You Cant Beat Death, But You Can Beat the Estate TaxMay 1, 2009
The typical reader of this column, (we’ll call him Joe), who calls me for estate-planning help has two basic characteristics:
- He has been successful at accumulating wealth, almost als in a business he started or was created by a family elder and passed to him, and a
- He hates paying taxes. Joe is usually married (but not necessarily to his first wife), has kids and about two-thirds of the time, one or more of his kids are in the business (Success Co.). Joe wants to sell Success Co. to his kid(s) and slow down. Rarely does Joe want to retire, he just wants to work less hours and spend more time with family, golf, travel and other nonbusiness pleasures.
This article is written for the Joes of the world, struggling to find a to deal with some or most of the above characteristics, facts or concerns.
We have designed a system that als delivers 100 percent of your wealth to your family or a portion to charity instead of losing as much as 55 percent of your wealth to the IRS. Best of all, every one of the strategies used in the system is legal, easy to do when you know how and als works, whether you are young or old, married or single, insurable or uninsurable.
The system revolves around three pillars:
- Select time-tested appropriate strategies,
- Accomplish your specific goals,
- Base the system on the assets you own.
Your job is to identify your specific goals, typically divided into goals for you and your spouse, your family and your business.
Our job is to select the strategies —various trusts, partnerships and other techniques—write the documents and implement the plan. Of course, the plan must be monitored over the years and updated as necessary, when required by changes in your family and business circumstances.
That leaves the assets—really a personal financial statement. We divide your assets into four distinct categories:
- Funds in a qualified plan, i.e. 401(k), IRA or profit-sharing plan,
- Investments such as real estate, stocks, bonds and an interest in other investments, usually managed by someone else.
Logic says that you must have two plans to legally beat the IRS: a lifetime plan and a death plan (the typical will and trust most lawyers draw). The real don’t-lose-your-wealth-to-the-IRS plan is als in the lifetime plan.