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Income Tax Planning

Thursday, January 09, 2014

Robert Keebler's 2014 Tax Planning Success Kit

More and more, you’re seeing clients (and prospects) turning their attention away from traditional estate tax and financial planning and toward income tax reduction and asset protection. 

Why? Because of ATRA’s higher ordinary and income tax rates, higher capital gains tax rates, deduction phase-outs and higher estate tax exemption, Obamacare’s “net investment income “surtax”, a higher estate tax exemption, and an increasingly lawsuit-happy society!

Fortunately, it’s not difficult to re-tool your practice to meet this new demand for income tax and asset protection planning.  You just need to “tweak” how you use many of the techniques already in your bag of tricks (and maybe add a few others).

Regardless of whether you’re a financial advisor, life insurance agent, CPA or estate planning attorney (and regardless of your level of expertise), you need to have the necessary planning tools and techniques at your finger tips - - so you can show them to your clients and prospects before your competitors do!

We have collaborated with one of the nation's leading experts in tax planning - - Robert S. Keebler, CPA, MST, AEP (Distinguished) - - and are pleased to announce the release of...

Robert Keebler's 2014 Tax Planning Success Kit

Every estate planner of every designation and level of experience and expertise should have this in their arsenal of resources and tools to use this year!


What's included in the 2014 Tax Planning Success Kit?
Robert Keebler's 2014 Tax Planning Success Kit comes complete with the following items:

  • The Advisor's Guide to The Top 25 Tax Planning Ideas for 2014 which includes a printed 100+ page manual with valuable information about strategies that are going to be key this year for your clients, including: Bracket Management Strategies, Income Smoothing Strategies, Income Shifting Strategies, Reducing Taxable Income Strategies, Specific Net Investment Income Tax Strategies and Wealth Transfer Strategies.  You will receive a printed version of this guide, plus a PDF copy of this on CD (so that you can easily print multiple copies for everyone in your office!).  PLUS, Bob has thrown in a special bonus for The Ultimate Estate Planner, Inc. edition, that even we don't know about!
  • Planning Checklists for the 3.8% Net Investment Income Tax (NIIT) and the Top 25 Planning Ideas, in a modifiable format* so that you can brand and customize these checklists to suit your practice needs and strategies.
  • The Top 10 Tax Planning Ideas for 2014 Chart, which includes a full-size (11 inches by 17 inches), full-color and laminated version, as well as a printable PDF version on CD for you to have a quick reference when meeting with your client, prospects and referral sources about the top ten strategies for 2014.
  • The Applying the 3.8% Net Investment Income Tax Chart, which includes a full-size (11 inches by 17 inches), full-color and laminated version, as well as a printable PDF version on CD for you to be able to quickly and easily discuss the 3.8% NIIT with your clients and prospects.
  • The Capital Gains Harvesting Chart, which includes a full-size (11 inches by 17 inches), full-color and laminated version, as well as a printable PDF version on CD.
  • The Roth IRA Conversion Decision Chart, which includes a full-size (11 inches by 17 inches), full-color and laminated version, as well as a printable PDF version on CD, so you can quickly and easily help make the decision with your clients and prospects about whether a Roth IRA conversion makes sense for them or not.
  • The Bracket Management Chart, which includes a full-size (11 inches by 17 inches), full-color and laminated version, as well as a printable PDF version on CD.
  • Sample Client Letters for both existing clients and prospective clients in a modifiable format* so that you can customize and brand the letters to you and your firm!

IMPORTANT NOTICE: This product includes items that will not be available until January 24, 2014.  All product orders placed prior to January 24th will be shipped out no later than January 31, 2014 via U.S. Priority Mail. 

*All modifiable checklists and letters are in Microsoft Word.

For your convenience, you can purchase Robert Keebler's 2014 Tax Planning Success Kit from one of the following two ways:

Online: It's fast, safe and convenient!

cart

By Phone: Call us at 1-866-754-6477

NOTE: Sales tax is only applicable to California purchasers. Some LA and Orange County attorneys may be sold portions of this package.  For more information, call 1-866-754-6477.

This post has been brought to you by The Ultimate Estate Planner, Inc., providing practical, tested and proven technical and marketing products to help estate planning professionals throughout the country build their practices. Connect with us on Facebook, Twitter or LinkedIn.

Image Courtesy of imagerymajestic / FreeDigitalPhotos.net


Monday, December 09, 2013

NEW SOFTWARE—Robert Keebler's Complete Net Investment Income Tax ("NIIT") Calculator

Robert Keebler's Net Investment Income Tax CalculatorWith the recent announcement about the release of the final regs for the 3.8% Net Investment Income Tax, nationally renowned CPA, Robert S. Keebler, has released a new calculator to help estate planning professionals run the numbers for clients with his Complete Net Investment Income Tax ("NIIT") Calculator.

