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Tax Planning

Tax Planning


            Tax planning means different things to different people.


            Many CPAs/accountants/EAs typically think of tax planning as doing a tax return for a client and sending them the bill for the taxes due.  Some might recommend a SEP IRA or SIMPLE Plan, but they typically do not deal with real tax planning


            Many attorneys think of tax planning as doing someone’s living trusts so the client can maximize estate tax exemptions


            Many financial planners/insurance advisors typically think of tax planning as the use of a 401(k) plan or funding a cash value life policy as a post tax investment.


            The WPI wants CWPP™ advisors to be unique and provide a better benfit to their clients. We want CWPP™ advisors to be familiar with the many tax planning topics from the course so they can be PROACTIVE not REACTIVE when it comes to tax planning.


            The use of domestic LLCs, FLPs, International Tax Planning, “Freeze” PartnershipsThe Leverage Bonus Plan, Section 79 Plans401k Plans, New Comparability PSPs, Defined Benefit and 412(i) Defined Benefit Plans (and carve out plans), ESOPsReverse MortgagesCharitable Remainder Trusts, Charitable Gift Annuities, Family Foundations, Qualified Pension Insurance Partnerships, Intentionally Defective Grantor Trusts, HRAs, HSAs, and Corporate Structure.          


            The above list is not an exhaustive one.  What we want to impress upon advisors is that if you are not familiar with “all” the topics in the marketplace, you are not providing the best advice to your clients and your are not in the best position to use tax planning as client gathering tool.


            Don’t be like most of the other advisors out there who deal with basic planning.  Be proactive to protect your client’s money from the IRS and state government.  Remember, your client’s number one guaranteed creditor every year is the IRS. 


            A good way to help your clients determine for themselves if they are paying too much in tax is for them to take the LOSS TEST.  As a free benefit for those surfing this site, you can download the LOSS TEST by clicking here.


            Some tax planning topics


            Qualified Retirement Plans—Many small to medium size business owners have a “qualified” plan of some kind (usually a 401(k)/profit sharing plan).  Because of this, most of those clients do not think there is anything more they can do to mitigate taxes or expenses.  That is not the case.  If your clients have a profit sharing plan is it a New Comparability plan?  If they have a New Comparability plan, are the employees all tested as individual classes?  Do you know what a Defined Benefit (DB) plan is or what a 412(i) DB plan is?  If you do, are you helping your clients supercharge these plans with “carve-out” planning?  Every profitable business should have a qualified plan, but they are not all created equal. If you want to learn how to help your clients put as much money away for themselves as the key executive or owner and as little away for the staff, then you should become a CWPP™ advisor.


           Captive Insurance Companies—If you have profitable small to medium sized business clients who would like to reduce their income taxes and estate taxes, a CIC is the most powerful tool in the industry today for those who financially qualify.


           Equity Harvesting—This concept is one of the best tax planning/retirement planning tools for many clients.  Think about this: if your clients could borrow money where they could write off the interest and invest that money in something that would grow tax free and come out tax free would they do it?  Their answer should be all day long.  Equity harvesting is simply removing X amount of equity out of a house, writing off the interest on the loan* and then investing the money into vehicles that grow income tax free and come out income tax free.   Also, be very careful with this topic and those that tout books such as Missed Fortune 101 ( or the Infinite Banking System.  This topic is incorrectly sold based on selling systems that are out there and you do not want to work with marketing firms who uses one of those systems.    


            International Tax Planning. Just saying international tax planning will make many people uncomfortable.  Why? Because they do not have even a basic knowledge of the subject matter.  There is nothing complex about using an international life insurance policy to help clients reduce or eliminate short and long term capital gains taxes or income taxes.  When advisors learn how simple and beneficial international tax planning can be to many clients, then they can call themselves "advanced" planners who are armed with the knowledge to provide the "best" advice to their clients.


            Charitable Planning—What would you say to a tool that could do the following for your clients: 


            Increase their discretionary (“spendable”) income

            Reduce or eliminate income taxes, capital gains taxes, and estate taxes

            Securing a tax free inheritance for their heirs

            Allow them to leave a lasting family and social legacy  


            You would not normally think of the previous as benefits of charitable planning, but it is and it is likely that if your clients have any amount of wealth or income, they can benefit from charitable planning that is “client” focused.


             Long-Term Care Insurance—What is the biggest expense for clients over the age of 65?  Typically it is there long term care expenses (drugs, doctor visits, surgeries, nursing home care).  How do clients typically pay for this expense?  Simply out of pocket as an after tax expense where they believe the premium is never coming back (which is why most clients don’t buy it).  There ae several ways to buy LTCI in an economically beneficial manner.  If you would like to learn how to help your clients deduct LTCI premiums, have those premiums and returned to the client’s estate. Would you like to know how clients can have access to the money they paid as LTCI premiums if they need it. Would you like to show you clients how to recieve a "free" LTCI benefit through their life insurance policy?  If you answered yes to these questions, then you should consider becoming a CAPP™ advisor.   




            The bottom line with “tax” planning is that in order to provide the best advice to your clients and to be able to use this topic as a great client gathering tool, you need to first know all the available solutions out there in the market place.  In addition, it is equally as important to know what topics in the market place to stay away from and which ones are being abused.


            The WPI’s goal is to not only educate you on advanced tax planning topics, but also to keep you out trouble.


            If you would like to take your consulting to the next level and become a CWPP™ advisor, please click here.


© 2017 The Wealth Preservation Institute • St. Joseph , MI • (269) 216-9978