14 05-17 the most common flaws in estate planningBruce Givner
The most common flaws in estate planning including the failure to get started, the failure to maintain fresh documents, the failures in many documents, failures in asset transfers, failure to consider family issues, and failures through overplanning and underplanning.
How Parents Keep Control Both During Their Lifetimes And After They Are DeadBruce Givner
Irrevocable trusts are required if you want to engage in estate tax planning, asset protection planning (creditor planning) and even in a great deal of income tax (including capital gains tax) planning. However, parents are not thrilled at the idea of having to give away assets to a trust that they cannot revoke!! Do you mean that they can't change it? What if they change their minds about their children? About the trustee? Happily, there are many ways to make the parents comfortable that even though the trust itself is unable to be revoked, it is flexible. The parents, of course, pick as the initial trustee the person they trust to do whatever he or she is told without question but simply out of loyalty. More importantly, the parents can - at any time, without a reason - remove the trustee and name a new one (as long as the new one is not "related or subordinate" as defined in IRC Section 672(c)). The parents can advise the trustee to drop the assets down into a single member LLC and appoint the parents as the non-managing members. The trust can have a protector who can be given the power to remove the trustee; to change the allocation among the children; to add grandchildren and spouses of heirs and charities as beneficiaries; to change the manner of distribution to the heirs. Under California law if all of the beneficiaries and the grantors agree, they can amend an irrevocable trust without having to go to court. There are also other ways to change an irrevocable trust, e.g., decanting to a new trust with better provisions. The trust can start off as a grantor (disregarded) trust for income tax purposes and it can "flip" or "toggle" to a complex trust and, perhaps, flip back again. So, the goal of this presentation is to make people aware that there are ways to make parents comfortable with irrevocable trusts, without which planning would be difficult, if not impossible.
20 07-23 building blocks to eliminate the estate taxBruce Givner
In 1977 Professor Cooper of Columbia Law School wrote an article that suggested the estate tax is voluntary. In 43 years, nothing has changed. Those who fail to plan, plan to fail. The elements of estate tax elimination include the discounts provided by a family limited partnership, such as lack of marketability and lack of control; thoughtful use of the lifetime estate and gift tax exclusion; private annuities, including how to meet the exhaustion test; generational split dollar; tiered entity discounts; GRATs (grantor retained annuity trusts); and SCIN-GRATs.
An overview of the entire state administrative process. Learn about when you can settle during the process, some great publications to read up on, how the audit wraps up, settlement, and what to do if you don't like the audit result.
For more information, please visit us at www.givnerkaye.com
Everything You Always Wanted To Know About Family Trusts But Were Afraid To AskBruce Givner
Family Trusts. Living Trusts. Inter Vivos Trusts. Revocable Trusts. Synonyms for trusts that are "Will substitutes." They help avoid probate and the need for a conservatorship. They help reduce the fees, including trustee and attorney fees, and delays of probate. Most of the documents are boilerplate, but why? What's wrong with using LegalZoom and other document preparation software? Must you file an IRS Form 1041 for a family trust? Must the living trust get its own EIN? What is a subtrust? What is an administrative trust? What is a grantor? A protector? A complex trust? How is competence determined? Are "no contest" clauses enforceable? Are illegitimate children "heirs"? Must a living trust be notarized? Must it be recorded? What is a "pourover" Will? What is a codicil? What is a holographic will? What is a personal property memorandum? What makes a power of attorney "durable"? What is a health care directive?
What is a "springing" power of attorney? What is a "pot" trust? What is a "specific" bequest? When should I use a corporate trustee? What's the difference between a fiduciary bond and fiduciary insurance? What is a trust certificate? What is a "blanket" assignment of assets? What is "per stirpes"? What is the rule against perpetuities?
California and federal forms; does it make sense to use non-California entities?; asset protection benefits; 3 different types of asset protection; problems with LLCs; gross receipts tax; best states for LLCs; the best structure; the rollout LLC; FLPs using LLCs; limited partnerships instead of LLCs; LLCs for tax-exempt entities;
14 05-17 the most common flaws in estate planningBruce Givner
The most common flaws in estate planning including the failure to get started, the failure to maintain fresh documents, the failures in many documents, failures in asset transfers, failure to consider family issues, and failures through overplanning and underplanning.
How Parents Keep Control Both During Their Lifetimes And After They Are DeadBruce Givner
Irrevocable trusts are required if you want to engage in estate tax planning, asset protection planning (creditor planning) and even in a great deal of income tax (including capital gains tax) planning. However, parents are not thrilled at the idea of having to give away assets to a trust that they cannot revoke!! Do you mean that they can't change it? What if they change their minds about their children? About the trustee? Happily, there are many ways to make the parents comfortable that even though the trust itself is unable to be revoked, it is flexible. The parents, of course, pick as the initial trustee the person they trust to do whatever he or she is told without question but simply out of loyalty. More importantly, the parents can - at any time, without a reason - remove the trustee and name a new one (as long as the new one is not "related or subordinate" as defined in IRC Section 672(c)). The parents can advise the trustee to drop the assets down into a single member LLC and appoint the parents as the non-managing members. The trust can have a protector who can be given the power to remove the trustee; to change the allocation among the children; to add grandchildren and spouses of heirs and charities as beneficiaries; to change the manner of distribution to the heirs. Under California law if all of the beneficiaries and the grantors agree, they can amend an irrevocable trust without having to go to court. There are also other ways to change an irrevocable trust, e.g., decanting to a new trust with better provisions. The trust can start off as a grantor (disregarded) trust for income tax purposes and it can "flip" or "toggle" to a complex trust and, perhaps, flip back again. So, the goal of this presentation is to make people aware that there are ways to make parents comfortable with irrevocable trusts, without which planning would be difficult, if not impossible.