This is a unique calculator that allow you to input the necessary income and expenses for filling out the DRAFT versions of Form 8959 (the 0.9% Additional Medicare Tax Form) and Form 8960 (the 3.8% Net Investment Income Tax Form). These inputs are then transferred directly to the corresponding IRS Form and the tax calculations are done for you (NOTE: These Forms are NOT to be filed with the IRS).   This NIIT Complete Calculator and Draft Form allows you to easily fill out the new IRS Forms. Additionally, it allows you to illustrate to your clients the substantial effect the NIIT may have on them. Once the effect of the NIIT on your client is known, proper tax planning can begin.

 

SAMPLE SCREENSHOTS:

3.8% Net Investment Income Tax Calculator - Robert KeeblerForm 8960 Preparation - Robert Keebler

Additional Medicare Tax Calculator - Robert KeeblerForm 8959 Preparation - Robert Keebler

Product Details:

  • Format: Microsoft Excel, Delivered Electronically
  • Published: December 9, 2013
  • Developers: Keebler & Associates, LLP

$99

 

This post has been brought to you by The Ultimate Estate Planner, Inc., providing practical, tested and proven technical and marketing products to help estate planning professionals throughout the country build their practices. Connect with us on Facebook, Twitter or LinkedIn.


Tuesday, December 03, 2013

December 2013 Newsletter

December 2013 Ultimate Estate Planner Newsletter

Earlier this year, we released our premier issue of our free monthly estate planning newsletter.  This is a newsletter unlike any others out there for estate planning professionals.  Not only is it intended for estate planning professionals of all designations - - including estate planning attorneys, CPAs, financial advisors, life insurance agents, and even administrative staff - - but it is intended to be practical, timely and provide useful technical, legal and practice-management strategies that professionals can actually use in their practice.

IN THE DECEMBER 2013 ISSUE (RELEASED TODAY):

  • PRACTICE-MANAGEMENT: Conduct a Successful 2014 “Kick-Off” Meeting with Your Firm by Philip J. Kavesh, J.D., LL.M. (Tax), CFP®, ChFC, California State Bar Certified Specialist in Estate Planning, Trust & Probate Law
  • TAX PLANNING: 2013 Year-End Tax Planning Ideas (Part 3) by Robert S. Keebler, CPA, MST, AEP (Distinguished)
  • ADVANCED-LEVEL PLANNING: Top Ten Reasons to Decant an Irrevocable Trust by Steven J. Oshins, J.D., AEP (Distinguished)
  • SUPPORT STAFF & EXECUTIVE ASSISTANTS: Kick-Start Your Boss’ Calendar in the Right Direction for 2014 by Kristina Schneider and Megan DeLaGarza, Executive Assistants

CLICK HERE to read December's newsletter

Click the "Subscribe Now" icon below and make sure that you're signed up to receive our free monthly newsletter so you don't miss out!

This post has been brought to you by The Ultimate Estate Planner, Inc., providing practical, tested and proven technical and marketing products to help estate planning professionals throughout the country build their practices. Connect with us on Facebook, Twitter or LinkedIn.


Monday, December 02, 2013

Teleconferences on Final 3.8% Net Investment Income Tax Regulations

As previously announced on November 26th, just before the Thanksgiving holiday, the IRS released the final regulations for the 3.8% Net Investment Income Tax (or "NIIT").  Nationally renowned CPA, Robert S. Keebler, is putting together a number of educational teleconferences on this topic to help practitioners navigate through this complex area of tax planning and to better understand its impact on the planning we do for our clients.

Please join us for one of the following dates for his special 90-minute presentation entitled, "Understanding the 3.8% Net Investment Income Tax and Its Effect on Individuals, Trusts & Estates, and Closely Held Entities - - After the Final Regs":

Tuesday, December 3rd at 9am Pacific Time

Tuesday, December 10th at 9am Pacific Time

Tuesday, December 17th at 2pm Pacific Time

Thursday, December 19th at 11am Pacific Time

Friday, December 20th at 9am Pacific Time

REGISTER NOW

This post has been brought to you by The Ultimate Estate Planner, Inc., providing practical, tested and proven technical and marketing products to help estate planning professionals throughout the country build their practices. Connect with us on Facebook, Twitter or LinkedIn.


