Page 47 - MetalForming September 2010

ed on his stationery that he is a “Board Certified Specialist in Estate Planning, Trust and Probate Law.”
• Joe (48 years old) owns Success Co. (an S corporation) that he started from scratch, is very profitable and growing. Joe likes Larry professionally, but feels that somehow the plan Larry created falls short of accomplishing Joe’s goals.
This is what we advised Joe to do:
1) Retain Larry and sign his docu- ments, after one suggested change.
2) Since the TEP does not legally speak until Joe dies (when that will be is uncertain, but according to the life expectancy tables, about 35 years) a lifetime tax plan should be created.
Everyone should have two plans: a death plan (TEP) and a lifetime plan. The purpose of the lifetime plan is to employ various strategies so that by the time you die, the estate tax has been eliminated or you have created enough
tax-free wealth so that any estate-tax lia- bility is covered. Remember, it’s not what you are worth today that’s socked with the estate tax, but what you or your spouse will be worth after both of you die.
Also remember that Joe, like the typ- ical guy, wants to control his wealth— particularly his business—until he dies.
Here’s a list of 10 strategies we wove into a comprehensive lifetime plan for Joe, his family and his business:
1) Asset protection strategies to pro- tect Joe’s personal assets and, separate- ly, the business assets.
2) A management corporation (a C corporation) was set up to provide Joe (but not other employees of Success Co.) with many tax-free fringe benefits (including long-term care and deductibil- ity of medical expensesfor Joe’s family).
3) A family limited partnership for Joe’s investment assets.
4) A nonqualified deferred compen-
sation plan for Joe’s two key employees (an easy way to prevent employees from leaving and competing with you).
5) A common paymaster to save sig- nificant amounts of payroll taxes every year.
6) A plan to use a portion of the profits of Success Co. to pay for the children’s college education.
7) Transfer Success Co. to the chil- dren tax-free, yet Joe maintains control. 8) Set up a family foundation and a charitable lead trust as a tax-effective way to make substantial charitable con- tributions without reducing the chil-
dren’s inheritance.
9) A strategy to save income taxes
whenever a new unit of Success Co. is opened.
10) How to make the insurance on Joe’s estate tax-free and buy $3 million of second-to-die life insurance using the government’s money. MF
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