by Ted Beringer
As we all know the current structure of the Federal tax system is a disaster. Experts plead for revision. For years Congress has talked about total reform. Recently, Congress made a few changes and opportunity awaits those who are proactive.
Through proper techniques the top 1 to 5% of taxpayers have found ways to legitimately reduce and minimize income and capital gains taxes. Some of these same people have found ways to avoid Federal estate taxes.
The family that most exemplifies avoidance are the Waltons. By all accounts the Waltons are worth over $100 Billion. If one pays the 50% share of estate tax it is next to impossible to accumulate this kind of wealth. Thus in our view the Federal Estate tax is a voluntary tax.
Despite this fact many in the highest net-worth bracket have acquiesced to this tax, even though they have fought so hard to avoid or minimize income taxes. When asked where they would most like their assets to go (Charity, Employees, Family, Friends, Government) a large percentage put government last. Yet the actual plans implemented do not support the objectives.
Very often we see a plan with all assets to a spouse which defers but does not eliminate or reduce the future tax. From there the assets are left to children, often with a ‘second to die’ life insurance policy to pay some or all of the taxes. This plan works adequately if both spouses die together close to the execution of the new plan. However, long life by one or both spouses results in a failed program.
One needs to be as diligent on estate taxes as other types of taxes. The proper utilization of charity, grats, sales to trusts, generation skipping devices and employee transfers properly utilized allows you to distribute assets where you want.
A business owner we know worked up a plan as follows:
- Family – 60%
- Employees – 15%
- Charity – 25%
- Government – 0%
The plan itself has resulted in hundreds of jobs, millions to charities of choice and dollars to family members to help provide the ability to grow the assets and help future charities, employees and family.
Thank You For Taking A Moment To Read.