Key Subject

Estate Plan – Business Succession Plan

Key Tax-Saving Subjects

The more you are worth, the more valuable — in real dollars — the above six subjects are to your economic and tax well-being. The subjects are intertwined. An interest or concern with any one of the subjects usually brings a flood of questions about the other five. What’s so interesting is that most high-net worth individuals have the same concerns… and questions. For example, the most asked questions (or some variation) by wealthy clients and wealthy visitors to this website are:

  1. Can you really beat the estate tax?
  2. Can I control my business and other assets, yet remove them from my estate?
  3. What is the best way to transfer my wealth — including my business — to my children tax-free?
  4. Is there a legal way to reduce the value of my business for tax purposes?
  5. How do I treat my non-business children fairly?
  6. How can I protect my assets from creditors (lawsuits and in-laws)?
  7. Can I create tax-free wealth during my life?… at death?
  8. How can I assure myself of a flow of income to maintain my (and my spouse’s) lifestyle for as long as I live?
  9. Why do the rich buy so much life insurance (and who should own the policy and be the beneficiary)? … [Questions — and good answers — about insurance are endless.]
  10. How can I avoid being double taxed on my profit-sharing plan (or 401(k), or IRAs, or similar qualified plans)?
  11. Can I really give substantial gifts to charity without reducing my family’s inheritance?
  12. Can you recommend a strategy to provide for my children’s (or grandchildren’s) education?

Now, stop for a moment… How many of the 12 questions above concern you, your family and your business?… Yes, the subjects are intertwined.

And, of course, there are many more common questions. This website answers all 12 of the above questions. And many more. More detail for all the questions and, best of all, the right answers are on this website. You’ll learn what to do and how to do it.

Now a separate look at each of the six tax-saving subjects (really, how to create your perfect plan to beat the estate tax and the IRS…. Legally)

Estate Planning

Let’s face it, estate planning is death planning… not a fun task. Most of the calls I get from new clients are, “Irv, will-you-do-my-estate-plan” calls. Some callers are as young as 35… rarely younger. About 90% are between 55 and 81… some older.

About two to three minutes into the call, I gently switch the conversation. We start talking about lifetime planning, wealth creation and how important your lifestyle — for the rest of your life — is. They love it. Then, we’ll talk about how to create their personal “Wealth Transfer Plan.”

How does a Wealth Transfer Plan differ from an Estate Plan?

A Wealth Transfer Plan concentrates on the specific assets that make up your wealth, rather than the estate tax caused by the total value of the assets. For example, if your assets total $10 million (it could be more or less), and the potential death taxes are $4 million, you are really worth only $6 million (after taxes). A Wealth Transfer Plan, instead of trying to lower the $4 million in taxes, causes 100 percent of the $10 million — every dollar of it — to be transferred to your family (all taxes, if any, paid in full).


A Wealth Transfer Plan is always a lifetime plan, which is designed to dovetail with your Estate Plan (really a death plan).

Why do most Estate Plans fail to take advantage of all the opportunities in the tax law?

The simple, but correct, answer is that conventional estate planning is bogged down in the terrible complexity of the tax laws without an organized system of dealing with the complex mess. The complexity has created a burgeoning estate planning industry (CPAs, lawyers, insurance agents, financial planners and bankers) …with each trying to grab a piece of the action. When a person of wealth goes to his/her final reward, almost 100 percent of the time the IRS wins the tax game. Then, it’s too late to work the tax magic taught on this website.

You and your family lose. Then your professional’s input is usually limited to an after-the-fact business valuation for the estate. But it doesn’t have to be that way.

To win the estate tax game, proper planning — a Wealth Transfer Plan — must be done while you are alive and well. A typical Wealth Transfer Plan includes the following:

  • Business Succession Plan (usually tax-free)
  • Wealth Transfer Plan (your non-business assets)
  • Asset Protection Plan (for all of your assets)
  • Life Insurance Plan (if you and/or your spouse are insurable)
  • Tax-Free Wealth Creation Plan (a must if neither you nor your spouse is insurable… or the premium cost is too high)
  • Retirement Plan (rarely is a profit-sharing plan, 401(k) or similar plan the best way)
  • Estate Plan (must dovetail with the above plans)

How can you tell if your Wealth Transfer Plan (Plan) is done and done right?

After your Plan is done, you’ll know it meets the highest possible standards if you are able to answer ‘Yes’ to all of the following questions:

  1. Does the Plan accomplish all of your pre-set goals?
  2. Is the Plan flexible, so you can change it if circumstances change?
  3. During your life do you have total control of all the assets — including your business — you want to control?
  4. During your life and after your death, are your assets protected from creditors, potential plaintiffs and ex-spouses who divorce a family member?
  5. After your death, does your Plan get all of your wealth — every dime of it — to your family? Or does your Plan actually increase the wealth your family will receive… tax-free?


