I never knew there were so many conservative investors until the last time I wrote about the subject in this column. I received a blizzard of responses via phone, fax and mail.
Most of my consulting time is spent putting together wealth transfer plans for successful business owners. Invariably, about half of my clients bring up two critical and related operational problems: how to keep their company’s top executives and how to attract quality people.
Joe, the 61-year-old owner of Success Company (a C corporation), recently asked me to evaluate two plans designed to transfer his business to his family. Mary, Joe’s wife, is 53 years old, and they have a 31-year old son, Sam.
About three out of every four readers who call me ask a variation of this troublesome question, “What will estate planning do for me, my family and my business?” The simple answer is that it will help you to legally avoid the impact of the estate tax when you die, and use the tax law to create tax-free wealth for your family (before and after your death).
There are basically two types of plans: a lifetime plan that should start now (in the next two or three months), and a death plan/estate plan (your will and trust documents) that usually sits in a drawer until your death.
Are qualified retirement plans—pension plans, profit-sharing plans, IRAs, 401(k) plans and so on—beneficial to everyone? After all, a current deduction for your contributions, plus tax-deferred accumulation of earnings could never be a bad tax move. Right? The answer is it all depends on 1) whether you will need that money someday and, in fact, do use your plan funds—down the road—for your retirement (a truly great tax deal); or 2) you turn out to be rich.
One perk of writing a tax column is receiving phone calls from readers, each with his/her own specific problems, concerns and questions. I find that the greatest reward I receive is being able to help almost all of the callers.
People often say something like, "Irv, I'm very conservative. " Then they tell me that they have allocated all or a large amount of extra cash in what they consider to be "conservative investments" (CI).
This is supposed to be a tax column, showing you how to keep money, once you've made it. To this end, let's explore another facet of hanging on to your money.
In early 1995, I wrote a lengthy article for this column titled "A New Plan to Beat the Estate Tax. " In part, the article said, "If you use the right tax tools and techniques together with the right professionals (lawyer, insurance consultant and CPA), you can develop a plan to legally beat the IRS.
First, let's explore why business owners (whether they own 100 percent of the business or a portion of it) search for the Holy Grail of tax planning, but never find it.
This is the story of a business owner (Joe, age 62), his wife (Mary, age 59) and their three sons (Pat, Paul and Peter, ages 39, 37 and 32).
