT) and a charitable lead trust (CLT).

1. If you have $200,000 or more in a rollover IRA, profit-sharing plan or 401(k), use a “Retirement Plan Rescue” to turn taxable dollars into tax-free dollars. For example, one client (a reader of this column) was able to turn $250,000 into $3.5 million of tax-free wealth for his family.

2. If you own appreciated assets, consider using a CRT to eliminate the capital gains tax and the estate tax, while enjoying an income stream for life and typically doubling the amount your heirs will eventually receive.

3. Get your life insurance into an irrevocable life insurance trust (or buy new policies in the trust).

4. If you are not insurable, consider a CLT.

The above list does not pretend to be complete. Nor are all the traps and exceptions considered. Make sure you work only with experienced and knowledgeable professionals.

It should be noted that in our practice we use 23 core strategies (only 10 are listed in this article) and an endless number of combinations to beat up the IRS ... legally.

Want to learn more! All 23 strategies and an organized system of how to use them to accomplish the three basic truths in your own estate plan are explained in detail on my Web site: www.taxsecretsofthewealthy.com. Browse around. You’ll be glad you did. Or did you have a question or unique concern? Call Irv Blackman at 239-417-9732.

---

Irv Blackman is a certified public accountant and lawyer who specializes in estate planning, business succession and asset protection. Contact him via e-mail at wealthy@bkbcpa.com or call 417-9732. His Web site is www.taxsecretsofthewealthy.com.