August 9, 2005

By John Dietz, Senior Advisor, Trustmakers
August 9, 2005

I get asked a lot of questions about generational wealth. Most high, net-worth clients are always concerned about the heavy, estate tax burden that could put there loved ones in an awful place. Haven’t we all heard the horror stories of good people having to sell the family house just to pay the tax bill? The current schedule gives a unified credit of $3.5 million in 2009, zero in 2010, but reverts back to $1 million in 2011. It’s safe to say that we will be burdened with this for sometime. It’s not going away unless we all lobby congress, or get them to stop spending money. The latter doesn’t seem likely.

On second thought, let’s just do some real live planning. Not the kind you have done with your revocable living trust. Yes, that one…the one you forgot to put assets into.

One of my early business mentors would always say: Reasonable people equally informed seldom disagree. Did you ever play monopoly with someone who did not know the rules? It’s no fun. We all live by a set of rules. If you don’t, the government has a funny way of imposing there own. Let’s just learn the rules and play the best game that we legally can. What I’m specifically talking about are products that allow you to amass generational wealth. In essence, they lower your estate taxes and let your hard earned wealth pass through to your heirs. The ancillary benefit for you is that this product can be funded with pre-tax dollars.

Here’s an example of one. What if you could invest money today that would be tax deductible on your tax return? The investment would guarantee to make a profit…the profit would be income tax free… your original investment and your profits would not trigger an estate tax…and the IRS would give you their blessing.

Now I sound like a currency trader. It’s true that there is a product that allows you to do this, and it’s been around since 1928. It’s called the Voluntary Employees Beneficiary Association, or VEBA for short. You may have heard of them. For a while they were famous—or infamous—due to abuses in the system. Legitimate planners either did not want the headache or the complexity to set one up. Either way, the IRS has ruled and maintains a set of strict guidelines for a VEBA implementation. VEBA’s have been used for years by municipalities on up to Fortune 500 companies.

VEBA’s may not be for your situation, but we would be happy to consult with you on your options.

Combined with a Trustmakers Asset Protection Plan, VEBA’s may help with your domestic business affairs. Of course, we will always bring the best to our client base. Hopefully, as much pretax dollars as we can get our hands on!

One last thing about VEBA’s: Your heirs will love you.

Until next time,

John

If you would like more information regarding asset protection, trusts, family limited partnerships or the subject of this article please call or email our office.