Tax Secrets: Your estate plan needs a lifetime plan

The right estate plan is a group of small – explained in this article – plans that all dovetail together to create a single comprehensive plan for you, your family and your business.

There are basically two types of plans: a lifetime plan that should start now and a death plan/estate plan (your will and trust documents).

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.

The typical business owner (Joe) should have three lifetime 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 retires) and (3) a business transfer plan (usually leaving the business to Joe’s business child or children) or a sell-the-business plan (to key employees or an outside buyer if there are no kids to take over the business). Can you imagine even one of the three plans being effectively handled in your death documents?

To help you get started on the task of creating the “right plans,” the balance of this article focuses on the twelve most common goals business-owner clients list in the real world. Each of these goals can be accomplished with ease by employing the appropriate strategy [most often used strategies given in parentheses]. You’ll quickly recognize which goals are a part of a lifetime plan and which a death plan. As you read, circle the goals that match your goals.

Maintain your lifestyle for as long as you live [intentionally defective trust, S corporation, family limited partnership, nonqualified deferred compensation plan, retirement plan].

Control your wealth – including your business – for as long as you live [voting/nonvoting stock for business; family limited partnership for investment assets, typically real estate, stocks and bonds].

Maintain your spouse’s lifestyle for as long as she/he lives after you are gone [marital deduction, Q-tip trust, irrevocable life insurance trust, retirement plan rescue and the strategies shown in 1 above].

Pass all of your wealth – every dime of it to your family – instead of losing it to the IRS [as shown in the other 11 items in this list].

Transfer your business to the business children; tax-free [grantor retained annuity trust or intentionally defective trust; never a sale].

Treat children (really non-business children) fairly [family limited partnership, irrevocable life insurance trust and retirement plan rescue].

Triple (or more) the value of your qualified retirement plan – like a profit-sharing plan, 401(k) or IRA – funds [retirement plan rescue].

Educate your children/grandchildren by creating tax-free wealth [Private retirement plan.]

Eliminate the capital gains tax [charitable remainder trust].

Attract new key employees and keep your current key employees [nonqualified deferred compensation plan].

Make gifts to charity without reducing the value – most clients actually make a large tax-free profit – of your wealth to be inherited by your family [charitable lead trust, charitable remainder trust and family foundation].

Use your existing wealth to create additional large amounts (for your heirs or charity) of tax-free wealth [a new strategy to purchase huge amounts ($5 million to no dollar limit) of life insurance called “premium financing.” Yes, second-to-die life insurance is available, if married. A great strategy: big-dollar death benefits with a tiny cash outlay].

The 12 goals listed above are actually a good roadmap to help you get started on your own lifetime plan, and dovetailed with your estate plan.

Want to learn more? Discover the tax strategies and an organized system that work together to accomplish all of your family, business and economic/tax goals. Continue your education by browsing my website taxsecretsorthewealthy.com. Yes, if you have questions it’s okay to call me (Irv) at 847-674-5295 or email me (irv@irvblackman.com).