Ask and answer the same five questions. If you don’t get a ‘Yes’ to all of them… get a SECOND OPINION (click here)

Business Succession

Approximately 85% of my wealthy clients own all or part of a closely held family business. Sooner or later every family owned business must be transferred. An unplanned transfer, especially if caused by your death, is an economic and tax train wreck. Expensive. Impossible to fix. Unnecessary.

Better to have a Business Succession Plan in place. Following are the most common business succession strategies we see in practice for successful businesses:

  • A tax-free transfer to one or more of the owner’s business children.
  • A sale to non-related stockholders or partners (brothers are considered non-related). Sale can be tax-free.
  • A sale to one or more key employees (also can be tax-free).
  • A sale to any person, group or company other than the above (sometimes can be tax-free).
  • Rare but happens:a) Goes publicb) Sale to an Employee Stock Ownership Planc) Liquidation


This website only covers the first strategy. If you are interested in more information for any of the other strategies contact Irv (click here) directly.

Why selling stock to your family is a no, no

You want to sell your business to your son (Sam). Each $1 million of the price (just substitute your own real price) is subject to three taxes:

  1. Sam must earn over $1.6 million: at 40%, the income tax is $600,000… only $1 million left.
  2. Sam pays you $1 million for your stock (assume zero tax basis). Your capital gains tax is $150,000… now only $850,000 is left.
  3. At your death, the IRS gets another $467,000 for estate tax… only $383,000 is left. It’s nuts! Sam must earn $1.6 million (or more) for your family to receive $383,000 (or less).


The tax rates might change, but the horrific tax results will not. Better to do the tax- free strategies discussed on this website.


The capital gains tax you must pay is bad enough when you sell your business to your kids. But the worst tax is the income tax your kids pay ($600,000 in the above example). Not only is the tax huge, but your kids lose the time value of that tax money for the rest of their lives. And remember, of necessity, your kids are a full generation younger than you. Compound the lost tax dollars for the life expectancy of your business-buying child. Use any rate you like. The number you get should convince you to never, never, sell your business to a younger family member.

Nonvoting stock — the road to control and tax heaven

Typical objectives:

  • Transfer your business (you own more than 50 percent of the stock) to your kids during your life.
  • Maintain control of the business for as long as you live.
  • Minimize (or eliminate) the tax cost of any transfer.

Keeping Control

Actually, nonvoting stock is not technically a tax strategy, but without it, the other business succession tax strategies can’t be done. Our years of experience prove it is an essential ingredient in almost every Transfer-of-a-Closely-Held-Business Plan.


The owner (Joe) turns all of his stock (common) into the corporation and takes back two types of common stock in exchange — voting common (say 1,000 shares) and nonvoting common (say 100,000 shares). This transaction, called a “recapitalization,” is tax-free and works for both C corporations and S corporations.

Joe then sells or gives the nonvoting stock (using a tax-free transfer strategy) to his kids. Usually over a period of years. Then, Joe can own as little as 1 percent of all the stock (1,000 shares of voting stock in this example) and still retain 100 percent of the voting control. Just what he wanted — low value, high control. Perfect!

Wealth Transfer Plan

If you have not already read the section titled “Estate Plan” on this part of the website, go back and read it. Okay then, we are ready to put more meat on those Wealth-Transfer-Plan bones.

Actually a Wealth Transfer Plan (Plan) is a two-pronged attack that:

  1. Deals separately with each type of asset you own, and
  2. Uses an organized System to create, monitor and, when necessary, change the Plan.

For Our Purposes, You Can Only Have Four (or Five)Types of Assets

  1. Residence.
  2. Business.
  3. Income in respect of a decedent (IRD)… typically, an IRA, 401(k), or other qualified plan.
  4. All other assets… for example, cash, securities real estate, partnership interests, oil wells, etc.
  5. If you (or your spouse) are insurable, you have a fifth asset: the ability to use a host of life insurance strategies.

Remember, each type of asset is dealt with separately, using one or more tax-destroying strategies or tax-free wealth creation strategies. The System shows you how.

The Organized System

The System has three main pillars:

  1. Assets
  2. Goals
  3. Strategies


The first step to create your Plan — easy to do — is get a complete list of your assets.


The second step is to identify your goals — usually easy, but sometimes not (because of crazy circumstances… more often than not, driven by feelings and emotions).

