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Estate Planning

We aid you in navigating the complex area of estate planning. Without estate planning, you can look forward to paying a large amount of tax, federal and state, on the sale of your company. With our aid in proper estate planning, we can help you minimize taxes and fulfill your goals in life and death, help your beneficiaries avoid taxes upon any inheritance. A well-planned trust can reduce capital gain taxes, ordinary income taxes, and estate taxes for your heirs while also ensuring an income stream. Below is a summary of the various ways in which you can avoid taxes and provide money to your heirs. We help you choose the right plan for your needs and goals.

Lifetime Gifting

  • Removes amounts from the estate tax free.
  • Basis is not stepped up though like it is if bequeathed at death.
  • $11K per person per year (married $22K).
  • Does not use up lifetime estate or gift tax credit.
  • Also, can be used to pay a person’s educational or health expenses without it counting toward gift limit (tax free).


  • Can be funded during lifetime (Inter Vivos) or by Will (Testamentary).
  • May be either revocable or irrevocable.
  • In certain types can protect against creditors or divorce (must be irrevocable).
  • Avoids probate.
  • Can allow for trustee discretion.
  • Can be for Special Needs persons.
  • A By-Pass Trust – assets above the estate exemption ($11K/$22K) left to spouse (the assets are then not included in spouse’s estate upon spouse’s death).
  • Certain Inter Vivos trusts of life insurance pass on to the trustee at death without the delay under a will.
  • Living Trusts avoid probate.
  • It is wise to appoint a corporate trustee as a secondary trustee, which carries on forever if first trustee dies, or appoint co-trustees.
  • Charitable Remainder Trust – Amount given is deductible against income, income stream goes to donor during his lifetime, the remainder upon death goes to the charity.


  • If owner has highly appreciated company stock with high capital gains inherent in it and he wishes to diversify – then a CRT is an option.
  • A CRT generates a lifetime stream of income to the owner without estate or capital gains taxes.
  • The donation can be in the form of stock (like in a sale), bonds, real estate, etc.
  • Reduces current income taxes with a carryover also.
  • Avoids a 55% estate tax (at highest rate).
  • Creates spendable income
  • Is charitable
  • The beneficiary of the income stream can be family members for up to 20 years or life of the donor.
  • Calculation to see if viable:
    • Income stream (PV) + capital gain savings if the stock donated would have been sold + income tax savings on deduction of donated amount VERSUS Net of tax sale of stock or asset + income stream from invested proceeds (PV) less any estate taxes to pay (PV).  This formula would show the different net cash solutions versus each other.


  • Allows owner to pass assets (or stock in a sale) to beneficiary but keep an income stream for a set number of years.  The appreciation of the assets passed is at a much lower estate and gift tax rate.
  • Contribution can be the owner’s stock in the company.
  • The income stream (the annuity) allowed is typically 2 to 7 years based on factors such as market value, length of annuity and IRS approved interest rate.
  • When annuity term ends, the assets pass on to the beneficiary (those assets can be in the form of another entirely different trust).
  • The amount to be claimed for gift tax purposes is the actual remainder left over and above the expected remainder (the “expected remainder was based on the factors mentioned above – IRS rate, term, market value) LESS the income stream from the annuity.  This often can be structured so the remainder after that calculation is zero, and thus no gift tax is levied (called a zeroed out GRAT).
  • However, if owner dies during the term of the GRAT it becomes part of the estate.
    • THUS – if you “exceed” the factors above (that is; you beat the expected remainder), then the appreciation of the GRAT passes to the beneficiary estate and gift tax free.
    • Can therefore be used to pass low-basis stock to children, who will get a stepped-up basis free of gift and estate taxes.
    • Note – If you set up the GRAT before the exit closes then the all of a sudden appreciation of the stock due to the gain on sale gets stepped up to the kids!
      • Note – It’s not actually the gain on sale, but that gain is reduced by the IRS allowing as much as a 30% discount on the sale price realized because when it was established (before the exit) it represented a lack of liquidity and a lack of marketability, and even possibly a minority interest (depending on how much went into the GRAT) all of which adds to the discount.
    • After the annuity period terminates, the remainder can be put into a Charitable Remainder Trust carrying on the tax benefits.