Tuesday, November 26, 2013

Breaking News: Robert Keebler with an Estate Planning Alert

Estate Planning Alert - Robert Keebler from The Ultimate Estate Planner, Inc on Vimeo.

This post has been brought to you by The Ultimate Estate Planner, Inc., providing practical, tested and proven technical and marketing products to help estate planning professionals throughout the country build their practices. Connect with us on Facebook, Twitter or LinkedIn.


Tuesday, September 17, 2013

Robert Keebler Charts Promotion - Get All 7 for Just $99!

Until tomorrow, September 18th, you can get all seven of Robert Keebler's Client-Friendly Laminated Charts for just $99, normally $19.99 each.

These charts are 11"x17" and come printed in full color and laminated.  These are great for explaining complex tax and retirement benefit planning concepts to clients.  You can purchase multiple copies and even purchase a customized design to brand the chart with your firm's logo.  >>MORE INFO

The seven charts include:

The Personal Exemption Phaseout & PEASE Impact
Personal Exemption Phaseout ChartThis chart evaluates the Personal Exemption Phaseout and the PEASE impact, along with projected tax rates for 2013.

 

 

The Healthcare Surtax
Robert Keebler Healthcare Surtax ChartThis chart provides a statutory overview of the Healthcare Surtax and its impact on trusts and estates, along with planning considerations for Investment Income and MAGI strategies. It also reviews the Surtax Bubble for 2013 Roth Conversions.

 
Applying the 3.8% Healthcare Surtax
Robert Keebler Applying the 3.8% Healthcare Surtax ChartThis chart evaluates the application of the 3.8% healthcare surtax, including its impact on and strategies for reducing MAGI and NII, plus a worksheet to help determine if MAGI or NII controls.

  

Traditional IRA Distribution Flowchart
Robert Keebler Traditional IRA Distribution FlowchartThis chart provides an overview of the required minimum distribution rules and the post-mortem options available.

 

 

Roth IRA Distribution Flowchart
Robert Keebler Roth IRA Distribution FlowchartThis chart provides an overview of the required minimum distribution rules for Roth IRAs as they apply to post-mortem options available.

 

 

The Roth IRA Conversion Decision
Robert Keebler Roth IRA Conversion Decision ChartThis chart is a summary of the reasons why a client should consider converting to a Roth IRA.  It also includes a checklist of actions needed to be taken for a successful Roth IRA conversion.

 

  The Roth IRA Quadrants
Robert Keebler Roth IRA Quadrants ChartThis chart provides a step-by-step explanation of the Roth IRA Distribution Rules.  it also illustrates the benefits of naming a trust as beneficiary of a Roth IRA.

 


Don't forget, this offer expires on September 18th so ORDER NOW!  >>MORE INFO

 This post has been brought to you by The Ultimate Estate Planner, Inc., providing practical, tested and proven technical and marketing products to help estate planning professionals throughout the country build their practices. Connect with us on Facebook, Twitter or LinkedIn.


Wednesday, August 21, 2013

Helping Your Clients with Portability

With passage of the American Taxpayer Relief Act in 2012, portability has now been made "permanent".  Introduced into law for the first time in 2011 with the 2010 Tax Act, the concept of portability permits a married couple to fully utilize its combined $10 million (and now $10.5 million) lifetime exemption as indexed by letting the surviving spouse claim any unused portion of the deceased spouse’s exemption.  With this provision now permanent, the surviving spouse no longer has a time limit to decide how best to use the increased exemption both during life through increased gifting and at death by protecting more of the estate from taxation.

As a result, the decision-making process with clients about whether to go with portability or with funding a B - - or whether to opt for some combination of both - - is not a simple knee-jerk decision.  According to one of the nation's leading estate planning attorneys and Ultimate Estate Planner President, Philip J. Kavesh, there were some unfortunate flaws in the way portability works that were initially a part of its introduction from the 2010 Tax Act.  These flaws were not corrected; nothing has been changed about it except they basically made it now permanent because originally it was only going to be into law for two years.

We are pleased to present a number of tools that may be helpful to you and your clients with portability.