20 07-23 building blocks to eliminate the estate taxBruce Givner
In 1977 Professor Cooper of Columbia Law School wrote an article that suggested the estate tax is voluntary. In 43 years, nothing has changed. Those who fail to plan, plan to fail. The elements of estate tax elimination include the discounts provided by a family limited partnership, such as lack of marketability and lack of control; thoughtful use of the lifetime estate and gift tax exclusion; private annuities, including how to meet the exhaustion test; generational split dollar; tiered entity discounts; GRATs (grantor retained annuity trusts); and SCIN-GRATs.
An overview of the entire state administrative process. Learn about when you can settle during the process, some great publications to read up on, how the audit wraps up, settlement, and what to do if you don't like the audit result.
For more information, please visit us at www.givnerkaye.com
Everything You Always Wanted To Know About Family Trusts But Were Afraid To AskBruce Givner
Family Trusts. Living Trusts. Inter Vivos Trusts. Revocable Trusts. Synonyms for trusts that are "Will substitutes." They help avoid probate and the need for a conservatorship. They help reduce the fees, including trustee and attorney fees, and delays of probate. Most of the documents are boilerplate, but why? What's wrong with using LegalZoom and other document preparation software? Must you file an IRS Form 1041 for a family trust? Must the living trust get its own EIN? What is a subtrust? What is an administrative trust? What is a grantor? A protector? A complex trust? How is competence determined? Are "no contest" clauses enforceable? Are illegitimate children "heirs"? Must a living trust be notarized? Must it be recorded? What is a "pourover" Will? What is a codicil? What is a holographic will? What is a personal property memorandum? What makes a power of attorney "durable"? What is a health care directive?
What is a "springing" power of attorney? What is a "pot" trust? What is a "specific" bequest? When should I use a corporate trustee? What's the difference between a fiduciary bond and fiduciary insurance? What is a trust certificate? What is a "blanket" assignment of assets? What is "per stirpes"? What is the rule against perpetuities?
California and federal forms; does it make sense to use non-California entities?; asset protection benefits; 3 different types of asset protection; problems with LLCs; gross receipts tax; best states for LLCs; the best structure; the rollout LLC; FLPs using LLCs; limited partnerships instead of LLCs; LLCs for tax-exempt entities;
Family Limited Partnerships Update - Diagrams and Bullet Points - February 6,...Bruce Givner
Normal FLP structure for estate tax planning; modifying it to amplify the extent to which it can help add a hurdle between valuable assets and some future (not currently in existence) creditor if properly aged (4 - 7 years before there is a problem) and if it has a business purpose; important points in the event of an estate tax audit, e.g., separate counsel for the children's trust; problem of timing of the funding of the assets to the FLP versus timing of the gift of LP interests; problem of the change of California's LLC act effective 1/1/14; use of FLPs with captive insurance companies, pensions, life insurance and as an alternative to an ILIT.
Crossing Borders: Primer On International Taxation For Individuals - June, 2013 Bruce Givner
Basic income and estate and gift tax rules for resident and non-resident aliens. Withholding. Returns to be filed. Pre-immigration planning. Residency for tax purposes. Expatriation - IRC Section 877A. How to hold real estate (inbound planning). Effectively connected income so as to be taxed at graduated rates. What does it mean to be engaged in a trade or business. Impact of treaties. Making the election to be taxed on a net income basis. Owning real estate through a foreign corporation, and handling the branch level taxes. IRS Forms 1120-F and 1040NR. FDAP: fixed,determinable and periodical income at 30%. Partnership might be required to withhold on foreign partner's share of gain on sale of real property under Section 1445 (USRPIs) and Section 1446 (partnerships). U.S. dividends paid to foreign subject to 30% under Sections 1441 and 1442. Treaties typically reduce the rate to 5% - 15%. Use W*-BEN. FIRPTA: the Foreign Investment in Real Property Tax Act treats gain from the sale of USRPI (United States real property interest) as if trade or business and gain as ECI (effectively connected income. Does not affect the character of the gain.
For more information, please visit us at www.givnerkaye.com
In 1989 Alaska was the first state to allow a domestic asset protection trust. In that same year Nevada and Delaware also changed their laws to allow DAPTs (also called self-settled spendthrift trusts). The question was - for 30 years - if a person in California set up a DAPT in Nevada - could a judgment creditor in California take his judgment to Nevada and have the Nevada court enforce the judgment against the California debtor's asset protection trust. Some lawyers argued "yes," citing Art. IV, Section 1 of the U.S. Constitution, the "full faith and credit clause." Other lawyers argued "No, it would be against Nevada's public policy." Finally, in June, 2019, the South Dakota Supreme Court held that it would give "full faith and credit to the California family law court order. However, it would not give full faith and credit to the enforcement against a South Dakota trust. Will this case make it to the U.S. Supreme Court? What about the on-going divorce of Ed and Marie Borsarge? The Cameron case did not involve an asset protection trust. But certainly South Dakota, Nevada and the other states will rule the same way in a case involving an asset protection trust.
Investing Retirement Plan Assets: What Are The Limits?Bruce Givner
The Internal Revenue Code and the Title I of ERISA (administered by the U.S. Department of Labor) have restrictions on how retirement plan assets can be invested. For example, certain investments will cause UBTI (unrelated business taxable income) to what is otherwise a tax-exempt trust. Certain investments may cause prohibited transactions with the resulting excise tax under IRC Section 4975. There are also the general fiduciary rules governing trustees generally, e.g., the duty to diversify. This handout is designed to advise the trustee and the plan sponsor on how to avoid the pitfalls.
