InKnowVision November 2013 HNW Technical PPT - Liquidity Planning

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In this presentation we looked at the problem seen in many large estates - the lack of liquidity to deal with estate equalization, estate taxes and charitable funding.

Many of our clients have significant private businesses or extensive real estate holdings that represent a large percentage of the family wealth. There is often a large shortage of liquidity to deal with the division of these illiquid assets among family members as well as pay any estate taxes that may be levied on the estate. Of course if estate taxes do need to be paid there is a limited window when money can be raised and often times this means selling property at a less than opportune time.

View this recording to see various designs for creating liquidity.

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InKnowVision November 2013 HNW Technical PPT - Liquidity Planning

  1. 1. Technical Webinar ©2013. InKnowVision LLC. All rights reserved. www.inknowvision.com
  2. 2. (630) 596-5090 www.InKnowVision.com All Content Copyright © 2013 @InKnowVision InKnowVision, LLC InKnowVision TheComplexEstate
  3. 3.  Buy-Sell Buddies  Fantastic Farmers  Business Owner | Real Estate | Family Stock Lover www.InKnowVision.com All Content Copyright © 2013
  4. 4.  Second generation company owners  Business thriving  FMV-$60M plus  Each partner’s net worth - $35M  Unfunded buy sell  No cash for estate tax www.InKnowVision.com All Content Copyright © 2013
  5. 5.  How much liquidity needed?  Determining value of business Appraisal?  Agreement?   Settling on terms  Single pay  Pay over time  Insurance choices  Term vs. permanent www.InKnowVision.com All Content Copyright © 2013
  6. 6.  Individual Ownership vs. Trust Ownership  Estate tax reduction vs. capital gains www.InKnowVision.com All Content Copyright © 2013
  7. 7.  Health underwriting  Tobacco  Lifestyle  Drug and Alcohol  Dangerous activity underwriting  Mountain climbing  Scuba  Car racing  Financial underwriting  Substantiating the need for insurance www.InKnowVision.com All Content Copyright © 2013
  8. 8.  Review of all  Corporate documents  Ownership interests  Shareholder agreements  Bank covenants  Estate planning documents  Buy sell agreement www.InKnowVision.com All Content Copyright © 2013
  9. 9.  $25M of term insurance issued to fund buy-sell agreement www.InKnowVision.com All Content Copyright © 2013
  10. 10.  Two farming families  Net worth  Family 1 - $40M  Family 2 - $40M  Partners in all ventures  10 year plan to sell out of family real estate www.InKnowVision.com All Content Copyright © 2013
  11. 11. ASSETS VALUES CASH AND EQUIVALENTS 616,632 MARKETABLE SECURITIES - EQUITIES CLOSELY HELD BUSINESS 34,034,000 RESIDENTIAL REAL ESTATE 1,175,000 TOTAL Husband Wife 1,758,000 37,583,632 77 Years Old 78 Years Old www.InKnowVision.com Uninsurable Table B-D All Content Copyright © 2013
  12. 12. Year Estate Tax Liquidity 2013 $10,800,000 $2,350,000 Where will the money come from? www.InKnowVision.com All Content Copyright © 2013
  13. 13.  Sell business interests to GDOT for a note  32 year note  Accruing interest/balloon note  Leave note to charity in event of death  No estate tax  Insure children to pay off the note  Children have the use of the property during their lives  Re-evaluate as farm sales occur  Look for new opportunities www.InKnowVision.com All Content Copyright © 2013
  14. 14.  $10M of term-daughter  $10M of term-son  $20M or GUL-survivorship on siblings  Paid for with business profits www.InKnowVision.com All Content Copyright © 2013
  15. 15.  Client owns  Business - $15M  Family Corporation Stock - $25M (public company)  Real Estate - $10M  Collectibles - $7M  Goals  Keep business  Keep family stock  Keep real estate www.InKnowVision.com All Content Copyright © 2013
  16. 16. $7 0,0 00,0 00 $6 0,0 00,0 00 $5 0,0 00,0 00 $4 0,0 00,0 00 After other planning techniques - $3 0,0 00,0 00 $2 0,0 00,0 00 $1 0,0 00,0 00 F am ily Stock F am ily Stock S o ld Th is ch art com p ares th e am ou n t o f you r Fam ily sto ck so ld to p ay e state taxe s un d er th e p rop o se d p lan . www.InKnowVision.com All Content Copyright © 2013 Esta te T a x 30 20 29 20 28 20 27 20 26 20 25 20 24 20 23 20 22 20 21 20 20 20 19 20 20 18 17 20 16 20 15 20 14 20 13 20 12 20 11 20 C ur re nt $-
  17. 17.  Income - $1.2M  Expenses - $1.2M  Need cash flow for premium ($250k per year) www.InKnowVision.com All Content Copyright © 2013
  18. 18.  Suggestion #1  Sell collectibles  Objection – no basis – high tax rate (28% plus state)  Solution  CRT for collectibles www.InKnowVision.com All Content Copyright © 2013
  19. 19.  Suggestion #2  Refinance commercial real estate www.InKnowVision.com All Content Copyright © 2013
  20. 20.  Suggestion #3  Captive Insurance Company  Use reserves in future to pay life premiums www.InKnowVision.com All Content Copyright © 2013
  21. 21.  $15M of GUL in force www.InKnowVision.com All Content Copyright © 2013
  22. 22. 715 Enterprise Drive Oak Brook, IL 60523 (630) 596-5090 www.inknowvision.com Scott@ikvllc.com (630) 470-6480 @InKnowVision InKnowVision, LLC InKnowVision TheComplexEstate Google+ All Content Copyright © 2013

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