FREE Portability vs. "B" Funding Comparison Chart
This chart compares Portability side-by-side with the "B" funding option, looking at the pros and cons of each choice.
Portability Comparison Chart

White Paper: "Post-ATRA: Comparing the Pros & Cons of  Portability vs. 'B' Funding"
For only $19.99, download this 8-page white paper entitled, "Post-ATRA: Comparing the Pros & Cons of  Portability vs. 'B' Funding".  This white paper will give a glimpse into a private attorney technical training on the decision-making process surrounding portability and "B" trust funding, particularly as he walks you through a number of "rules of thumb" to follow when making this decision with your clients.  Additionally, you will get a Portability vs. "B" Funding Pros & Cons Comparison Chart in a modifiable Microsoft Word version so that you can actually brand this chart with your firm name and use the form in your client meetings.
Portability White Paper

On-Demand Program: "The Traps of the New Form 706 and Portability"
On Tuesday, August 20th, nationally renowned CPA, Robert S. Keebler, presented a 90-minute teleconference on portability.  It was one of our most popular and well-attended programs of the year!  This program goes over how to handle portability on the new Form 706, along with how the portability rules work, overlooked GST issues, the impact of choosing portability (or not), and how to avoid malpractice traps associated with portability.  You may have missed out on this program, but you can still purchase the handout materials and the audio recording.  These are available for immediate download or on CD.
Portability Teleconference

We hope that you will use some or all of the above tools and resources available to you to help you and your clients with the issue of portability.  If you have any questions or if there's any other way that we can assist you and your practice, do not hesitate to contact us at 1-866-754-6477.

This post has been brought to you by The Ultimate Estate Planner, Inc., providing practical, tested and proven technical and marketing products to help estate planning professionals throughout the country build their practices. Connect with us on Facebook, Twitter or LinkedIn.


Thursday, August 01, 2013

August Newsletter

Ultimate Estate Planner August NewsletterEarlier this year, we released our premier issue of our free monthly estate planning newsletter.  This is a newsletter unlike any others out there for estate planning professionals.  Not only is it intended for estate planning professionals of all designations - - including estate planning attorneys, CPAs, financial advisors, life insurance agents, and even administrative staff - - but it is intended to be practical, timely and provide useful technical, legal and practice-management strategies that professionals can actually use in their practice.

IN THIS MONTH'S ISSUE:

  • PRACTICE-MANAGEMENT: Free Checkup Meetings Generate Lots of Revenue! by Philip J. Kavesh, J.D., LL.M. (Tax), CFP®, ChFC, California State Bar Certified Specialist in Estate Planning, Trust & Probate Law
  • TAX PLANNING: Tax and Economic Implications of the DOMA Decision by Robert S. Keebler, CPA, MST, AEP (Distinguished)
  • LIFE INSURANCE: Life Insurance from the Estate Planning Attorney's Viewpoint by Steven J. Oshins, J.D., AEP (Distinguished)
  • FINANCIAL PLANNING: What's Wrong with Variable Annuities? by Richard Gilman, CFP®
  • ADVANCED-LEVEL ESTATE PLANNING: Is the JEST Trust a Joke? by Alan Gassman, J.D., LL.M. (Taxation), Florida State Bar Certified Specialist in Wills, Trusts & Estates, AEP (Distinguished), and Christopher J. Denicolo, J.D., LL.M (Estate Planning)
  • SUPPORT STAFF & EXECUTIVE ASSISTANTS: 6 Ways to Better Manage Your Interruptions by Kristina Schneider and Megan DeLaGarza, Executive Assistants

CLICK HERE to read August's newsletter

Click the "Subscribe Now" icon below and make sure that you're signed up to receive our free monthly newsletter so you don't miss out!

This post has been brought to you by The Ultimate Estate Planner, Inc., providing practical, tested and proven technical and marketing products to help estate planning professionals throughout the country build their practices. Connect with us on Facebook, Twitter or LinkedIn.


Monday, July 01, 2013

July Newsletter

Ultimate Estate Planner NewsletterIn May 2013, we released our premier issue of our free monthly estate planning newsletter.  This is a newsletter unlike any others out there for estate planning professionals.  Not only is it intended for estate planning professionals of all designations - - including estate planning attorneys, CPAs, financial advisors, life insurance agents, and even administrative staff - - but it is intended to be practical, timely and provide useful technical, legal and practice-management strategies that professionals can actually use in their practice.