Planning to Avoid the New Medicare Tax & Other 2013 Tax IncreasesBruce Givner
Information on all of the new tax increases for 2013, including the new Medicare tax, and how it will affect you!
For more information, please visit us at www.givnerkaye.com
Everything You Always Wanted To Know About Grantor (And Other Irrevocable) Tr...Bruce Givner
What is an irrevocable trust? How can it be flexible? How can the parents maintain a level of control? What makes an irrevocable trust a "grantor" trust and, therefore, disregarded for income tax purposes? What are the advantages of a grantor trust for asset protection planning and estate tax planning purposes? What are the disadvantages? How can you eliminate the disadvantages through the use of a "toggle" (or flip) switch? What are the tax return and EIN requirements for a grantor trust? What happens when the owner dies? When there is an outstanding installment note, does the owner's death trigger gain? Can a trust be treated as owned by someone other than the grantor? Do grantor trusts still make sense now that the estate tax rates are 40% and the income tax rates, in states like California, are even higher? Are grantor trusts here to stay?
14 07-09 orange county bar association - int'l estate planningBruce Givner
U.S. persons with real estate in multiple countries; U.S. persons with relatives in other countries; U.S. citizens abroad; non-U.S. persons with real estate in the U.S.; residency for income tax purposes; residency for transfer tax purposes; expatriation;
InKnowVision October 2013 Case Study - Lewis FWGAInKnowVision
Duncan and Tina are both 65. They live a comfortable lifestyle, spending about $1,600,000 a year after taxes and gifting about $2,000,000 a year to their family foundation. With assets worth approximately $62M and annual income of over $7M, they currently pay just over $2M a year in income taxes and have an increasing estate tax and ongoing income tax exposure.
The primary planning goals are to:
-Make sure that they have sufficient funds to live on for the rest of their lives (approx. $1,600,000/yr. after taxes and gifts).
-Assure that Duncan's, Inc. does not have to be liquidated as a result of their death.
-Provide a successful transition of the business to their son, Jason, while ensuring an equal inheritance for their son, Jeremy. They would like to leave 50% of their estate to Jason & Jeremy and another 25% to their grandchildren and other family members.
-They wish to continue annual giving to their family foundation and ultimately leave 25% of their estate to the foundation at death.
-Make sure the company buy/sell agreement accurately reflects the wishes of the family owners in the most tax efficient manner possible.
-Eliminate or reduce estate taxes.
Using Life Insurance in Zero Tax Estate Planningwardwilsey
This presentation describes the uses of life insurance in estate plans designed to eliminate the estate tax. For a version with audio as well, please email me at wardwilsey@wilseylaw.com
The Best Way to Buy Sell or Replace Life Insurancefreddysaamy
http://ekinsurance.com/pennsylvania-life-insurance/
Traditionally, life insurance is purchased during your working years to replace your income for your family in case you died. But if you are retired, do you still need life insurance?
A Mid-Year Financial Review:
More Time to Plan
Understanding Mutual Fund
Expense Ratios
How Much Life Insurance is
Enough?
I started a business that lost
money this year. Do I have
NOL?
Family Limited Partnerships Update - Diagrams and Bullet Points - February 6,...Bruce Givner
Normal FLP structure for estate tax planning; modifying it to amplify the extent to which it can help add a hurdle between valuable assets and some future (not currently in existence) creditor if properly aged (4 - 7 years before there is a problem) and if it has a business purpose; important points in the event of an estate tax audit, e.g., separate counsel for the children's trust; problem of timing of the funding of the assets to the FLP versus timing of the gift of LP interests; problem of the change of California's LLC act effective 1/1/14; use of FLPs with captive insurance companies, pensions, life insurance and as an alternative to an ILIT.
Crossing Borders: Primer On International Taxation For Individuals - June, 2013 Bruce Givner
Basic income and estate and gift tax rules for resident and non-resident aliens. Withholding. Returns to be filed. Pre-immigration planning. Residency for tax purposes. Expatriation - IRC Section 877A. How to hold real estate (inbound planning). Effectively connected income so as to be taxed at graduated rates. What does it mean to be engaged in a trade or business. Impact of treaties. Making the election to be taxed on a net income basis. Owning real estate through a foreign corporation, and handling the branch level taxes. IRS Forms 1120-F and 1040NR. FDAP: fixed,determinable and periodical income at 30%. Partnership might be required to withhold on foreign partner's share of gain on sale of real property under Section 1445 (USRPIs) and Section 1446 (partnerships). U.S. dividends paid to foreign subject to 30% under Sections 1441 and 1442. Treaties typically reduce the rate to 5% - 15%. Use W*-BEN. FIRPTA: the Foreign Investment in Real Property Tax Act treats gain from the sale of USRPI (United States real property interest) as if trade or business and gain as ECI (effectively connected income. Does not affect the character of the gain.
For more information, please visit us at www.givnerkaye.com
In 1989 Alaska was the first state to allow a domestic asset protection trust. In that same year Nevada and Delaware also changed their laws to allow DAPTs (also called self-settled spendthrift trusts). The question was - for 30 years - if a person in California set up a DAPT in Nevada - could a judgment creditor in California take his judgment to Nevada and have the Nevada court enforce the judgment against the California debtor's asset protection trust. Some lawyers argued "yes," citing Art. IV, Section 1 of the U.S. Constitution, the "full faith and credit clause." Other lawyers argued "No, it would be against Nevada's public policy." Finally, in June, 2019, the South Dakota Supreme Court held that it would give "full faith and credit to the California family law court order. However, it would not give full faith and credit to the enforcement against a South Dakota trust. Will this case make it to the U.S. Supreme Court? What about the on-going divorce of Ed and Marie Borsarge? The Cameron case did not involve an asset protection trust. But certainly South Dakota, Nevada and the other states will rule the same way in a case involving an asset protection trust.
