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Throughout the industry, investors are receiving big tax bills due to larger than normal capital gains distributions. The hefty distributions can be attributed to several years of favorable stock market returns, the sale of holdings no longer believed to be long-term values, and management and strategy changes.
2000 Federal Election Analysis
For the next two years politics in Washington will definitely be played between the 40 yard lines; the right and left wings of both political parties -- especially in the House, where partisanship has been rife in recent years -- will be marginalized and will no longer exert the same influence they have had in the past. Irrevocable trusts funded with life insurance can cost-effectively provide liquidity outside the grantor/insured's estate to pay estate taxes and expenses. Backdating policy applications can reduce premiums but may result in an issue date preceding the existence of the trust. Existing law suggests this does not create incidents of ownership attributable to the insured that could cause estate tax inclusion or a possible three-year rule problem.
Estate Planning Like a Vanderbilt Requires Life Insurance
A dynasty trust can provide for subsequent generations and reduce transfer taxes. The Generation-Skipping Transfer (GST) exemption allows clients to use virtually the same strategy used by the Vanderbilts and Rockefellers for generations to avoid estate tax. Without this type of trust, property is normally taxed twice by the time it reaches the grandchildren. As clients age and accumulate wealth, their life insurance needs often evolve from survivorship income to estate liquidity. Continued ownership of life insurance policies on themselves when no longer needed to financially protect the surviving spouse needlessly subjects the proceeds to estate tax. Changing policy ownership may allow existing policies to serve estate liquidity needs.
The versatility of limited liability companies (LLCs) makes them an alternative to traditional business entities and a useful estate planning tool, allowing clients to obtain estate and gift tax advantages while retaining control and access to assets.
Split dollar and selective employee retirement plans (SERP) are popular nonqualified employee benefits. Split dollar allows the employer to finance the life insurance premiums, giving the employee's beneficiary an income tax-free death benefit.
The intent of Section 303 (of the Internal Revenue Code) is to avoid the forced sale of a closely held business at the death of a shareholder by providing a tax efficient method to raise cash. Section 303 provides favorable tax treatment to qualifying partial redemptions of the deceased shareholder's stock.
Have you heard about Section 529 plans? These are state sponsored investment programs given special tax status under section 529 of the Internal Revenue Code. There are two types of qualified state tuition programs: "college savings plans" and "prepaid tuition plans." For some clients, the potential benefits of these plans may be significant.
Benefit Exchange: A Solution to a Potential Estate Tax Problem
A wealthy executive nearing retirement and facing a potential estate tax problem owns a substantial nonqualified deferred compensation account. The executive will have adequate retirement income from other sources so she does not need the deferred compensation benefit. ESOPs: Qualified Retirement Plans for Small Business Owners A small business owner wants to sell her business, diversify her investments and retire but her stock basis is low and she wants to avoid capital gains tax on the sale. Additional Incentive Match: How it Helps Businesses Reward Key Employees
Many highly-paid employees want to defer current income but are already making maximum contributions to a 401(k). You might think nonqualified deferred compensation. But what if the employer wants a current income tax deduction, an incentive for the key employee to remain, and demands simplicity? Charitable Remainder Trusts : A Good Solution Under the Right Circumstances
With estate tax rates as high as 55%, many clients strive to get property out of their estate. One obstacle is their concern they may need income from that property in the future. A charitable remainder trust (CRT) can be a good solution. Section 303 Redemptions: A Unique Opportunity for C-Corps The death of a shareholder of a closely held corporation presents a rare opportunity to take money out of the corporation tax free by means of a partial redemption. Deferred Compensation Alternative Highly paid employees frequently want to defer more current income but cannot because they are already making maximum contributions to a 401(k) plan. Nonqualified deferred compensation is an often-used solution, but does not provide the employer a current income tax deduction. Executive Bonus Arrangements: Golden Handcuffing An executive bonus arrangement is a method of providing tax deductible life and disability benefits to executives and business owners. This article discusses how executive bonus arrangements, which are simple and inexpensive to administer, can also be used to handcuff key employees to a business. Basis Step Up for S Corporation
A buy-sell agreement funded with life insurance provides stability to the business and security to the owners' families by guaranteeing that upon the death of an owner the surviving business owners will be financially able to purchase the stock of the deceased owner. Cross purchase agreements are often favored because surviving owners receive a stepped up basis in the purchased interest even though entity redemption agreements offer several advantages, particularly where insurance funds the arrangement. No Sell Buy-Sell A frequent challenge for planners arises when a client's major asset is a business interest. The business may be incorporated or may be conducted as a partnership. Employee Stock Ownership Plans A small business owner wants to sell her business, diversify her investments and retire but her stock basis is low and she wants to avoid capital gains tax on the sale. Wait and See Buy-Sell Agreements Buy-sell agreements can provide estate liquidity and business continuity upon the death, disability or retirement of an owner. However, choosing the best structure for the agreement, cross purchase or stock redemption, is difficult because of conflicting considerations. Total Return Unitrusts Traditionally designed trusts create an inherent conflict between the interests of income beneficiaries and remainder beneficiaries by strictly separating principal and income. A new concept in trust design, the Total Return Unitrust (TRU), seeks to resolve this conflict by uniting the interests of income beneficiaries and remainder beneficiaries and maximizing returns to both. Making an Irrevocable Trust Revocable Many estate clients procrastinate completing estate planning because they want the flexibility to make changes to wills and trusts and adopt new estate planning strategies. Protecting the S Election with Buy-Sell Agreements Buy-sell agreements can lend stability to small businesses and provide security for the families of the owners. Cross Purchase Arrangements Buy-sell agreements are typically structured to provide for estate liquidity and allow for business continuity upon the death, disability, or retirement of one of the owners. These agreements fall into two basic categories -- entity purchase and cross purchase arrangements. |
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