IN THIS MONTH'S ISSUE:

  • PRACTICE-MANAGEMENT: Blow Up Your Annual Maintenance Fee Program! by Philip J. Kavesh, J.D., LL.M. (Tax), CFP®, ChFC, California State Bar Certified Specialist in Estate Planning, Trust & Probate Law
  • RETIREMENT BENEFIT PLANNING: Beneficiary Designation Problems with IRAs: There's A Lot More to Know than Just RMD Rules! by Kristen M. Lynch, J.D., AEP, CISP, CTFA with Robert S. Keebler, CPA, MST, AEP (Distinguished)
  • LIFE INSURANCE: Is It Time to Reevaluate Your Clients' and Prospects' Trust-Owned Life Insurance Policy? by Michael W. Halloran, CFP®, AEP®, ChFC®, CLU®
  • FINANCIAL PLANNING: Is Financial Planning for Women Different? by Michelle A. Fait, CFP®, MBA, EA
  • ADVANCED-LEVEL ESTATE PLANNING: Should Your Clients Be Using the "Optimal Basis Increase Trust" by Edwin P. Morrow, III, J.D., LL.M. (Tax), CFP®, RFC®
  • SUPPORT STAFF & EXECUTIVE ASSISTANTS: How "Electronically" Organized Are You? by Kristina Schneider and Megan DeLaGarza, Executive Assistants

CLICK HERE to read July's newsletter

Click the "Subscribe Now" icon below and make sure that you're signed up to receive our free monthly newsletter so you don't miss out!

This post has been brought to you by The Ultimate Estate Planner, Inc., providing practical, tested and proven technical and marketing products to help estate planning professionals throughout the country build their practices. Connect with us on Facebook, Twitter or LinkedIn.


Monday, May 20, 2013

Superstar Estates: Fleeting Fame, Enduring Security by Robert L. Moshman, Esq.

Reproduced with the expressed written consent and permission from Robert L. Moshman, Esq., author of the The Estate Analyst. To contact Bob Moshman to be included on his distribution list of his monthly newsletter, e-mail Bob at bmoshman@optonline.net.

Actors, musicians, athletes, and Kardashians can become famous overnight, but notoriety doesn’t automatically mean financial security; sadly, it usually ends up meaning the opposite. Lottery winners and other windfall recipients often follow a similar path, even if their “stardom” is limited to local friends, neighbors, and family.

Celebrity wealth can evaporate along with fleeting fame. Celebrities also attract lawsuits, moochers, and scam artists. Professional athletes have all of these issues but in a condensed career that can be over with a single injury.

Let’s examine the special financial planning challenges of these estates.

Shooting Stars

Blazing a path across the sky, a star can be born suddenly and in brilliant fashion. This has been especially true in the age of the Internet and social media.

Until recently, for example, few people outside of South Korea had heard of a chubby singer in sunglasses known as “Psy.” Then his new song went viral. He sold only 100,000 physical copies of his new song—not enough to become wealthy.

However, with the new economics of music, “Gangnam Style” was viewed more than 900 million times on YouTube, netting Psy $1 million. The video was also downloaded more than 3 million times on iTunes, netting him $2.6 million. Fame led to product endorsements for $5 million. Stock in YG Entertainment, Inc., which manages Psy’s career, rose dramatically, thereby increasing Psy’s family’s wealth by $30 million (on paper) and increasing the company’s worth by $200 million.

All of this happened in the course of 6 months.

It is possible that Psy’s artistry will endure with one masterpiece after another like Mozart or The Beatles. On the other hand, there are long lists of previous one-hit wonders. Remember the Baha Men? Perhaps not. But you might remember their one-and-only hit, “Who Let the Dogs Out,” from 2000, which was ranked the third most annoying song of all time by Rolling Stone in 2011.

Actor Richard Harris, now remembered for playing the role of Albus Dumbledore, recorded “MacArthur Park,” a seven-minute song that peaked at #2 on the Billboard Hot 100 in 1968. In 1992, humorist Dave Barry’s readers selected it as the worst song ever recorded, but perhaps “Who Let the Dogs Out” could now compete for this distinction.

 The career of Harris, in particular, should be illustrative to Psy. Folks may recall the verse: “Someone left the cake out in the rain; I don’t think that I can take it, ’cause it took so long to bake it, and I’ll never have that recipe again.” But fads fade away, and interest decays into contempt. Harris relied on his acting career and other endeavors without ever finding musical success again. Psy’s career may consist of cameos as “the guy who once did the horsey dance.”

Planning With Stars

A celebrity with some sudden wealth may not be as easy to work with as a self-made entrepreneur who has learned to live without wealth and is instinctively conservative about planning for the future. Businesspeople may have a better grasp of financial and investment strategies and may be more disciplined about achieving goals.

“Stars and athletes are hard to represent,” warns attorney Martin Shenkman, “because you have to convince them not to rely on their circle of followers and advisors.” The fact that other teammates are working with a particular investment advisor doesn’t ensure the capabilities of that advisor.

Shenkman also warns about celebrities who succumb to peer pressure and take unnecessary risks.

