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Most estate tax plans are really death plans. You do the documents (typically, a will and revocable trust for him and the same for her). Put them away for safe keeping. Then, forget about them. Someday you die and the documents are dug up and read.

What’s the result? The IRS is guaranteed a big payday. On average, the family loses 41 percent of its wealth to the tax collectors. Totally unnecessary.

Let’s set a new target for you to hit with your estate plan: All your wealth — every dime of it — to your family; all taxes paid in full. For example, if you are worth $3 million, then $3 million to your family; $30 million, then $30 million to your family. Stop for a moment! Fill in your own current net worth. Then, estimate what amount it might grow to by the time you get hit by the final bus. That future amount not your current net worth — is what the IRS will ravage with taxes.

A real-life example (the story of Joe) is the best way to illustrate what you and your family must face when you battle the estate tax monster. Joe (age 63) and his wife (age 61) Mary are worth 11 million. Joe called me for a second opinion.

What was missing? Simply put, a lifetime plan. Burn this into your mind: No matter how fancy the will and trust, death documents cannot whip the IRS. It takes a lifetime plan that dovetails with your death plan (the typical will and trust which is only the first step you must take to win the estate tax game).

Here are the four main lifetime strategies we used for Joe and Mary (that will work for nineteen out of twenty family business owners or retirees reading these words).

Strategy #1. We created a family limited partnership (FLIP) to own their investment assets (the real estate leased to Joe’s business and a stock/bond portfolio). We started an annual gifting program to the two nonbusiness children. Estimated estate tax savings $1.5 million.

Strategy #2. We used an intentionally defective trust (IDT) to transfer Joe’s business, Success Co., to his only business child, his son Sam. The transfer from Joe to Sam, using the IDT, is 100 percent tax-free, escaping all income taxes and capital gains taxes. Estimated estate tax savings, $2.2 million.

Strategy #3. We used the funds in Joe’s 401(k) to purchase $3 million of second-to-die life insurance (on Joe and Mary). The way we structured the plan, the $3 million will be free of the estate tax. To help pay the premium, we had the 401(k) invest in life settlements (LS). This investment is not subject to market risk and has an average rate of return of 15.83 percent per year. The LS investment is the brainchild of a company that trades on the NASDAQ.

Strategy #4. Joe and Mary own two homes. We put the titles to each home into the existing (death plans) trusts. For example, their Florida home is owned 50 percent by Joe’s trust and 50 percent by Mary’s trust. Estimated estate tax savings, $350,000.

When the lifetime plan for Joe and Mary was completed, the estimated amount of wealth that will go to their three children is $13 million (which includes the $3 million of insurance), all taxes paid in full. Not only is the impact of the estate tax eliminated, but additional tax-free wealth is created for the family… The typical result of proper lifetime planning.

Sam, the business child, commented that, “You turbocharged Mom and Dad’s plan.”

Here’s the lesson to be learned from Joe and Mary: The key to winning the estate tax game is a comprehensive lifetime plan. Properly done, the IRS is out of the game when you go to the big business in the sky.

One final point: Joe will stay in absolute control of all of his assets — including Success Co. — for as long as he lives.

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