Typically the goals are divided into three categories:

  1. You and your spouse.
  2. Your children, grandkids and other relatives (or extended family, related or not.)
  3. Your business.

Your goals should take you through two time frames: short-term (3 to 5 years) and long-term (from 10 to 25 years, depending on your age). Remember, as you get older, your goals almost always change. So, your Plan must be flexible to accommodate changing circumstances.


There are 23 core strategies and dozens of sub-strategies. And an infinite number of combinations. The large number of strategies (or which ones to use) never causes a problem. Even the most complex Plans — great wealth and many diverse business interests — only use six to nine strategies. Most Plans only need three or four strategies. The System automatically guides you to the right Strategies no matter what your circumstances, complexity or uniqueness.


Your Wealth Transfer Plan is created by selecting the right Strategies to accomplish your Goals based the Assets you own.

Asset Protection

We live in a litigious society. Too bad but some people are see-you-in-court crazy. As a result, asset protection has become a big and essential subject. Articles. Books. Seminars. If you have wealth, prudence dictates that you protect it from others.

For asset protection purposes, “others” fall into four distinct categories:

  1. The IRS and other tax collectors.
  2. Creditors.
  3. Plaintiffs in a future lawsuit against you.
  4. Divorcing spouses — for example, an ex-son-in-law or ex-daughter-in-law who divorces one of your children.

Your Wealth Transfer Plan is not complete unless it protects your personal assets from the four categories of potential asset-eating predatory (human-type) animals. Your business assets are a different story: You may have to change your business structure to accomplish the “best” asset protection results.


No, generally you can accomplish effective asset protection by using the appropriate Strategies right here in the good-old USA.

Life Insurance

First, the bad news: Life insurance premiums (subject to few exceptions) are not deductible. The good news: Depending on your age and health, a small amount of premium can multiply your after-tax wealth. Why?… because life insurance, courtesy of the Internal Revenue Code, puts you in a tax-free environment: during your life, at your death and beyond.

Why the rich buy life insurance

A tax-free environment gives the rich — who are always in the highest income tax and estate tax brackets — an easy way to make money. Here’s something most people don’t know: the tax-free tricks you can do with life insurance.

  1. During your life
    1. Earnings. The cash surrender value (CSV) of an insurance policy accumulates tax-free. A simple example: If the CSV of Joe’s $1 million policy is $100,000 at the beginning of the year and the insurance company earns 6 percent (or $6,000) during the year, that $6,000 is added to his CSV tax-free and carried over to start the next year.
    2. Policy Loans. Joe can borrow the CSV (loans are tax-free) and create a tax-free flow of cash. Loans are repaid (also tax-free) at Joe’s death out of policy proceeds.
  2. At death
    1. Policy proceeds. The excess of the death benefit Joe’s heirs receive over the amount of premiums paid (say $250,000) is tax-free. The excess in this example is $750,000 ($1 million minus $250,000)… and is a clear profit on the entire transaction. But, by law, this profit is tax-free.
    2. The estate tax. The policy proceeds are not subject to estate tax if Joe uses any one of a number of tax-free strategies.
  3. BeyondSuppose Joe is married to Mary and causes one of the many tax-free environments (typically a trust, but could be some other entity) to buy a $10 million policy on his life. Joe dies and the $10 million death benefit is paid — tax-free — to the trust. No estate tax at Joe’s death. Mary dies many years later, and the amount in the trust has grown to $15 million. Every penny of that $15 million will pass to Mary’s heirs tax-free: No estate tax, no income tax. (Note: The trust’s annual earnings are subject to income tax.)


Yes, life insurance is the only product we know of that can deliver lifetime tax-free (income tax) benefits and also deliver tax-free (both income tax and estate tax) benefits at death. But to receive the benefits of these tax-free goodies, you must do the specific strategy selected (as explained on this website) exactly right. Do it wrong, and the tax law will crush you.

Is $1 million a lot of money?

In a taxable environment, more than you think (because of the double tax). How many dollars must you earn to leave your family $1 million after taxes? Try this:

Earn $3.7 million
Less — Income tax on $3.7 million at 40%* $1.5
Balance $2.2
Less — Estate tax on $2.2 million at 55%* $1.2
Balance to family $1.0 million

*Rate may change from year-to-year


A premium of about $17,500 per year for 15 years (for a 50-year-old male) or about $263,000 does the work of $3.7 million. The annual premium for a second-to-die policy (husband and wife, both 60 years old) is about $15,900 for 15 years (a total of about $239,000)… much easier than earning $3.7 million.