“You almost have to undo the mis-education these stars have received about what planning should be,” says Shenkman. “They often hear wild stories about successes and they want to get in on the action. Some of these investments sound questionable, and some ventures smack of worse, including potential tax problems. So you have to guide the athlete past all of these preconceived notions and back to fundamental planning.”

Several basic planning techniques come to mind for someone of wealth who requires basic tax planning and asset protection. There are retirement plans, irrevocable life insurance trusts, domestic asset protection trusts, setting up LLCs and FLPs, and almost always a combination of these techniques.

Is there a particular technique or game plan that would suit the typical celebrity?

“There’s no such thing as a ‘standard trust’ or an ‘athlete plan.’ Looking for a magic bullet is a mistake,” says Shenkman.

Instead, he applies “the LEGO approach,” i.e., using building blocks.

“Evaluate what works for a particular client first,” Shenkman advises, “and start with proven planning components to put together the framework of the plan. The creativity of planning is to then take the LEGO in the toolbox and customize it into the right building plan for the client.”

Sport Careers

Well known estate planners Richard A. Oshins Martin J. Shenkman, Robert S. Keebler, and Eido M. Walny recently collaborated on a Webinar and PowerPoint presentation concerning estate and financial planning for athletes.

Oshins points out that typical athletes have a relatively short window for their entire career. For many, this is only the years spanning from about ages 20 to 35.

That career window may close suddenly. The average player in the National Football League is 27 years old and earns $1.9 million annually. But the average NFL career is only 3.5 years (Bloomberg Business Week, January 27, 2011.)

For Major League Baseball, career lengths vary a great deal. Nolan Ryan pitched for 27 years (1966 and 1968 through 1993). By comparison, Larry Yount was not as fortunate. In 1971, Yount was announced as a relief pitcher for the Houston Astros, but his elbow “popped” while he was warming up. His career was over. Ironically, his younger brother had a 20-year baseball career—Robin Yount was inducted into the Hall of Fame in 1999.

The Sports Cliché

Walny describes a classic example of an athlete’s attempt to get his financial planning in place. 

A huge, corn-fed young man from the Midwest came out of a “Big Ten” school and made it to the NFL as an offensive lineman. “I don’t want to fall into the same old traps,” he told his financial advisors. “I want to save my money.” He voluntarily agreed to live on a budget and work with a professional advisory team. He was heading in the right direction.

Then the vices of the League caught up with him. Spending began to exceed the budget, first slowly, then more rapidly. After a while, the financial advisor reminded him of his goals. “Don’t worry,” said the sincere young man, “we’ll pick this all up on the next contract.”

“But ‘NFL’ stands for ‘Not For Long,’ especially for offensive linemen,” points out Walny. “Flash-forward, the young man blew all his money, no ‘next contract’ ever came, and he ended up living in a stereotypical it’s-not-going-to-happen-to-me story.”

Insurance = Good

Where might one begin with an athlete’s plan?

“Contrary to the general perception,” says Walny, “a good place for athletes to start is permanent life insurance. I’m a big believer in insurance and the value that can be derived. Athletes get homeowners and car insurance, so expanding into life insurance is easy for them to understand.”

“You do have to combat the perception that purchasing insurance means you are going to die,” notes Walny. So the emphasis should be on the asset protection and investment benefits as opposed to the death benefits.

“Remember,” says Walny, “life insurance is a unique asset class that has tax-free accumulation and proceeds that avoid income taxation. With the higher rates that became effective in 2013, this is even more of an advantage. Insurance can be structured as a class of assets that creditors cannot attack, e.g., when it is held by a properly formed and funded irrevocable life insurance trust (ILIT).”

Walny also likes having the insurance as a starting point for more sophisticated planning that may include a beneficiary defective inheritor’s trust (BDIT), which can be ideal with athletes. If insurance is held in the BDIT instead of a separate ILIT, the athlete can access the buildup in value of the insurance if there are hard times.

“With a life insurance policy asset to work with,” he explains, “we can design an ILIT to provide added strategic function. However, the ILIT involves ongoing gifts to pay premiums. Without an ILIT, insurance is still valuable and can be put into a BDIT. The BDIT needs to be in the conversation because it has a self-sustaining method of paying for premiums inside the trust without ongoing gifts and Crummey powers. A BDIT also provides more control than an ILIT. For many athletes and stars, having multiple trusts can provide incremental protection, even from the athlete or star’s own fiscal irresponsibility.”

Career Earnings and Endorsements

“The threshold discussion is where athletes are in their career because that dictates what they can and can’t do,” notes Shenkman.

