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Heirs inheritance from a $5M IRA rollover

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Not every wealthy investor requires their retirement money (when net worth is $20M+ and they have built $2M+ in an IRA Rollover). This strategy is not appropriate for every investor and as always you have to check tax, legal and any money matters with your tax council, legal council and financial advisor. The case was a specific example demonstrated in 2013 so all the facts and figures were correct at that time given the circumstances. We have heard from Development officers when they were reached by wealthy donors, CPA firms dealing with retired executives, wealth management firms and others when it comes to alternative strategies dealing with a large rollover asset. Please contact me for a more detailed conversation.

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Heirs inheritance from a $5M IRA rollover

  1. 1. MOMENTUM ADVANCED PLANNING | 1 What do heirs inherit from my $5M IRA Rollover? For Illustrative Purposes ONLY For: 1. Financial Advisors 2. CPA’s 3. Non Profit Development Officers 4. UHNW Investors
  2. 2. MOMENTUM ADVANCED PLANNING | 2 Disclosures IRS Circular 230 Disclosure: To ensure compliance with requirements imposed by the IRS, we inform you that any U.S. federal tax advice contained in this communication (including any attachments) is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing, or recommending to another party any transaction or matter addressed herein. Past performance is no guarantee of comparable future results Diversification does not guarantee investment returns and does not eliminate the risk of loss
  3. 3. MOMENTUM ADVANCED PLANNING | 3 Disclosures Please Note: This presentation is designed to provide introductory information in regards to the subject matter covered and by no means complete. Consult your attorney, financial advisor or tax advisor for complete up-to-date information concerning Federal and state tax laws. Momentum Advanced Planning and its representatives do not provide tax, investment, accounting or legal advice and not “fiduciaries” (under ERISA, the Internal Revenue Code of otherwise). Any taxpayer should seek advice based on the taxpayers particular circumstances from an independent tax advisor.
  4. 4. MOMENTUM ADVANCED PLANNING | 4 Disclosures The projections here are based on assumptions stated and the information provided is not a reflection of past experience or future guarantees. Changes in tax law could affect the tax consequences. Momentum Advanced Planning strongly recommends that any proposed plan or changes to an existing plan be reviewed by your tax advisor. Any statements contained herein were not written nor intended to be used for purposes of avoiding U.S. federal, state, and local tax penalties. The views contained herein are not to be taken as an advice and or recommendation to buy or sell any investment. Please consult with your advisor.
  5. 5. MOMENTUM ADVANCED PLANNING | 5 75 Year Old Retired Couple
  6. 6. MOMENTUM ADVANCED PLANNING | 6 $20M Net Worth
  7. 7. MOMENTUM ADVANCED PLANNING | 7 $5M in Assets
  8. 8. MOMENTUM ADVANCED PLANNING | 8 $5M 22.9 $218k Calculating Annual Required Minimum Distribution (for additional information please refer to Publication 590)
  9. 9. MOMENTUM ADVANCED PLANNING | 9 $87k in Income Taxes* * Assuming 40% Income Tax Bracket
  10. 10. MOMENTUM ADVANCED PLANNING | 10 $131k Net Deposit* * Assuming 40% Income Tax Bracket
  11. 11. MOMENTUM ADVANCED PLANNING | 11 The $131k But I
  12. 12. MOMENTUM ADVANCED PLANNING | 12 4 Choices (in no particular order) (1): Do Nothing (3): Pension Plan (2): Roth (4): Roth Alternative The color coding of the diagrams does not indicate any preferences
  13. 13. MOMENTUM ADVANCED PLANNING | 13 5th Option (sudden passing) is by default, and out of everyone’s control
  14. 14. MOMENTUM ADVANCED PLANNING | 14 $2.2M Estate Taxes* * Assuming 45% Estate Tax Bracket
  15. 15. MOMENTUM ADVANCED PLANNING | 15 $1.1M In Income Taxes to Beneficiaries* * Assuming 40% Income Tax Bracket for Beneficiaries
  16. 16. MOMENTUM ADVANCED PLANNING | 16 33% Of Original Balance Remains $5M -$2.2M* -$1.1M** $1.6M * Assuming 45% Estate Tax Bracket ** Assuming 40% Income Tax Bracket
  17. 17. MOMENTUM ADVANCED PLANNING | 17 Not much inheritance left for you kids - Sorry
  18. 18. MOMENTUM ADVANCED PLANNING | 18
  19. 19. MOMENTUM ADVANCED PLANNING | 19 For Illustrative Purposes ONLY Do nothing and live to 95
  20. 20. MOMENTUM ADVANCED PLANNING | 20 For Illustrative Purposes ONLY Do nothing and live to 95 Option 1 For Illustrative Purposes ONLY Roth