Investing Retirement Plan Assets: What Are The Limits?Bruce Givner
The Internal Revenue Code and the Title I of ERISA (administered by the U.S. Department of Labor) have restrictions on how retirement plan assets can be invested. For example, certain investments will cause UBTI (unrelated business taxable income) to what is otherwise a tax-exempt trust. Certain investments may cause prohibited transactions with the resulting excise tax under IRC Section 4975. There are also the general fiduciary rules governing trustees generally, e.g., the duty to diversify. This handout is designed to advise the trustee and the plan sponsor on how to avoid the pitfalls.
Planning to Avoid the New Medicare Tax & Other 2013 Tax IncreasesBruce Givner
Information on all of the new tax increases for 2013, including the new Medicare tax, and how it will affect you!
For more information, please visit us at www.givnerkaye.com
Everything You Always Wanted To Know About Grantor (And Other Irrevocable) Tr...Bruce Givner
What is an irrevocable trust? How can it be flexible? How can the parents maintain a level of control? What makes an irrevocable trust a "grantor" trust and, therefore, disregarded for income tax purposes? What are the advantages of a grantor trust for asset protection planning and estate tax planning purposes? What are the disadvantages? How can you eliminate the disadvantages through the use of a "toggle" (or flip) switch? What are the tax return and EIN requirements for a grantor trust? What happens when the owner dies? When there is an outstanding installment note, does the owner's death trigger gain? Can a trust be treated as owned by someone other than the grantor? Do grantor trusts still make sense now that the estate tax rates are 40% and the income tax rates, in states like California, are even higher? Are grantor trusts here to stay?
14 07-09 orange county bar association - int'l estate planningBruce Givner
U.S. persons with real estate in multiple countries; U.S. persons with relatives in other countries; U.S. citizens abroad; non-U.S. persons with real estate in the U.S.; residency for income tax purposes; residency for transfer tax purposes; expatriation;
InKnowVision October 2013 Case Study - Lewis FWGAInKnowVision
Duncan and Tina are both 65. They live a comfortable lifestyle, spending about $1,600,000 a year after taxes and gifting about $2,000,000 a year to their family foundation. With assets worth approximately $62M and annual income of over $7M, they currently pay just over $2M a year in income taxes and have an increasing estate tax and ongoing income tax exposure.
The primary planning goals are to:
-Make sure that they have sufficient funds to live on for the rest of their lives (approx. $1,600,000/yr. after taxes and gifts).
-Assure that Duncan's, Inc. does not have to be liquidated as a result of their death.
-Provide a successful transition of the business to their son, Jason, while ensuring an equal inheritance for their son, Jeremy. They would like to leave 50% of their estate to Jason & Jeremy and another 25% to their grandchildren and other family members.
-They wish to continue annual giving to their family foundation and ultimately leave 25% of their estate to the foundation at death.
-Make sure the company buy/sell agreement accurately reflects the wishes of the family owners in the most tax efficient manner possible.
-Eliminate or reduce estate taxes.
Using Life Insurance in Zero Tax Estate Planningwardwilsey
This presentation describes the uses of life insurance in estate plans designed to eliminate the estate tax. For a version with audio as well, please email me at wardwilsey@wilseylaw.com
The Best Way to Buy Sell or Replace Life Insurancefreddysaamy
http://ekinsurance.com/pennsylvania-life-insurance/
Traditionally, life insurance is purchased during your working years to replace your income for your family in case you died. But if you are retired, do you still need life insurance?
A Mid-Year Financial Review:
More Time to Plan
Understanding Mutual Fund
Expense Ratios
How Much Life Insurance is
Enough?
I started a business that lost
money this year. Do I have
NOL?
Tax-Efficient Investing: Retirement Distribution Strategies (Part 3 of Tax-Ef...Robert Keebler
This "Introduction To Tax-Efficient Investing" webinar was the first of a four-part series with Advisors4Advisors on tax-efficient Investing. Advisors4Advisors members can view the on-demand webinar replay and receive CFP and IMCA CE credit.
Goal Based Investing: Planning for Key Life Events (Series: Personal Finance ...Financial Poise
There is a redundancy in the title for this episode, for one should invest only with one or more goals in mind. This goes along with being the ally of the future version of you – someone you like and hope to admire. This webinar identifies key events and discusses approaches to husbanding our investment dollars.
To view the accompanying webinar, go to: https://www.financialpoise.com/financial-poise-webinars/goal-based-investing-2019/
Similar to 11 12 02 Want To Save A Fortune On Taxes (20)
15 06-18 Top 10 Tax Preparer And Other Tax Penalties - Not Going To Jail But ...Bruce Givner
What is the definition of a tax return preparer? What is the accuracy-related penalty? What are the primary other penalties? What is IRC Section 6694 (the preparer penalty)? How is it coordinated with the accuracy-related penalty? What are the easiest crimes to commit, e.g. obstruction of justice. What good can an opinion by a tax lawyer do for you?
15 07-24 Puerto Rico Income Tax IncentivesBruce Givner
Instead of expatriating, it is better to consider retaining your U.S. citizenship and becoming a resident of Puerto Rico. You sign a 20 year contract with the government. As a result, as an individual, you can pay zero federal and state tax on local interest, dividends and capital gains. The incentives for business are also phenomenal: a 4% rate with profits paid to owners tax free. A business must have 3 employees of which husband and wife can count as two.
