Estate planning for the rich? -Sign "You earned it, you keep it!"Illinois Estate Planning Attorneys

A recent report from the New York Times reveals the impact of lobbying in economic inequality and a how a private tax system built by the richest Americans saves them billions of dollars each year. The article suggested that these techniques are only available to the wealthiest of US taxpayers. But, is it really just for “the rich”? Over the course of our many years of providing tax advice, we have implemented many of those strategies for clients of more moderate means.

Tax policy has changed significantly over the past 20 years. In addition to the increase in inheritance tax exemption, the most significant of these changes is the fairly dramatic lowering of the capital gains tax rate, or taxes on profits from investments, and on certain dividends, since the early 1990s.

The strategies used may seem complex, but are often based on a few simple methods.

When reviewing assets, such as a privately-held business, many options that can affect overall taxation are available. These options include what type of entity structure is used, who the ultimate owners are and how certain assets are owned by sub-entities and licensed or rented to the primary company. Other options include the use of charitable organizations, which can lower the overall tax burden while benefitting causes that the client believes are important. Life insurance and “carried interest” investments can also be structured to lower the overall tax burden of an ownership group. Finally, the use of retirement plans to own certain assets can greatly maximize after-tax returns.

Private placement life insurance and private annuities can be used to hold assets and reduce overall taxation.

These strategies must all be carefully analyzed to make sure they are within the boundaries of our tax laws, as well as contract law, property, agency, and corporate law. A comprehensive understanding of all these areas is necessary to make sure the strategies make sense from a tax perspective, legal and regulatory angle, and to make sure they meet each owner group’s personal objectives.

Regardless of the size or state of financial assets, smart individuals use Illinois Estate Planning and Wealth Management professionals who can help them protect their assets and minimize their tax exposure. These professionals not only provide support in structuring assets but they also have access to institutions and opportunities historically available only to large individual investors.

While political lobbying by “the rich” may have resulted in the reduction of tax rates and increasing options to protect assets and investments, privately-held businesses and individuals can also take advantage and benefit from these strategies.

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