“If they are getting on in their career, have they amassed assets?  A young athlete just turning pro may have low endorsement value, so he can set up an LLC and sell endorsement interests to the LLC in trust and get it out of his estate in a prospective way before there is value. This might be wishful thinking, but it may work well. A more established athlete might benefit from the same planning, but the value of the endorsement contracts may be significant, and that will affect what planning can be done.”

Consider the value of endorsements for Michael Jordan. Although Jordan was earning $30 million per year in NBA salary at the end of his Bulls contract, his overall career earnings of $90 million only placed him 87th on the all-time earnings list compiled by HoopsDoctor in 2012. The top earner of all time on that list was Kevin Garnett with $328,562,000, based on a longer career and more recent earnings.

Yet Michael Jordan currently has a net worth estimated at $650 million (despite a $138 million divorce settlement). The majority of his wealth came from Nike and other endorsements, plus good long-term investments. Today, Jordan continues to earn $80 million annually in endorsements—10 years after the end of his basketball career. 

Not every player gets the same endorsement opportunities or investment advice. Teammate Scottie Pippen earned $108 million in NBA salary but had fewer endorsements. He also made some mistakes, such as buying a jet and calling it “Air Pip,” two bad ideas in one. Some have suggested that Pippen has struggled financially of late.

Antoine Walker, who had NBA career earnings of $110 million, ended up in even worse financial shape and had to declare bankruptcy. His was a stereotypical example of lavish spending on too many cars, gambling sprees, and supporting a posse and family of 70 people.

BDITs for Athletes

A beneficiary defective inheritor’s trust (BDIT) is a good technique for an athlete for several reasons.

A BDIT involves having a family member, such as a parent, set up a trust and gifting $5,000 to start it. An athlete can then sell assets to the trust (but never gift to it). Because the athlete is not the settlor of the trust, the athlete can be one of the trustees, but it is generally advisable to utilize an institutional co-trustee in one of the domestic asset protection jurisdictions such as Alaska, Delaware, South Dakota, or Nevada.

A professional athlete is often the right age and has parents or other benefactors who can set up the BDIT. Athletes may also have significant assets of endorsement contracts that can be sold to a BDIT. Oshins suggests setting up a separate entity for non-salary income, such as endorsements, funds from autograph shows, or appearance fees, and that entity can be sold to the BDIT.

Instead of giving money out to family and friends and having them run off, funds can be earned inside the BDIT (e.g., by the business owning endorsement contracts that the athlete sells to the BDIT). The trustee can then hold the authority to take care of everyone.

“This locks in loyalty,” notes Oshins. If hangers-on turn on the athlete or girlfriends break up with the athlete, the trustee is informed and makes sure the trust funds are protected.

Some estate planning professionals have clung to older planning techniques and have been slower to take advantage of the BDIT. Oshins notes that part of the problem is that advisors need to learn how to explain the concept to clients.

Shenkman confirms this observation. “Planners fall back into a pattern of not using new techniques,” he said. “The comfort of an old shoe is common, even when better styles are available. Be mindful of differentiating a great technique from a clever technique that is mainly for getting the thought process going. On the other hand, practitioners can become too comfortable with their well-worn drafting tools. If you draft the way you did 10 years ago, then you are doing a disservice to your clients.”

Shenkman also provides an example concerning the use of favorable trust jurisdictions. “Most practitioners use the client’s home jurisdiction for every trust. But that is not always the right answer, especially for clients with the wealth and challenges of a professional athlete. I would not ask if a trust should be in one of the key DAPT jurisdictions; rather, I would ask if there is any reason NOT to do it in one of the four best jurisdictions.”

Meanwhile, Oshins has noted a growing appreciation for the effectiveness of the BDIT.  “People who do the BDIT love it,” he says. “Many life insurance companies employ it and have set up training sessions for their staff.”

The proof is in the results.

“I did a BDIT for a client and sold 30% of the business to a BDIT,” says Oshins. “The family could end up paying no estate tax and still control 70% of the business. It is working very well. I did another one for a wealthy family with many kids and moved hundreds of millions of dollars out of the estate very successfully.”

For the athlete, a BDIT with an outside manager may be better than a domestic asset protection trust, which is self settled (i.e., the athlete gifts assets to the trust). In contrast, the athlete gifts nothing to a BDIT, so it may be more impenetrable to creditors and others.

“Once you see all the legs of the octopus,” says Oshins, “the BDIT makes sense.”

Twin BDITs

Even though the BDIT works for transfer tax purposes (with assets growing outside of the athlete’s estate) and creditor protection, the athlete, with a track record as his own worst enemy, serving as a trustee, could be the Achilles’ heel of the arrangement.