15 02-19 "C" Corporation Asset Sale - Martin Ice Cream and Bross: Personal Go...Bruce Givner
The Problem of Sale of "C" Corporation - it is usually a sale of the assets. What is Personal Goodwill? What are the benefits? What are the characteristics? What happened in Martin Ice Cream to make personal goodwill so attractive? It was affirmed in Norwalk, but the taxpayer lost in Solomon and Howard. The 2014 Bross Trucking case affirmed that there is a pro-taxpayer approach as did the estate tax case of Adell. How do you do the planning for this? First, you must do it years in advance of a sale. You need to value the personal goodwill and document it.
14 12-18 Everything You Always Wanted To Know About Public Charities But Were...Bruce Givner
Tax deductible vs. tax exempt; charities vs. other tax-exempt entities such as trade associations; UBTI - unrelated business taxable income; Forms 990 and 990-T; self-dealing rules; Section 4940 and the 2% excise tax on investment income, 4941 and the taxes on self-dealing, 4942, 4943, 4944 and 4945; intermediate penalties and Section 4958; private foundations vs. public charities; private operating foundations; medical research organizations; types of public charities;
What information would your trustee or executor need and/or want to know if you died suddenly? Where is the information about your assets, debts, estate planning documents, relatives, retirement benefits, insurance policies? This checklist is designed to get you to put all of that information in one place, and to update it regularly.
14 09-04 Everything You Always Wanted To Know About Post-Mortem PlanningBruce Givner
Portability vs. disclaimer to a bypass trust; getting rid of an unwanted bypass trust; notice of proposed action vs. a 17200 petition; valuable information for the successor trustee; Heggstad assignment of assets; modified financial statement for the successor trustee; funding the subtrusts; first spouse post-mortem checklist; Prop. 13 problems; 16061.7 notice;
14 06-19 U.S. Treaties - How To Understand And Plan With ThemBruce Givner
IRS publications and forms; list of countries with which the U.S. has income and estate and gift tax treaties; reasons for both types of treaties; situs vs. status transfer tax treaties; German estate tax treaty as an example; treaties vs. the Internal Revenue Code; review of the basic provisions of income tax treaties, including tie-breakers, independent workers, directors, artists and athletes, students and teachers, interest, dividends, royalties, real property income and gains, Publication 901 table examples, double Irish structure.
Everything you ever wanted to know about trustees: What does it mean to be a trustee? What are your responsibilities and liabilities? What makes a good trustee?
For more information, please visit us at www.givnerkaye.com
1. 2012
Want To Save A
FORTUNE
On Income Taxes?
Givner & Kaye,
A Professional Corporation 1
Owen@GivnerKaye.com
2. Want To Save A Fortune On Taxes?
The Best Planning Is Done At The
Beginning Of The Year:
1. More time to review the alternatives.
2. Time to calmly and carefully put the structures in place.
3. Advisors are not hassled with year-end crises.
4. Able to adjust to the actual results throughout the year.
Givner & Kaye,
A Professional Corporation 2
Owen@GivnerKaye.com 2
3. Want To Save A Fortune On Taxes?
What We Will Cover:
1. The Big, Easy Deductions. P. 5
1.1. Defined Benefit Pension Plans. P. 6
1.2. Captive Insurance Companies. P. 15
2. Charitable Alternatives. P. 25
2.1. Grantor Charitable Lead Annuity Trusts. P. 26
2.2. Charitable Remainder Annuity Trusts. P. 31
2.3. Charitable Limited Partnerships. P. 36
3. Investments. P. 39
3.1. Oil and Gas. P. 40
3.2. Real Estate (Component Depreciation). P. 43
4. Questions and answers. P. 47
Givner & Kaye,
A Professional Corporation 3
Owen@GivnerKaye.com 3
4. Want To Save A Fortune On Taxes?
Our Process
Four Phases – Four Engagements – Four Fixed Fees
(so the client does not feel “on the clock”).
Review – Design – Implement - Maintain
Givner & Kaye,
A Professional Corporation
Owen@GivnerKaye.com 4
5. Want To Save A Fortune On Taxes?
The Big, Easy
Deductions
Givner & Kaye,
A Professional Corporation 5
Owen@GivnerKaye.com 5
6. Want To Save A Fortune On Taxes?
Defined
Benefit
Pension Plans
Givner & Kaye,
A Professional Corporation 6
Owen@GivnerKaye.com 6
7. Want To Save A Fortune On Taxes?
Tax Qualified Employee Retirement Plan
Joe
Trustee
Plan
Owner committee
The corporation The Plan The Trust
(Plan Sponsor)
$ $
Employees/
participants
Givner & Kaye,
A Professional Corporation 7
Owen@GivnerKaye.com 7
8. Want To Save A Fortune On Taxes?
There are two types of plans: one that defines how much goes in – one
that defines how much goes out
Corporation
(plan sponsor)
Money goes in – define (limit) the contribution
Retirement
Trust Money goes out – define
(limit) the benefit
Employee/
Participant
Givner & Kaye,
A Professional Corporation
Bruce@GivnerKaye.com 8
9. Want To Save A Fortune On Taxes?
If you limit how much goes in (IRC
Section 415(c) - $49,000), then there is
no limit on how much goes out. So if you
are going to buy Qualcomm at $1 and
Defined have it go to $100, do so in a defined
Contribution contribution plan; it will not impact your
Plan future contributions.
Employee/
Participant
Givner & Kaye,
A Professional Corporation
Bruce@GivnerKaye.com 9
10. Want To Save A Fortune On Taxes?
If you limit how much goes out (IRC
Section (b), (d) - $195,000), there is no
specific limit on how much goes in. So if
Defined
you want a contribution of more than
Benefit
$49,000 per person, you need a defined
Plan
benefit pension plan.