  21. 21. MOMENTUM ADVANCED PLANNING | 21 Comparison (for Illustrative purposes ONLY) Retiree Lives to 95 and passes Roth Pension Plan (1, 2, 3 & 4) Roth Alternative (1, 2, 3 & 4) Are distributions required? No Yes No Are distributions subject to income tax? No Yes No Are there penalties for withdrawals prior to age 59 ½? No Yes No Does the plan provide a death benefit beyond the cash balance? (b) No No Yes (1) Death benefits subject to income and/or estate tax? (b) Yes Yes No (1) Estimated taxes paid $4.3M $6.6M (3) <$2M (3 & 5) Benefits received by retiree + heirs $5.2M $7M (3) $7M (3) 1) Requires underwriting and illustration of life insurance policy 2) Please contact us for more detailed information 3) Please consult your tax and financial advisor 4) Not suitable and appropriate for every investor 5) Assumes taxes are paid at death from policy
  22. 22. MOMENTUM ADVANCED PLANNING | 22 Reminder Profit Sharing and Roth Alternative Strategies: • Examine possibilities to remove assets out of taxable estate • Not suitable and appropriate for every investor • Requires underwriting and illustration of life insurance policy • Retiree did not need IRA Rollover distributions • Consult your legal council on formation of any legal strategies • Consult your tax and financial advisor before deploying any such strategy • Contact Amir Rafizadeh for more details on both Profit Sharing and also Roth Alternative Strategies • Illustration occurred in 2013 so rates and assumptions were valid for that time - (for up to date information please contact us)
  23. 23. MOMENTUM ADVANCED PLANNING | 23
  24. 24. This has been prepared by Amir Homayoun Rafizadeh For more information please contact me:
  25. 25. MOMENTUM ADVANCED PLANNING | 25 Sources of Pictures (1) Uncle Sam Tax Picture: http://www.savvysenior.org/ Retired Couple Picture: http://www.dia-trofis.gr/eidisis/4-aploi-kanones-igeias-makrozoias/ Net Worth Picture: http://www.investopedia.com/financial-edge/1212/net-worth- through-your-life.aspx RMD Taxes Picture: http://abcnews.go.com/blogs/business/2012/06/median- household-net-worth-down-35-percent/ IRA Rollover Picture: http://www.bgcmc.org/index.cfm/ira.htm
  26. 26. MOMENTUM ADVANCED PLANNING | 26 Sources of Pictures (2) IRA RMD Table Picture: http://www.irs.gov/publications/p590/ar02.html Don’t Need The Money Picture: http://juangreatleap.com/2011/12/20/9-pinoy-startup-myths-i- discovered-just-werent-true-part-1-of-3/ Burn The Money Picture: http://www.thedisciplinedinvestor.com/blog/2009/01/14/banks-we-dont- need-no-stinkin-lending/ Bank Teller Deposit Picture: http://buzz.money.cnn.com/2012/07/16/banks-loans-deposits/ Tax Alternatives Picture: http://www.foxbusiness.com/personal-finance/2014/02/21/earned- income-tax-credit-could-pay-off/
  27. 27. MOMENTUM ADVANCED PLANNING | 27 Sources of Pictures (3) Estate Taxes Picture: http://dontmesswithtaxes.typepad.com/dont_mess_with_taxes/estate- tax/ Family Funeral Pictures: http://realtruth.org/articles/090806-007-religion.html Heirs Inheritance Picture: http://www.grantthornton.ie/Services/Investment-Life-and- Pensions/Personal-financial-counselling/Inheritance-and-gift-tax-planning 4 Choices Picture Source: http://gregory-g-allen.blogspot.com/2011_08_01_archive.html Shocked Kids with no inheritance pictures Source: http://www.wnd.com/2012/02/now-kids-targeted-in-digital-privacy-breach
  28. 28. MOMENTUM ADVANCED PLANNING | 28 Why most advisors NEVER see their clients entire assets Out on Slideshare next:
  29. 29. MOMENTUM ADVANCED PLANNING | 29 Disclosures IRS Circular 230 Disclosure: To ensure compliance with requirements imposed by the IRS, we inform you that any U.S. federal tax advice contained in this communication (including any attachments) is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing, or recommending to another party any transaction or matter addressed herein. Past performance is no guarantee of comparable future results Diversification does not guarantee investment returns and does not eliminate the risk of loss
  30. 30. MOMENTUM ADVANCED PLANNING | 30 Disclosures Please Note: This presentation is designed to provide introductory information in regards to the subject matter covered and by no means complete. Consult your attorney, financial advisor or tax advisor for complete up-to-date information concerning Federal and state tax laws. Momentum Advanced Planning and its representatives do not provide tax, investment, accounting or legal advice and not “fiduciaries” (under ERISA, the Internal Revenue Code of otherwise). Any taxpayer should seek advice based on the taxpayers particular circumstances from an independent tax advisor.
  31. 31. MOMENTUM ADVANCED PLANNING | 31 Disclosures The projections here are based on assumptions stated and the information provided is not a reflection of past experience or future guarantees. Changes in tax law could affect the tax consequences. Momentum Advanced Planning strongly recommends that any proposed plan or changes to an existing plan be reviewed by your tax advisor. Any statements contained herein were not written nor intended to be used for purposes of avoiding U.S. federal, state, and local tax penalties. The views contained herein are not to be taken as an advice and or recommendation to buy or sell any investment. Please consult with your advisor.
  32. 32. | 32 REFERENCE
  33. 33. MOMENTUM ADVANCED PLANNING | 33
  34. 34. MOMENTUM ADVANCED PLANNING | 34

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