Wilsey Estate Planning Blawg

Interesting Article Outlining the Emotion, Financial, and Estate Tax Consequences of the Sale of a Family Business

Here's an interesting article outlining all the things one must take into consideration when selling a family business.

Worth Magazine Article

From my perspective as an estate planning attorney, I'm very attune to the emotional dynamics of the family business, as some family members run the business, some are employees, and some are somewhere in between.

Whatever the family dynamics, one thing that business owners must be aware of is the possibilities that exist to minimize the estate tax consequences on the explosion of wealth that occurs when a business is sold. If we can freeze the value of the business at a value prior to any buyers expressing interest in the business, and the business is ultimately sold for much more than that value, then the excess in wealth will pass outside the business owners estate, and will not be subject to estate taxes. This is something that unfortunately, most business owners do not take into account prior to the sale. The result is a great deal more payable in estate taxes than is necessary.

Advisor Bootcamps

We will be holding a series of Advisor Boot-Camps at my office. These Boot-Camps are designed to help Financial Professionals, such as Financial Advisors, CPAs, and Attorneys, assist their clients with estate planning. The next classes will be held on September 4th and September 18th at 1pm until 4:30pm.

For more information, see the link below:

Download financial_professional_bootcamp_invitationv_09042008.pdf

The Beneficiary Protection Trust

Here's an article that I've written about the Beneficiary Protection Trust. I've developed this trust after careful research into California law, as well as the laws of several other states, in an effort to create the most powerful asset protection vehicle available for your child's inheritance.

In addition, this trust has the benefit of ensuring that your child's inheritnace will last for their lifetime, and they will not fall victim to the common fate of blowing their inheritance very quickly.

Here's a copy of the article:

Download the_beneficiary_protection_trust.pdf

Interesting case involving religious rights

Here's a case from Illinois that demonstrates the issues caused by trying to disinherit a descendant based on their not marrying within a certain religious faith. Here's a link to the Chicago Times article:

Link to Article

Max Feinberg, a hard working dentist who accumulated a great deal of wealth through his investment skills, created a will that expressly disinherited any descendant who married "outside of the Jewish faith".

The Illinois Appellate Court ruled in a 2-1 decision that such a clause was void on public policy grounds.

My feeling is that most estate planning clauses that contain restrictions based on race or religion will be disregarded by the court. But the bigger issue is that family strain that such clauses cause. The Feinberg family will never be the same.

For instance, one of the persons affected by the clause is Michelle Trull. She is suing her father, Michael Feinberg, who is an executor of the will in question. Michael Feinberg's wife, Marci, said something in the article to the effect that "Ms. Trull's actions are something like the old adage about cutting off your nose to spite your fact. She might win in court, but she is exiled from the family dinner table."

Whether these clauses are right or wrong is something for the courts to figure out. What is apparent, is that before inserting divisive clauses into estate planning documents, one must be sure they are willing to live with the effects that will likely occur.

Ward Wilsey to Lecture on Advanced Estate Planning for Attorney Conference

I'm happy to announce that on November 17, 2008 I will be lecturing for the National Business Institute on the topic of "Estate Planning for High Net Worth Clients" at the Handlery Hotel & Resort. This lecture will be given in front of dozens of estate planning attorneys, CPAs, and other financial professionals, who will learn some of the techniques I use with my clients, as well as my overall philosophy on advanced estate planning.

For more information, please visit: http://www.nbi-sems.com/seminfo/nbi-moreinfo.asp?session-id=46560

Stretch IRA Trust Conference Call on Thursday, August 28, 2008

On Thursday August 28, 2008, I will be holding a conference call at noon to educate my current clients and the public about the benefits of a Stretch IRA Trust.

I often recommend the Stretch IRA Trust to client with an IRA, 401K, or other qualified retirement plan worth $250,000 or more. Here's an article I've written about the Stretch IRA Trust. Download stretch_ira_trust.pdf

For receive call in information for this conference call, please send me an email to wardwilsey@wilseylaw.com.

Family Protection Planning

I've spoken often to clients, advisors, and the public in general about the need to go past typical Probate Avoidance Planning to really protect one's family. I call my style of planning Family Protection Planning.

There is a huge distinction between the typical Probate Avoidance Trust I see in my practice, and the Family Protection Trust I've developed. In fact, I use a 12 point checklist when comparing the typical Living Trust to the style of planning I use to create Family Protection Trusts for my clients. I've written a comprehensive article that describes the Family Protection Trust in depth and explains the advantages over mosts Living Trusts. If you would like a free review of your Living Trust, please contact me at wardwilsey@wilseylaw.com. Please download the attached article entitled Family Protection Trust: Beyond Probate Avoidance Planning.

Download family_protection_trust.pdf

New IRS Private Letter Ruling Eliminates Planning Opportunities with IRAs and 401Ks

I've always held to the belief that it was perfectly legitimate to transfer an IRA or 401K to an Intentionally Defective Grantor Trust ("IDGT") in order to move it's appreciation out of a client's estate. An IDGT is an irrevocable trust in which the assets are out of the Grantor's (the person who puts assets into the trust) estate, as long as they are properly gifted to the trust. However, the assets in the trust are still taxes to the Grantor for INCOME tax purposes.

It's a great tool and I use it all the time for wealthy client. The client not only gets assets out of the estate, but the assets grow out of the estate without being eaten up by income taxes because the Grantor is paying income taxes with assets that are still in the estate. From the Grantor's perspective, since they'd have to pay the income taxes anyway if they didn't do the IDGT, this is a win-win situation.

The question here has always been whether you can do this with qualified assets, such as an IRA or 401K. I've always thought you could transfer an IRA or 401K to an IDGT. My thought was that since an IDGT is ignored for income tax purposes, this should not matter. However, I was, rightfully it turns out, reluctant to do this without my clients first obtaining a Private Letter Ruling from the IRS. A Private Letter Ruling (or "PLR") is where the IRS rules on a particular tax issue as it applies to one individual taxpayer. While a PLR is not actual legal authority, except to the taxpayer to which it is issued, it gives us a good idea of the intentions of the IRS for other clients.

Now the IRS has released PLR 200826008, which basically states that the only way a transfer to an IDGT will not be a taxable transfer (meaning income taxes due) is if the transfer is not a completed gift. This kind of eliminates the possibility of gifting an IRA or 401K to an IDGT. It's not really clear in my opinion whether this PLR, by omission, means that you can make a transfer via a sale rather than a gift.

See the full PLR here