Estate Plan or Wealth Transfer Plan: Which One Eliminates the Estate Tax Every Time?


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This question was the subject of a seminar I gave recently. And the answer is important to your economic health, as well as that of your family and your business.

The sad fact is that only 10% (11 people in an audience of 112) knew the difference between an estate plan and a wealth transfer plan. Worse yet, not one person in the audience answered “Yes” to the question: “Do you have a wealth transfer plan or are you working on one?”

“What about your estate plan?” I asked; 32 had a completed plan; 26 were working with their professional advisers on their estate plans. A great start to the seminar. All 112 people in the audience needed help. So if you haven’t started planning, you’re not alone.

The traditional estate plan—consisting of a will and a revocable trust—is in reality a death plan. It just lays there until you die, and when you do, it guarantees the IRS a big payday. Simply put, a traditional estate plan (standing alone without any additional tax planning) can and will hurt you.

But wait a minute, you ain’t dead yet.

Enter the tax-saving system we call “Wealth Transfer.” Wealthy taxpayers have used the concept of wealth transfer for years: Develop a lifetime tax plan that transfers all of your wealth—intact and tax-free—to your family. Burn it into your mind: You must have a lifetime plan, not only a death plan. If you own a business, a separate lifetime plan to transfer your business tax-free to your children who are working in the business must be integrated into your overall wealth transfer plan. Of course, your lifetime plan is tailor-made to dovetail with your death (will and trust) plan.

When should you complete your plan? The sooner, the better. Your plan must focus on lifetime strategies such as qualified personal residence trusts, intentionally defective trusts and family limited partnerships (QPRTs, IDTs and FLIPs, respectively). Each strategy does a separate tax-saving trick, yet allows you to control your assets for as long as you live. Yes, your business is one of the assets.

All in all, there are 23 wealth transfer strategies (and a practically endless number of combinations and variations). These strategies, when used to build an overall tax plan, answer the three basic questions that have been asked by readers over the years: 1) “How do we [me and my spouse] maintain our lifestyle for life?” 2) “How do I maintain control of my business for life?” and 3) “How do I get ALL of my wealth-—intact—to my family without any reduction for taxes?”

For many years, I’ve thought of writing a book that answers these questions, and it’s finally done. The title is Tax Secrets of the Wealthy, and it introduces an organized system that’s not designed to beat the estate tax. Instead, the system focuses on your wealth. The book teaches you how to use the system and 23 different strategies to pass your entire wealth (or even increase the amount of wealth) to your family without any reduction for taxes or other costs.

Here’s a sample of what you’ll learn: 1) why your qualified plan [profit sharing, 401(k), IRA] is a tax trap if you are in the highest tax brackets (the IRS gets 75% or more; your family only 25%) and how to turn the tables on the IRS (your family gets 100 %). 2) How to create a private retirement plan that creates tax-free dollars for your retirement. 3) How to eliminate the capital gains tax. 4) How to give significant amounts to charity without a single dollar of cost to your family.

Think of the strategies outlined in this book, which are designed especially for the owner of a closely held business, as the bricks, mortar, lumber and other material used by a skilled architect to build a solid house. You owe it to yourself, your family and your business: Review your current estate plan. If your family will not receive every dollar of your wealth, there is truly a way to get the job done. Legally. And easily.

If you’re interested in purchasing a copy of the book, write to Book Division, Blackman Kallick Bartelstein LLP, 10 South Riverside Plaza, 9th Floor, Chicago, IL 60606.