In a taxable environment the IRS pays 55 percent of the premium

Suppose you are in the 55 percent estate tax bracket, pay $500,000 in premiums (from the day you bought $2 million in coverage to the day you die). The $500,000 is gone. It’s just not there to be taxed in your estate. Result: If you had not paid the premium, your family would have received at death only an additional $225,000 ($500,000 less $275,000 to pay the estate tax).

Your family gets the entire $2 million (because the policy was owned by a tax-free trust). So, the real out-of-pocket, after-tax cost of the policy is only $225,000.


Why do the rich buy life insurance?… To get some of their discretionary dollars out of a taxable environment and into a tax-free environment.

The math above, shows you why insurance is often the investment — as opposed to all other investments available — of choice. Remember why: earnings on CSV are tax-free; so are profits (the excess of death benefits over premiums paid); and the same happy result for death benefits.

Tax-Free Wealth Creation

So, you are wealthy. Why should you care about a concept called “Tax-Free Wealth Creation?” Suppose you are worth $50 million (go ahead, fill in your own number, but it should be at least in the $5 million or more range for this example to be a tax winner for you.)

The System described on this website uses two significant steps to attack the estate tax monster head-on.

Step One. The System freezes the value of your taxable net worth. The estate tax monster’s bite on $50 million is about $26 million. But if you hang around for another 6 to 9 years (more or less), chances are your $50 million wealth will double to the $100 million range. Then, the monster would take a tax bite of about $53 million. Take a moment and do the math on your wealth (use zero % on the first $2 million and 54% on the excess) for your life expectancy.


Failure to put wealth-freezing strategies into place allows the estate tax bleeding to continue to the day you die.

Step Two. Various discounting strategies are used to lower the $50 million to about $30 to $35 million. Certainly, another good tax-saving move. But the estate tax still rears its ugly head… in the $16 to $18 million range.

What to do?

Enter the Tax-Free Wealth Creation Strategies. Remember, our goal is to transfer all of your wealth — intact — to your heirs, all taxes paid in full.

Logic tells you we must have an organized plan to build your wealth to pay the potential estate tax. But progress is only possible if the additional wealth you build is tax-free. (Taxable wealth only digs the estate tax hole deeper. Actually 55 cents deeper for every dollar your wealth increases).

The Weapons of Choice to Defeat the Estate Tax Monster

The tax law is designed to “taketh” away. But, if you know what to do, it also “giveth.” We are back to our ever-faithful companion: a tax-free environment. The law gives you two:

  1. Insurance.
  2. Charity.

We have already discussed insurance above… For most people, the easiest way to slay the estate tax monster. But what happens if the insurance weapon does not work for you?… uninsurable or the premiums are just too high.


We cannot overcome being uninsurable…The insurance company simply does not want your money.

However, we usually can overcome the high premium cost. For example,

  1. Pay the premiums from a qualified plan like a 401(k) or profit-sharing plan (even an IRA — after a proper transfer — can join in the premium-saving fun.)
  2. Second-to-die insurance lowers the premium cost (typically in the 40% range)
  3. Premium financing can — if you qualify — almost eliminate the entire premium cost.
  4. Often, combinations of the above are used to reach your lower-the-premium goals.


Suppose insurance is out of the question — for whatever the reason. You can still get the job done via charity. Jackie Kennedy did it… she was not insurable. You can do it too.

Let’s sum it up

The Tax-Free Wealth Creation concept allows us the luxury of being able to assure you that all of your wealth — every dime of it — can be passed on to your family, intact, with all estate taxes paid in full. No matter how much you are worth. Single or married. Young or old. Insurable or not.


A significant purpose of this website is to help like-minded Americans who are dedicated to keeping their wealth (tax-free) and creating additional tax-free wealth. Using tax-advantaged Strategies. And only by legal means.


Free special report:

How to transfer your business (to your kids), yet keep control


When closely help with business owners call me for help with their business successions plan they typically have two goals:

- Get their business out their estate (particularly when it is growing in value) in a tax effective manner

- keep control for long as they live

it is a rare that the business owner finds an advisor who knows how to accomplish both goals.

this special report shows you how to keep absolute control of your business while transferring it to your successors.

Download Now!

Free Special Report:

How to legally eliminate your state tax liability


When people of means contact me to help do their estate plans (or review their existing plans), they typically have two goals concerning their estate tax:

- Reduce their potential estate tax liability

- Make sure there is enough liquidity to pay the potential estate tax liability

Well, my goal and the goal of this special report is to show you how to eliminate your potential estate tax liability whether you are young or old , married or single, insurable or uninsurable.

Download Now!

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