Employee/
Participant
Givner & Kaye,
A Professional Corporation
Bruce@GivnerKaye.com 10
11. Want To Save A Fortune On Taxes?
In General:
Sample maximum contributions at various ages:
35 – 5 years past service - $65,000 + DC plan @ 6% of comp + $16,500 in 401(k) X 2 spouses in
year one is $190,000. Over 5 years it’s $1,000,000.
45 - $130,000 + $30,000 X 2 spouses = $320,000, or $1,600,000 over 5 years.
55 - $237,000 + $30,000 X 2 spouse = $534,000 or $2,670,000 over 5 years.
Plus life insurance.
Using the “cushion method” the amount in the first year might be it could be 3 to 4 times that amount
(though zero in the second year).
Givner & Kaye,
A Professional Corporation
Bruce@GivnerKaye.com 11
12. Want To Save A Fortune On Taxes?
Monthly Benefit Contribution
at RA 62
Helen 11/16/63 $60,000 $4,878.00 $ 29,276.00
Michael 3/26/74 $40,000 $2,402.00 $ 11,045.00
George 10/6/77 $45,000 $3,450.00 $ 12,147.00
Lucy 9/5/70 $30,000 $1,773.00 $ 9,871.00
Paul 8/29/76 $25,000 $1,173.00 $ 4,131.00
Steven 11/18/79 $40,000 $1,615.00 $ 5,009.00
Gary 8/2/75 $90,000 $3,403.00 $ 13,658.00
Jane 10/25/57 $250,000 $7,634.00 $226,464.00
Sam 9/2/51 $250,000 $7,667.00 $306,102.00
Totals $617,703.00 [86.2% for bosses]
Givner & Kaye,
A Professional Corporation 12
Owen@GivnerKaye.com 12
13. Want To Save A Fortune On Taxes?
Is There A Good Set Of Facts?
1. You cannot determine if the facts are good simply by
talking to your CPA.
2. You cannot determine if the facts are good simply by
talking to a third party administrator or actuary.
3. The proper construction of the facts is a process that we
must discuss with you and help you create. It must be
conducted under the attorney‐client privilege.
4. The presentation of the facts is absolutely critical to the
outcome and will make the difference between an attractive
plan and one that will not work.
Givner & Kaye,
A Professional Corporation
Bruce@GivnerKaye.com 13
14. Want To Save A Fortune On Taxes?
Givner & Kaye,
A Professional Corporation 14
Owen@GivnerKaye.com 14
15. Want To Save A Fortune On Taxes?
Captive
Insurance
Companies
(“wealth captives”)
Givner & Kaye,
A Professional Corporation 15
Owen@GivnerKaye.com 15
16. Want To Save A Fortune On Taxes?
Captive Insurance Companies
for the Middle Market
Originally used only by the very largest companies,
captives are no longer the exclusive tool of those in the
Fortune 500. There are now well over 5,000 captives
writing over $50 billion in annual premiums. Many of
these captives insure middle market companies and
successful professionals.
Givner & Kaye,
A Professional Corporation 16
Owen@GivnerKaye.com 16
17. Want To Save A Fortune On Taxes?
IRC Section 831(b)
A small property and casualty insurer with
annual premium income not exceeding $1.2
million pays no tax on its underwriting profits
but is taxed solely on its investment income. In
this case, the business that pays premium to a
captive deducts the premium expense while the
captive pays no tax on the underwriting profits.
Givner & Kaye,
A Professional Corporation 17
Owen@GivnerKaye.com 17
18. Want To Save A Fortune On Taxes?
Estate Planning
Estate planning is an important business
continuity consideration for closely held companies
and for their owners. A CIC can be a key component
in estate planning with the captive being owned by
or for the benefit of the next generation (a dynasty
trust) and so enabling a lifetime transfer of pre-tax
underwriting profits.
Givner & Kaye,
A Professional Corporation 18
Owen@GivnerKaye.com 18
19. Want To Save A Fortune On Taxes?
Common Captive Coverage
Property & Casualty
* Director & Officer * Subsidence
* General Liability * Exclusions
* Employment Practices * Deductible Reimbursement
* Litigation Defense * Difference in Conditions
* Construction Defect * Difference in Limits
* Warranty * Workers’ Compensation
* Mold
Givner & Kaye,
A Professional Corporation 19
Owen@GivnerKaye.com 19
20. Want To Save A Fortune On Taxes?
Captive Insurance Company: Deducting $1,200,000 Per Year
Diagram 1: Pre-Setup
Wilmington Trust
Company
David
(or some other Delaware
Trust Company)
Grantor
David Dynasty Trustee
Trust
(Delaware –
Perpetual)
$300,000
We commonly set up
the trusts which own
David’s heirs the captives in
Nevada.
Givner & Kaye,
A Professional Corporation 20
Owen@GivnerKaye.com 20
21. Want To Save A Fortune On Taxes?
Captive Insurance Company: Deducting $1,200,000 Per Year
Diagram 2: Set Up The Captive
David Dynasty
Trust
(Delaware –
Perpetual) The captive is exempt from
Delaware business income tax.
It is treated as one enterprise
100% owner Delaware LLC and, therefore, subject to only
(taxed as a “C” corporation for one $5,000 minimum annual
Federal income tax purposes) premium requirement. Each
$500,000 series can receive up to $1.2
million tax free under IRC
Section 831(b).
Series “A”: Series “B”:
Property & Health Plan
Casualty Risks Liabilities
Givner & Kaye,
A Professional Corporation 21
Owen@GivnerKaye.com 21
22. Want To Save A Fortune On Taxes?
Business Captive Insurance Company: Deducting $1,200,000 Per Year
#1
Diagram 3: Operating The Captive Alternative #1
Business Delaware Business
#2 LLC #12
Business Business
#3 #11
Business Business
#4 #10
Business
Business
Business Business Business #9
#8
#5 #6 #7
Each business must pay a premium of 5% - 15% of the $1,200,000 total.