  • Avoids the 55% tax on the estate you must pay if you leave money to grand-children directly.
  • Leaving money to kids who leave it to their kids gets taxed twice.
  • A Dynasty Trust holds family assets forever.  Family members can use assets and income with no estate tax because no one inherits them.


  • In general, when first spouse dies no tax is paid by survivor – it is paid upon second spouse’s death.  This is only true for assets without a terminable interest (an interest that terminates during survivor’s lifetime – like an asset passed on to a spouse that terminates and goes to a child – that would be taxable generally.
  • QTIP property however is an exception to this and is thus used to get assets to the kids without estate taxation.  For example, let’s say the survivor gets the house for her lifetime (or income from other assets could also be the case).  The income (or right to live there) must occur (be paid if other assets) annually.  It is done by making an election on the asset.
  • Because only income is provided (or right to live there), a QTIP protects the assets from being spent frivolously and effectively preserves the assets therefore for the kids.
    • It is often used in second marriages to provide income to second spouse but preserve assets for the original kids.



  • Limited time period of coverage.
  • Renewable annually but cost increases at intervals (Ex: 5,10,15,20 years).
  • Level Term Insurance – one premium amount over entire term.
  • Decreasing Term Insurance – One premium amount over term but benefit decreases over time.
  • Term Life is the lowest cost.  Can be cancelled because no cash value builds.
  • When term ends though a new policy is very costly.
  • Permanent Term Life is costly but assures renewal (which term life doesn’t).
  • Can have a conversion provision to Whole Life, but again is costly.


  • Guaranteed for life, a fixed premium is calculated.
  • Cannot be cancelled by insurer.
  • A portion of each payment goes into a “sinking” fund account (called cash value).  As time passes it amortizes to add to the premium the insurer gets.
  • The cash fund has a guaranteed return % (4% to 8%) tax free but has risk versus market and/or inflation.
  • You can borrow against the cash value, but that reduces face amount of benefit.
  • Can be cashed in anytime (taxable, and any losses on a non-guaranteed policy are not deductible).


  • A variation of Whole Life.
  • Cannot be cancelled.
  • A sinking fund is established with a guaranteed return, but if fund earns more than the guarantee then the insured gets to reduce the premium by the excess (but if actual is less then premium increases, and if they cannot make payment it gets cancelled.


  • Can invest sinking funds into mutual funds or money market accounts.
  • No guarantees, if fund wipes out insurance is cancelled.
  • Risky.


  • Purchase a mixture.
  • Has best short-term benefit with a low cost, but then has the whole life steadiness and non-cancellable portion.


  • INCOME REPLACEMENT – If the family cannot maintain the business upon owner’s death then this provides income to replace owner’s lost income.
  • ESTATE TAX LIQUIDITY – Used to pay estate taxes instead of having to have a fireside sale of the business to pay taxes.
  • KEY PERSON LIFE – Protects the business.  The company pays the premiums and is the beneficiary (non-deductible premiums but non-taxable benefit).  Preserves cash flow (which can allay the fears of creditors, family, managers, employees, customers, etc..).  Can be used to groom a replacement.
  • FUNDING A BUY-SELL AGREEMENT – For closely held businesses.  Either a Redemption (where company buys shares) or a Cross Purchase (stockholders buy shares). * Note – In a Redemption, assets are not stepped up.  It is best to buy life insurance on all shareholders in a Buy-Sell but it gets complicated.
  • FOR COMPENSATION ENHANCEMENT – A valued benefit in eyes of employee in a package for key employees.
    • SPLIT DOLLAR AGREEMENT – Employer & employee split the cost.  The company receives the cash value (which effectively pays for the premium) and the family receives the death benefit.
    • NON-QUALIFIED DEFERRED COMP – For key employees, one way to fund is with life insurance.  The employees value this.  The company as beneficiary uses the cash to pay off the deferred obligation (if death before retirement) OR if employee leaves (cashes out) company uses cash value to pay off the deferred obligation.
  • DISABILITY INSURANCE – Often overlooked.  Ensures survival of the business as well as a family income stream.