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Estate Planning, Asset Protection, & Business Succession Your Own Private “Tax Reduction Actâ€. Presented by: Lance Wallach, CLU, ChFC, CIMC. Basic Estate & Asset Protection Planning. How a Will Works…. The Marital Deduction. How a Revocable Trust Works….
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Estate Planning, Asset Protection, & Business Succession Your Own Private “Tax Reduction Act” Presented by: Lance Wallach, CLU, ChFC, CIMC
Basic Estate & Asset Protection Planning
Putting it all together in Your Own Private “Tax Reduction Act”
“WISH LIST” FOR ACCUMULATING WEALTH • Save money on tax-deductible basis • Allow assets to accumulate tax-free • Available to any type of business • Approved by IRS and US Congress • Protected from creditors • Pass to heirs estate-tax free • Limited vesting for employees • Flexible contributions - no minimum commitment • May make large contributions in good years • Funds are securely held - safety of investment
“WISH LIST” FOR ACCUMULATING WEALTH A VEBA can satisfy all of these wishes.
TYPES OF BENEFITS PROVIDED Death Benefit Retiree Medical Benefit Disability Insurance Benefit Health Reimbursement Benefit
Death Benefit • Premiums are paid with pre-tax dollars • Multiple of compensation formula favors key employees • May select term or permanent insurance • Coverage may continue after retirement • Death proceeds are tax-free to beneficiary May be set up to avoid estate taxes upon distribution • May be used for estate planning or buy-sell funding Note: Life insurance in excess of $50,000 creates modest current taxable income to insured
Retiree Medical Benefit • The Plan may provide a fund for the payment of medical expenses tax-free after the participant’s retirement. Medical expenses are broadly defined under IRC Section 213(d), and include such items as out-of-pocket expenses, long-term care premiums, Medicare Supplement coverages, etc.
BENEFITS OFFERED: Benefits available under the Plan include: • Death Benefit • Retiree Medical Benefit • Disability Insurance Benefit
Disability Insurance Benefit • Funded with insurance policies • Premiums are paid with pre-tax dollars • Percentage of compensation formula favors key employees • Income benefits from policy are taxable
Health Reimbursement Benefit • In addition to medical benefits after retirement, the retiree medical account may be used prior to retirement for payment or reimbursement of medical expenses which are not covered by insurance.
BENEFITS OFFERED: Benefits available under the VEBA include: • Death Benefit • Retiree Medical Benefit • Health Reimbursement Benefit
WHO SHOULD HAVE A VEBA? • Profitable businesses who wish to reduce their income taxes
WHO SHOULD HAVE A VEBA? • Profitable businesses who wish to reduce their income taxes • Firms which have maximized their retirement plan contributions • Firms whose owners have estate tax problems and who wish to reduce or eliminate inheritance taxes • Businesses who wish to protect their assets from creditors
IMPORTANCE OF IRS APPROVAL • VEBAs have received favorable letters of determination from the IRS. This means that the IRS has examined the plan documents, coverage and plan operations, and has accepted certain trusts as qualified under IRC Section 501(c)(9).
ASSETS SAFE FROM CREDITORS • Wouldn’t it be a shame to build a large nest egg and lose it overnight because of an accident, a lawsuit or a business setback? As an ERISA-qualified plan, your assets held in the VEBA are fully protected from creditors.
ESTATE TAX ADVANTAGES • By working with your attorney in developing your designation of beneficiary, your insured death benefits may avoid estate taxes.
VEBA Advantages: • IRS-approved • Contributions are tax-deductible • Life insurance is based on multiple of salary • Optional medical benefits • Employer sets contribution level • Death and medical benefits are paid tax-free • Assets are protected from creditors
TAX IMPLICATIONS • Contributions to the VEBA are tax-deductible to the Employer. • Employees realize a modest annual economic benefit for life insurance coverage which enables death benefit proceeds to be paid tax-free. • Benefits other than death proceeds of life insurance and medical are taxable when received. • A Life Insurance Trust can render benefits free of Federal Estate taxes.
