Reviewing your Insurance

Tuesday, October 6th, 2009

Some people don’t have the habit of reviewing their life insurance policies.  But bear in mind that an insurance could be a vital part of your financial strategy or estate plan.

You can buy a life insurance policy and make your spouse or children as beneficiaries.  Business owners can also use a buy-sell agreement funded with an attached life insurance so that surviving owners may buy the company’s interest in case of a deceased partner.  In the same token, key-person insurance assures business aid when one of the core employees passes away.

However, there is a downside to this.  Life insurance proceeds form part of your taxable estate and your beneficiaries may be heavily taxed when you pass away.  One alternative around this law would be to allow your children or other beneficiaries to own your policy.  You can give gifts to your kids for the acquisition of the insurance - it’s like pooling their money and buying the policy for you.  Another way you can remove the proceeds of your life insurance from your taxable estate is to get irrevocable life insurance trust.

Life insurance can help you build wealth.  It can also be useful for employee benefits, business continuation, education planning, retirement planning, and estate planning.

Tags: beneficiary, business, estate, estate plan, Estate Planning, law, life insurance, policy, tax, trust, wealth
Posted in Estate Planning, Family Trust | No Comments »

Allan Scott’s Estate in a Family Battle

Tuesday, August 4th, 2009

As a trucking magnate, Allan Scott accumulated an estimated $600 million estate.  His two favored children will receive a big bulk of this empire.  However, there is a current rift developing within his family due to the fortune he left behind.

A source close to the Scott family said that some relatives have been angry that Mr. Scott short-changed his grandchildren, as only three were explicitly mentioned in the last will.  The source said that “Zena’s got all the power and money so she can do whatever she likes.”  Due to this some relatives are filing a legal challenge.  On the other hand, his widow, Grace Scott, have not yet seen a copy of the will.  She said the family kept her in the dark about the inheritance.  “I’m very illiterate when it comes to this legal stuff,” she commented further.

Mr. Scott died of heart failure and left all his wealth and business in the hands of his two children, Raymond and Zena as well as lawyer and business associate Tony Johnson.  His will acknowledged that Raymond and Zena should receive a greater portion of his estate because they spent their effort, time, and goodwill to contribute a lot to the business.

Tags: Allan Scott, business, empire, Grace Scott, lawyer, legal, Raymond, Tony Johnson, trucking, will, Zena
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Addressing Control of Family Trust

Monday, June 29th, 2009

When you own your own business, there are many things to think of.  Often, ensuring that your personal, business, and financial affairs are in order in case of your death takes low priority.  But if you don’t address this issue, your business ownership may pass on to the wrong people.  “And if you have young or handicapped children, you may want to ensure that their future is financially secure,” writes Max Newnham.

Nowadays, there’s a lot of confusion on how discretionary trust affects one estate.  Also, a person who controls the family trust just because they’re the trustee can’t deal with the trust assets through their will.  Moreover, if the business is owned by trust, the business control is not affected by a person’s will.

There’s common misconception that all power belongs to the trustee.  However, the true power lies in the person called the appointer.  Sure, the day-to-day control of trust is given to a trustee; however, the appointer can remove and appoint a new trustee.

In other words, business owners who bequeath shares in their trustee companies may mistakenly believe that they’ve chosen the person they want to have control of the business.  Normally, the business owner will also be the appointer; but when they pass away, it’s their personal legal representative - which is often the executor - who assumes this power.  So even if the executor is not one of the shareholders in the trustee company, they can still assume business control by appointing themselves and removing your assigned trustee.

Tags: appointer, business, discretionary trust, estate, executor, Family Trust, financial, Max Newnham, ownership, trustee, will
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Succession Planning is Necessary

Tuesday, June 16th, 2009

If you own a part or all of a closely-held business, you’ll have to put value to that business whether you like it or not. Otherwise, the IRS will.

Many things can happen, like selling or gifting a family business to the children, divorce (where valuation can become a very expensive legal battle), or death (where valuation is require for estate tax purposes). If there is a wrong valuation of your business, it can rob you of your hard-earned dollars. And your family will be affected as well. What’s worse, there’s even a possibility that you’re business might just be sold to taxes.

Make no mistake; it’s very easy to transfer business ownership to your kids. Just follow these simple steps:

1. *Recapitalize your company by converting majority of the old voting common stock into non-voting stock.
2. *Get an appraiser to value your non-voting stock.
3. *Take appropriate discounts – the law allows three separate discounts: minority discount, lack of marketability discount and non-voting stock costs less than voting stock discount.
4. *Elect S Corporation even if you’re now a C corporation.
5. *Transfer to your children only the non-voting stock.

A lawyer and a certified public accountant can help you with this process. You can find these professionals through referrals or lawyer listings online.

Tags: business, Divorce, IRS, lawyer, lawyer listings, online, referrals
Posted in Divorce | No Comments »