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WEALTH PRESERVATION PLANNING TOOLS

WEALTH PRESERVATION PLANNING TOOLS

Below are very brief descriptions of some of the planning solutions that we, or our associates, provide to some of our clientele. Naturally, each client's requirements and goals will vary, and customization for unique factors must always be considered.

Wealth Preservation & Asset Protection Planning Techniques Overview

Living Trusts, Childs Trust, & various other Trusts (Domestic and Foreign): Non-grantor trusts serve as excellent estate planning vehicles. Often times a tremendous amount of probate administration and attorneys fees can be avoided with living trusts, while achieving maximum privacy. Trusts can be structured as foreign or domestic under US tax law, the import being predominately in different reporting duties. These trusts can be used in any context calling for a trust, such as Childs Trusts, Pension Trusts, Charitable Trusts, Irrevocable Life Insurance Trusts, and various other varieties. Trusts provide excellent opportunities for wealth preservation, asset protection, and estate planning.

Family Limited Partnerships: Family Limited Partnerships (FLPs) offer opportunities for various wealth preservation and asset protection planning, along with opportunities for estate planning through gifting techniques. One of the great benefits of this planning tool is that it can provide for Charging Order protection, if the plan is properly implemented and established in the correct jurisdiction. This means that creditors may have no, or very limited rights to, assets held within the FLP. Often used either by individuals or families looking to limit their planning to stateside techniques, or as part of advanced offshore planning techniques where control over assets are maintained locally.

Offshore Family Asset Protection Trusts (FAPT): In almost every case (if not in every case) an offshore asset protection trust will be treated as a grantor trust for U.S. income tax purposes, and thus is not a tax-planning vehicle for the trusts settlor. That is, it is designed as tax neutral. The offshore FAPTs utility is as an advance planning technique that tends to place trust assets beyond the reach of future potential creditors of the settlor. Particularly when used along with other planning tools such as Family Limited Partnerships, LLCs, and other structures, it offers one of the most aggressive and advanced planning tools available today, worldwide. FAPT integrates estate planning as a function of the planning tool.

Family Wealth Counseling: Taking into consideration the entire financial and personal objectives of a family, and giving proper thought to the many stateside and offshore wealth preservation and asset protection planning techniques, a family has great opportunity to reach its financial and personal planning objectives. This involves a multi-disciplinary approach of many different professionals working closely together as a team. This team approach is a broad analysis and application of all planning tools.

Zero Estate Tax Planning: Simply stated, this approach identifies the many tax planning tools that might be used in an individual or family situation, and then structuring the ownership of assets so as to eliminate estate taxes. Generally used as part of the Family Wealth Counseling approach (see above). This allows for a maximum benefit of the estate for spouses, children, and future generations, without burdens of evolving federal and state estate tax obligations.

Irrevocable Life Insurance Trusts (ILIT): Unknown to most people, and generally their life insurance agents, is that while the proceeds of life insurance are not taxable to recipients, that the value of the life insurance policies are included in the estate at the time of death. In essence, the use of life insurance to pay off debts or estate taxes is often actually INCREASED substantially by the policies themselves. By removing the ownership of a life insurance policy from your estate and placing it into an ILIT, the tax burden can be eliminated, and the moneys under the policy can pass to a spouse and heirs by control of the trust provisions. 

International Business Company Planning & CFC, PFIC & FPHC Analysis: US taxpayers owning shares in offshore companies generally cannot avoid tax burdens upon themselves due to CFC, PFIC, & FPHC regulations. However, under certain circumstances for legitimate businesses, a US taxpayer can own shares in offshore businesses which may not be subject to special reporting and taxation rules, depending upon the application of the US foreign inclusion regimes. In many circumstances, the CFC, PFIC and FPHC rules are not implicated at all; in others, their effects can be diluted or avoided with proper planning.

US Stateside Asset Protection Planning Techniques: On occasion, certain individuals are uncomfortable with seeking offshore wealth preservation or asset protection planning. For those individuals, there are many stateside planning techniques that allow them to seek benefits without going offshore. For other individuals that use offshore planning for wealth preservation and asset protection planning, so long as they maintain a personal or business presence within the US, they too should utilize the many different types of stateside planning techniques to achieve the greatest amount of asset protection. The list of stateside planning opportunities is long, and the benefits vary depending on objectives and circumstances of a particular client. Undoubtedly, the different tools used are often driven by the amount of assets to be protected, and the costs associated with setting up and maintaining the tools.

Personal Philanthropy - Charitable Trusts and Foundations: US taxpayers can realize significant tax benefits (deductions, deferrals, etc.) by giving to charity. For example, in the case of a qualified charitable remainder trust, the donor is entitled to an immediate income, gift, or estate tax charitable deduction equal to the present value of the charitable remainder interest upon the creation of the trust; the donor may retain an income interest in the trust for his or her life (or a term of years not to exceed 20) or create such an interest in another person. There are several ways of structuring philanthropic planning. For example, pooled income funds are similar to charitable remainder trusts in that a donor retains an income interest in the property donated (or creates such an interest in another) and the donor is entitled to an immediate charitable deduction for the present value of the remainder interest passing to charity. Also, those persons not needful of any lifetime interest can, of course, make outright gifts to charities.

Corporate Philanthropy: Relevant for US and foreign companies paying US tax or treated in whole as US taxpayers. Although the basic rules authorizing an income tax deduction for contributions by both individuals and corporations are similar, corporations contemplating charitable contributions will encounter differences. For example, a corporation must often determine if its planned contribution is valid under local law, and there are percentage limitations and carryovers applicable to contributions by corporations. Opportunities for positive public relations and good karma must not be overlooked.

Depending on the special requirement and circumstances of clients, other tax planning techniques are available, which provide opportunities to maximize tax savings. While the list is long, and the explanations are complex, the following is a sampling of some of the different tools that may be available:

Offshore Life Insurance

Offshore Annuities

Offshore Private Annuities

Captive Insurance Arrangements 

Hybrid Corporate relations

Choice of Entity/Domicile

International Pensions

Deferred Compensation Plans

Stock Option Plans

Insurance as Executive Compensation

Offers in Compromise

Dropdown Policies 

With Profit Bonds

(C) Copyright 2006 David Tanzer all rights reserved.