Givner & Kaye,
A Professional Corporation 22
Owen@GivnerKaye.com 22
23. Want To Save A Fortune On Taxes?
Captive Insurance Company: Deducting $1,200,000 Per Year
Diagram 3: Operating The Captive Alternative #2
Delaware
LLC
49% of the 51% of the Captive
Operating premiums premiums Manager’s
Business Pool
Assume the captive manager re-insures 40% of the risk. Then 11% of the risk
is shared among the pool. If there are 8 members of the pool and one has a
$1,200,000 casualty, then the other 7 members lose $171,000 each.
Givner & Kaye,
A Professional Corporation 23
Owen@GivnerKaye.com 23
24. Want To Save A Fortune On Taxes?
Captive Insurance Company: Deducting $1,200,000 Per Year
Diagram 4: Using The Captive’s Profits
Delaware
David Dynasty
LLC
Trust
(Delaware – Dividends
Perpetual)
David as
manager
LLC used to
LLC used to
buy real
buy real
estate and
estate and
other
other
investments
investments
Givner & Kaye,
A Professional Corporation 24
Owen@GivnerKaye.com 24
25. Want To Save A Fortune On Taxes?
Charitable
Alternatives
Givner & Kaye,
A Professional Corporation 25
Owen@GivnerKaye.com 25
26. Want To Save A Fortune On Taxes?
Grantor
Charitable Lead
Annuity Trust
Givner & Kaye,
A Professional Corporation 26
Owen@GivnerKaye.com 26
27. Want To Save A Fortune On Taxes?
Gives $600,000 of LLC units
CLAT
Mom
$464,000 charitable deduction
8.3% per year
- $50,000 – for
10 years
Children’s trust gets what is left
at the end of the 10 year period
Children’s Charity
Trust
Givner & Kaye,
A Professional Corporation 27
Owen@GivnerKaye.com 27
28. Want To Save A Fortune On Taxes?
Charitable Lead Annuity Trust – Alternate #1
Bunching The Deduction Up Front
October, 2011 Section 7520 rate of 1.4% (lower is better)
$1,000,000 of real estate generating $50,000 per year in an LLC
Valuation discounts of 40% make it $600,000 generating $50,000
$50,000 is an 8.333% payout on $600,000
10 Year Term, Remainder To Children
Immediate Charitable Gift of $463,542 (77.257%), which saves Mom $209,000
if in a 45% state and Federal bracket [13 year term is 98.4% gift!!]
Gift to the children’s trust of $136,459, for which a 709 must be filed
Mom is taxed on the income each year so she gives back the charitable
deduction that was bunched up front
Givner & Kaye,
A Professional Corporation 28
Owen@GivnerKaye.com 28
29. Want To Save A Fortune On Taxes?
Charitable Lead Annuity Trust – Alternate #2
Deduction Up Front, No Taxable Income Later
October, 2011, Section 7520 rate of 1.4%
$1,000,000 of muni bonds generating $40,000 per year in an LLC
Valuation discounts of 30% make it $700,000 generating $40,000
$40,000 is a 5.7% payout (annuity) on $700,000
10 Year Term, Remainder To Children
Immediate Charitable Gift of $369,921 (53%), which saves Mom
$166,464 if in a 45% state and Federal bracket [20 years = 99% gift!!]
Gift to the children’s trust of $330,079, for which a 709 must be filed
Mom is taxed on muni bond income each year (zero)
Givner & Kaye,
A Professional Corporation 29
Owen@GivnerKaye.com 29
30. Want To Save A Fortune On Taxes?
Doesn’t Have To Be A Gift Over To The Children – Can Come Back To Mom
Gives $1,000,000
CLAT
Mom
5% per year -
$50,000 – for
Mom gets what is 10 years
left at the end of
the 10 year
period
Charity
Givner & Kaye,
A Professional Corporation 30
Owen@GivnerKaye.com 30
31. Want To Save A Fortune On Taxes?
Charitable
Remainder
Annuity Trust
Givner & Kaye,
A Professional Corporation 31
Owen@GivnerKaye.com 31
32. Want To Save A Fortune On Taxes?
Charitable Remainder Annuity Trust
October, 2011 Section 7520 rate of 1.4%
But We Are Allowed To Use August’s 2.2%
(Higher interest rate is better)
(Longer retained term yields lower deduction)
$1,000,000, 10 Year Term, 5% payout to Mom
Immediate Charitable Gift of $555,535, which saves Mom $250,000 if
in a 45% state and Federal bracket
20 year term results in a $198,000 charitable deduction ($89,000 tax
savings)
Givner & Kaye,
A Professional Corporation 32
Owen@GivnerKaye.com 32
33. Want To Save A Fortune On Taxes?
Gives $1,000,000
Mom CRAT
Charity gets what
5% per year is left at the end
- $50,000 – of the 10 year
for 10 years period
Charity
Givner & Kaye,
A Professional Corporation 33
Owen@GivnerKaye.com 33
34. Want To Save A Fortune On Taxes?
CRAT
August Section 7520 rate of 2.2%
Mom, age 71, Retains 5% income for life
Immediate Charitable Gift of $416,710, which saves Mom $187,520 if
in a 45% state and Federal bracket
[not significantly different than the results of a 20 year term]
Note: Will Not Work For A 70 year old!!!