“Most of the athletes form an FLP or LLC for the ancillary assets instead of having the trust hold these assets directly. Some have family members employed. And they buy a house for their mom. But the athlete may not be disciplined enough to control these entities.”

The solution, says Oshins, is to set up two separate BDITs, one with the athlete and his associates as trustees, and another with only a professional trustee who buys a house for the athlete, invests in life insurance, and establishes a portfolio of conservative investments. If the athlete commits a crime or is exposed to liability, the conservative portfolio will provide future security. If the structure is raided, even by the athlete on a spending binge, the independent trustee can hold the fort.

“The conservative BDIT is your atom bomb money,” explains Oshins. “If everything goes bad, then there is at least a house, life insurance, and funds. And if you have professional advisors for the investment portfolio and something is done improperly, they can be held accountable.”

Walny concurred with this approach. “Athletes do get into trouble with their own control. It is difficult in professional sports because athletes keep up with the wealth displays of others. At the end of the day, it is useful if the athlete is not in a position to have to say no to family and friends but can instead direct them to the trustee. This takes a lot of stress off the athlete. This is true of a BDIT or any other trust—empowering athletes to concentrate on what they are good at.”

Shenkman notes that the BDIT addresses a fundamental element, i.e., the psychology of the athlete. He compares it to what happens to lottery winners.

“It is very hard for people to realize that you can blow through a big pot of money at a shocking pace. Everyone understands the rainy day concept. This is the piggy bank that even the client can’t break into. Everyone wants to be in control, but you need some funds that are immune from coercion and even mistakes you might make yourself.”

Many thanks to my distinguished guests for their excellent input. Robert S. Keebler, CPA, MST, AEP (Distinguished) is a Partner with Keebler & Associates, LLP, Green Bay, Wisconsin; Richard A. Oshins, JD, LLM, AEP (Distinguished) is a Partner with Oshins & Associates, LLC, in Las Vegas, Nevada; Martin M. Shenkman, CPA, MBA, JD, PFS, AEP (Distinguished) is a Principal at Shenkman Law, PC, in Paramus, New Jersey; and Eido M. Walny, JD, EPLS, AEP, is with Walny Legal Group, LLC, in Fox Point, Wisconsin.


Monday, April 15, 2013

Robert Keebler on President Obama's 2014 Budget Proposal

Thanks to generosity of Robert Keebler, CPA, MST, AEP (Distinguished) of Keebler & Associates, LLP, AICPA and Leimberg Information Services, we are pleased to provide to you two free podcasts to download on the subject of President Obama's 2014 Proposed Budget.

Obama's proposed budget will have a negative impact on the following planning:

  1. The estate tax rate would increase to 45% from today’s 40% rate.
  2. The gift tax exemption would be reduced to $1,000,000
  3. The estate tax and GST exemptions would be reduced to $3,500,000
  4. The GST period would be limited to 90 years from today’s unlimited period
    1. Current dynasty trust transactions would be grandfathered
  5. The IDGT trust transactions will be eliminated on a prospective basis
    1. Current dynasty trust transactions would be grandfathered
    2. Additional sales would not be protected
  6. The GRAT transaction will be eliminated on a prospective basis
    1. Ten year rule
    2. No zeroing out GRATs
  7. A Buffet rule would impact income greater than $1,000,000
  8. Itemized deductions would be reduced to a credit for those with income greater than $250,000
  9. Carried Interests capital gain treatment would be eliminated
  10. A special provision would eliminate the ability to retain more than approximately $3,400,000 in an IRA or pension plan.

The 90-year GST rule may require some thought and attention.  Recall that for pre-1986 GST trusts any contribution after the effective date eliminates grandfather status.  It may be prudent  to sever/decant/reform insurance and other trusts before the end of 2013 if this provision becomes law.

AICPA Podcast
"Robert Keebler on President Obama's 2014 Proposed Budget"
DOWNLOAD

LISI's 60-Second Planner Podcast
"Key Elements of the President's 2014 Budget"
DOWNLOAD

The podcasts above are the copyrighted materials of Robert S. Keebler, CPA, MST, AEP (Distinguished), AICPA and Leimberg Information Services, Inc. These are provided to you as a courtesy from the permission granted to The Ultimate Estate Planner, Inc.  Reproduction in any form or forwarding to any person prohibited without the express permission of AICPA and Leimberg Information Services, Inc.

This post has been brought to you by The Ultimate Estate Planner, Inc., providing practical, tested and proven technical and marketing products to help estate planning professionals throughout the country build their practices.  Connect with us on Facebook, Twitter or LinkedIn.


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