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Please Click Links to the Left to Read about the Phase 2 Benefits
To help the client appreciate the advantages of using advanced planning techniques, it is useful to illustrate the benefits with graphics for the client supported by pages of appendices for the advisers. For example, a client can depict the RLT, ILIT, and Dynasty Trust on a simple flow chart with a few boxes and then upgrade the flow chart until it eventually illustrates results from all twelve planning tools discussed in this article. The optimized flow chart might look like this:
When creating the flow chart, it is important to anticipate which assets will fund each legal tool depicted on the diagram. This level of analysis helps planners avoid funding legal tools with inappropriate assets. Moreover, when analyzing particular assets, the planner can collect information about the basis, yield, tax character of cash flow, beneficiaries, and other details that impact calculations about future lifetime income and transfers to heirs. Understanding the attributes of each asset helps the planner illustrate numbers for each tool in a format that clearly shows how tools work together to improve transfers to heirs, increase capital available for charity, avoid estate taxes, minimize income taxes, or achieve other benefits. The client can study these numbers for any year and see the relative benefits of moving from the basic to the leveraged plan and then to the total wealth control or optimized plan. The following chart depicts the relative benefits of these four plans:
The above chart shows that a client can receive significant tax benefits as she upgrades her plan until she ultimately has an optimized blueprint. More important than the tax benefits may be the peace of mind that results from having all estate and portfolio strategies summarized on one flow chart. The client and her advisers can then all look at a one page blueprint for minimizing taxes and maximizing capital available to fulfill the client’s vision.
Exhibit 3
Conclusion
The quest to find the best zero tax planning tools leads us to several interesting conclusions. First, as we analyze different planning techniques, we see that the choice of tools depends greatly on the vision and goals of each client. Second, as we study how leveraged and total wealth control plans improve benefits for clients, we see that planning teams should include legal and financial professionals who understand the more advanced planning techniques. Perhaps most important, we see that integrating planning instruments, like solving a Rubik’s Cube, can create a very challenging puzzle unless we have a proven way to analyze all of the six main taxes affecting wealth planning. Fortunately, the modern wealth planning process gives us the power to optimize after-tax wealth by combining legal and financial instruments in full view of a client’s vision. Therefore, it is reasonable to conclude that the wealth optimization process is the best zero tax planning tool. |
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Voorhees Family Office Services, Inc.
650 Town Center Drive, Suite 890, Costa Mesa, CA 92626
Phone: (800) 447-7090 • Fax: (866) 447-7090
©Tim Voorhees, 2002-2017 |