Givner & Kaye,
A Professional Corporation 34
Owen@GivnerKaye.com 34
35. Want To Save A Fortune On Taxes?
Gives $1,000,000
Mom CRAT
Charity gets what
5% per year is left when mom
- $50,000 – passes away
for her life
Charity
Givner & Kaye,
A Professional Corporation 35
Owen@GivnerKaye.com 35
36. Want To Save A Fortune On Taxes?
Charitable
Limited
Partnerships
Givner & Kaye,
A Professional Corporation 36
Owen@GivnerKaye.com 36
37. Want To Save A Fortune On Taxes?
Donate 97% of LP interests
Mom and Dad Charity
3% GP
Limited Partnership
Contribute $1.0 of Becomes the 97% LP
appreciated
property
97% of $1.0 X 90% (to allow for 10% valuation discounts) = $873,000 charitable deduction
which saves $392,850 in income tax, but the $1,000,000 stays in the limited partnership.
Givner & Kaye,
A Professional Corporation 37
Owen@GivnerKaye.com 37
38. Want To Save A Fortune On Taxes?
The end result is that you have a limited partnership which you control.
However, the largest limited partner is a charity. You must make a distribution of 5%
of the value of the assets each year, and 97% of that distribution will be to the
charity. You must make that distribution so that the charity realizes and reasonable
return on its investment. Beyond that, you can make appropriate investments with
the limited partnership assets, e.g., loans to your business, investments in real
estate that you like, etc.
This is an attractive way to control capital at an attractive cost, especially if
you have an interest in benefitting charity.
Givner & Kaye,
A Professional Corporation 38
Owen@GivnerKaye.com 38
39. Want To Save A Fortune On Taxes?
Investments
Givner & Kaye,
A Professional Corporation 39
Owen@GivnerKaye.com 39
40. Want To Save A Fortune On Taxes?
Oil
and
Gas
Givner & Kaye,
A Professional Corporation 40
Owen@GivnerKaye.com 40
41. Want To Save A Fortune On Taxes?
EXAMPLE (adapted from Hard Rock Partners 2011-a, L.P.):
No Oil & Gas Investment Oil & Gas Investment ($50,000 investment)
Gross income $200,000 Gross income $200,000
Taxable income $200,000 IDC deduction ( 50,000)
Taxable income $150,000
State Tax 6.5% $ 11,875 State Tax 6.5% $ 8,625
Federal Tax $ 44,070 Federal Tax $ 30,070
Total Tax $ 55,945 Total Tax $38,695
Tax Savings $17,250 (34.5% of $50,000)
The cash flow often runs 10% per year for decades.
Givner & Kaye,
A Professional Corporation 41
Owen@GivnerKaye.com 41
42. Want To Save A Fortune On Taxes?
Economics:
Gas prices are low, meaning any increase will improve investor
returns
U.S. is the Saudi Arabia of natural gas
Work with an experienced operator that has (i) drilled hundreds of
wells and (ii) excellent track record in existing developed fields
Risk diversification in multi-well programs
Return of initial investment in tax benefits and cash in 5 to 8 years
Residual income for decades
Givner & Kaye,
A Professional Corporation 42
Owen@GivnerKaye.com 42
43. Want To Save A Fortune On Taxes?
Real Estate
Givner & Kaye,
A Professional Corporation 43
Owen@GivnerKaye.com 43
44. Want To Save A Fortune On Taxes?
Two methods of depreciation for Commercial Properties:
Straight-line method - depreciated over 39 years.
Stipulates that an asset must be depreciated by equal amounts each year
over its useful life.
Example:
You buy a commercial shopping center for $10,000,000. The land the center
resides on is worth $4,000,000 (40%). The building is valued at $6,000,000.
Current law allows you to depreciate commercial properties by equal
amounts annually over 39 years.
$6,000,000/39 years = $153,846 annually
Or calculate by multiplying the building percentage by 2.56%.
Givner & Kaye,
A Professional Corporation 44
Owen@GivnerKaye.com 44
45. Want To Save A Fortune On Taxes?
Accelerated Depreciation –
Same $10.0 one story Shopping Center. Reasonable Cost Segregation
allocations and related depreciation figures ($6.0 to Building, $4.0 to land):
5 year property 28% of $6,000,000 = $1,680,000
7 year property 3.5% of $6,000,000 = $ 210,000
15 year property 11.84% of $6,000,000 = $ 710,400
39 year property 56.66% of $6,000,000 = $3,399,600
Here is the resulting First Year Depreciation:
5 year property = $ 672,000
7 year property = $ 60,000
15 year property = $ 71,040
39 year property = $ 87,169
___________
Total Depreciation in year one: $890,209
Givner & Kaye,
A Professional Corporation 45
Owen@GivnerKaye.com 45
46. Want To Save A Fortune On Taxes?
Accelerated Depreciation –
Value of building 6,000,000
Bldg.
Segregation Yr 1 Yr 2 Yr 3 Yr 4 Yr 5 Totals
5 year property 1,680,000 672,000 403,200 241,920 145,152 87,091 1,549,363
7 year property 210,000 60,000 42,857 30,612 21,866 15,618 170,954
15 year property 710,400 71,040 63,936 57,542 51,788 46,609 290,916
39 year property 3,399,600 87,169 84,934 82,756 80,634 78,567 414,061
Totals 6,000,000 890,209 594,927 412,831 299,440 227,886 $2,425,294
Givner & Kaye,
A Professional Corporation 46
Owen@GivnerKaye.com 46
47. Want To Save A Fortune On Taxes?
Questions and Answers
Send us e-mail:
Bruce@GivnerKaye.com
Owen@GivnerKaye.com
Kathy@GivnerKaye.com
Givner & Kaye,
A Professional Corporation 47
Owen@GivnerKaye.com 47