5 Million Dollar Strategies – Exclusions and Planning by George Mentz JD MBA CWM

With less than 3 weeks before the Estate and Gift Tax rates change, Americans are speedily transferring assets so as to benefit from the existing tax fairness rules.

There are 2 key objectives in wealth management. There are rules and then there is strategy. The purpose must be effectively intertwined with the laws on the books, and then mixed with the products and services available. And, it all must be documented effectively.

This all makes you think about the options available under the “so called” 5 million dollar exclusion. Here are examples:

1. Gift money to a trust and use a trust department while creating trust documents that have various provisions such as “spend thrift” or education, welfare, and living sustainability clauses.
2. Gift cash to multiple 529 plans to benefit several if not dozens of heirs for educational purposes.
3. Move stock or member interests in small to medium companies to heirs.
4. Create a dynasty trust with a wide array of beneficiaries who are descendants of children or relatives.
5. Buy homes or apartments for loved ones. Have the homes in trust where they are sustained & can’t be encumbered or legally attacked.
6. Set up UGMA or UTMA accounts for grandchildren, nieces, nephews and so forth.
7. Move income producing assets into your children’s name so as to capture a better tax rate.
8. Donate appreciated assets or stock to your children and have them move to a tax free state such as Texas and capture the low capital gains rate before year end.
9. Sell a business for stock, and immediately gift the stock to heirs or loved ones.
10. Borrow the money against your assets such as stock or real estate, and gift it to loved ones.
11. Release loans to family members as a gift.
12. Fund a major insurance trust immediately with a single premium policy.
13. If you demand that family behave and receive a lot of money later, create trust where beneficiaries only receive a portion of the money until they turn 35 or 45 years old.

*It is generally best to consult with a Chartered Wealth Manager and then use a licensed attorney who specializes in your county or state with trusts and wills. Moreover, it is advisable to consider using a lawyer or trust department to manage your estate, trusts and wills. Trust departments offer a lot of services to evaluate and can manage the assets of a trust while also paying bills, insurance, managing successions, and even running a business.

The TJSL Thomas Jefferson School of Law has an LLM program in international tax and finance.  To enroll or tell your staff about the program, view here: www.llmprogram.org

About the Author: Dr. George Mentz is a world recognized consultant and award winning professor who has authored several revolutionary books. Prof. Mentz, an international lawyer, has been a keynote speaker globally in Asia, Arabia, USA, Mexico, Switzerland, and in the West Indies. Mentz can be contacted for speaking engagements at www.gmentz.com or www.managementconsultant.us or www.selfhelpbook.org  Mentz is a licensed attorney and CWM Chartered Wealth Manager who resides in Colorado Springs Colorado USA
*No tax, insurance, investment or legal advice provided herein. Please consult with a licensed professional in your jurisdiction before making any important financial or legal decision.

As a wealth management consultant and professor for over a decade, it is that time again to file our taxes. With tax filings, we must document our income, expenses, deductions, exemptions, retirement contributions and so forth. Some of us must file our taxes for partnerships or corporations.

Wealth management comprises various subjects including: Economics, Banking, Investments, Risk Management, Investment/Asset Management, Estate Succession, Taxation, and Trust Planning and Retirement Planning.

Many of us simply receive W-2 and employment income and traditional company benefits primarily, but others who are self-employed or contractors are doing their best to utilize the system to declare income, pay for insurance, take mortgage deduction and so forth.

The good news is that that the tax code has become more amicable to the self employed over the last decade. Self employed individuals are able to write off or deduct more of their health care expenses while also setting aside more money pre-tax into their self directed retirement accounts.

Here are some thoughts related to Wealth Management 2012

Investments: While we are not sure what will happen with taxes going forward, several of today’s tax rates on income such as dividends and long-term capital gains are reasonable. If they go up, many people may sell out of dividend stocks or other related holdings. Dividend stocks have been particularly popular for retirees and those who don’t want CDs with the rates so low.

Thus, dividend stocks have been the alternative for income producing investments because the tax rates are at 15%. Overall, if income taxes go up on dividend stocks at this time, the hardest hit may be seniors and those who live on a fixed income.

Retirement and Education: In light of the present situation, we hope you are able to maximize your contributions to your retirement before April 15th each year. Also, setting aside money in a 529 plan is a good way to fund a child or grandchild’s education for the future. The annual gifting rules and estate and gift tax rules allow you to gift cash to others during life or at death. Therefore, now may be a good time to consider large gifts due to the generous estate & gift tax exemption for 2012.

Estates and Succession: As for estate taxes, those rates right now are the most generous ever. However, the large exemption may be reduced again to the Clinton era rates if nothing is done by Congress before 2013.

The other major estate management issues are succession documents. Do you have a valid will? Do you have health care directives? Have you considered limited powers of attorney for your financial affairs or health care affairs? Have you arranged for the guardianship of your children if something happens to you? All of these issues can be dynamic and very important?

Insurance: Other topics are risk management related. Do you have proper life, health, and home insurance? Have you considered an umbrella policy or disability policy? Again, protecting yourself and your family in this way is imperative. However, you must remember that insurance contracts have beneficiaries and that each policy can have primary beneficiaries or secondary beneficiaries. Further, these assets are not controlled by your will and the beneficiary receives regardless of what your will says. Providing the policy numbers and information to your loved ones may also be a good exercise.

Banking and Investment Accounts: Additionally, if you have bank or brokerage accounts, you should consider listing your spouse or loved one as person who receives the account upon death. TOD “Transfer on Death” and POD “Payable on Death” accounts are typical choices for your accounts and this allows a loved one to have access to cash immediately if something happens to you. Sometimes, rolling over or consolidating accounts is a great exercise so as to help create a better view of the totality of your investments.

Taxation: The IRS has a tax tips section which is interesting and resourceful. Moreover, there are many great tax software programs out there to chose from that you can use privately on your computer. Thus, with good information coming from the Treasury Department and quality software, all of us have a fair opportunity to get our tax paperwork done on time.

Economics: Keep in mind that there has been a number of economic cycles in the last 20 years in the USA and Internationally. That means that we should all keep an eye on our risk tolerance and our investing time horizon. When you are getting closer to retirement, you should be moving out of riskier investments and into more stable investments or stocks with less volatility if possible. Other related problems such as an election year and global debt crisis issues domestically and abroad are also now part of the macro-economic effects.

In the end, most people are concerned with financial security. During our earning years, all of us want to work in a labor of love, earn what we can, protect our children and retirement, and worry about taxes later. In the end, the key is doing what you want to do, and have the experts handle your legal, tax and wealth management for you.

*No investment, legal or tax advice is intended to be given herein. Please see a licensed professional before making any important decision.