Wealth Preservation For The Affluent

353 Pages·2006·2.39 MB·English

Wealth
Preservation
For The
Affluent

A Practical Guide to Help High Income
and/or High Net Worth Clients with:

Asset Protection
Income Tax Reduction
Estate Planning
Financial Planning
Business Management (cost reduction)

Wealth
Preservation
For The
Affluent
A Practical Guide to Help High Income
and/or High Net Worth Clients with:

Asset Protection
Income Tax Reduction
Estate Planning
Financial Planning
Business Management (cost reduction)

By: Cindy Fields, MBA, CWPP™

Roccy DeFrancesco, Jr., JD, CWPP™
This publication is designed to provide accurate and authoritative information

regarding the subject matter covered. It is presented with the understanding that

neither the publisher nor the authors are engaged in rendering legal, accounting, or

other professional services through the issuance of this book. If you need individual

advice on the topics covered in this book, please contact one of the authors for an

individual consultation. Also, always seek counsel from an advisor before taking

actions based on the material in this book. Laws and products change rapidly and you

want to make sure when you implement a plan that it is based on the most up to date

information possible.

Wealth Preservation For The Affluent
By Cindy Fields, MBA, CWPP™ and Roccy DeFrancesco, JD, CWPP™

Copyright © 2007 by The Wealth Preservation Institute, LLC. All rights
reserved. No part of this book may be reproduced or transmitted in any form or
by any means electronic or mechanical, including photocopying, recording, or by
any information storage and retrieval system, without prior written permission
from the publisher.

The Wealth Preservation Institute, LLC
8490 Danbury Blvd., #203
Naples, FL 34120
269-408-1841
269-408-1926 (fax)
[email protected]
www.thewpi.org

ISBN 0-9770770-1-2
Table of Contents
________________________________________________________________________
Wealth Preservation For The Affluent

A Practical Guide to Help High Income
and/or High Net Worth Clients With:

Asset Protection
Income Tax Reduction
Estate Planning
Financial Planning
Business Management

Table of Contents

Page

Forward and Help From the Authors........................................................................viii

Critical Capital Mass (CCM)*................................................................................xii

Chapter One
Asset Protection

Introduction............................................................................................................... 20

Section 1
Why “Professionals” Should Protect Their Assets?..................................................21
Why Any Client With Wealth Needs to be Asset Protected......................................25
-Home Owner’s Liability...............................................................................25
-Teenage Children..........................................................................................26
-Boats, Automobiles, Snow Mobiles, Planes (other toys).............................27
-Rental Property.............................................................................................28

Section 2
Asset Protection Planning.......................................................................................31

Section 3
Fraudulent Transfers...............................................................................................34

Section 4
Existing Laws Help Protect Your Assets...................................................................38
-Homestead Exemption..................................................................................38
-Life Insurance and Annuities........................................................................41

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Section 5
Retirement Plans (ERISA Governed Plans)..............................................................43
-Non-ERISA Plans and IRAs (the use of the MAXI-IRA).........................45

Section 6
Typical Asset Protection Solutions (that do not always work)..................................47
-Types of Co-Ownership...............................................................................47

Section 7
Corporate Entities....................................................................................................54
-Sole Proprietorships and Partnerships.......................................................54
-Corporations (C and S).................................................................................56
-Types of Creditors (inside and outside creditors)....................................59
-Director and Officer Liability.......................................................................60
-Trustee/Fiduciary Duties..............................................................................61
-Limited Liability Companies (LLCs); Family Limited Liability
Companies (FLLCs); and Family Limited Partnerships (FLPs)............63
-The Charging Order.......................................................................64
-Where to Incorporate....................................................................................70

Section 8
Trusts as Asset Protection Tools................................................................................71

Section 9
Offshore Asset Protection Strategies......................................................................73
-Offshore Limited Liability Companies (LLCs)............................................76
-Offshore Trusts.............................................................................................76
-Contempt of Court..........................................................................79
-Closely Held Insurance Companies (CICs)..............................................81

Section 10
Protecting the Marital Home/Personal Residence................................................83
Tenants by the Entireties (TE).......................................................................83
Qualified Personal Residence Trust (QPRT).................................................85
LLCs and FLPs..............................................................................................87
Debt Shields (Equity Harvesting)...............................................................88

Section 11
Accounts Receivable (Asset Protection)*...............................................................92

Conclusion/Summary on Asset Protection..............................................................102

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Chapter Two

Estate Planning

Introduction..............................................................................................................105

Section 1
Wills.........................................................................................................................106

Section 2
Durable Powers of Attorney.................................................................................108

Section 3
A&B, Marital, or Living Trusts...........................................................................112

Section 4
Life Insurance (different types and the ones that are right for you)........................116
-Term Life Insurance...................................................................................116
-Return of Premium Term Life Insurance*............................................117
-Whole Life Insurance.................................................................................120
-Variable Life Insurance..............................................................................122
-Universal Life.............................................................................................123
-The “New” Equity Indexed Life Insurance Policy (EILIP)..................125

Section 5
Irrevocable Life Insurance Trusts (ILIT)............................................................127

Section 6
Leveraged Life.........................................................................................................130

Section 7
Life Settlements......................................................................................................133

Section 8
Reverse Mortgages...................................................................................................137

Section 9
Disability Insurance (What You Need to Know Before You Buy).........................140
How to Purchase More than $15,000 a Month in Coverage*............................144

Section 10
Divorce Protection...................................................................................................146

Section 11
Generation Skipping Tax.........................................................................................148

Section 12
Charitable Planning..................................................................................................150
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Section 13
Long Term Care Insurance (LTCI).....................................................................150

Section 14
IRA Protection (controlling your IRA from the grave).........................................152

Section 15
Family Limited Liability Companies to Lower Estate Taxes............................154
“Freeze” Partnerships (receive a 90% discount)..........................................160

Section 16
Other Estate Planning Tools....................................................................................167
-Grantor Retained Annuity Trust (GRAT)..................................................167
-Defective Grantor Trust (DGT)..................................................................167
-Qualified Personal Residence Trusts (QPRT)............................................167

Section 17
Capital Gains Reduction/Avoidance........................................................................168

Section 18
Mitigating the 70-80% Tax Trap.............................................................................168

Chapter Three
Income Tax Reduction

Section 1
Introduction and Traditional Solutions....................................................................176
-401(k) Plan.................................................................................................176
-Profit Sharing Plan......................................................................................176
-Money Purchase Plan.................................................................................177
-New Comparability Plan............................................................................177
-Defined Benefit Plan..................................................................................177
-IRA.............................................................................................................178
-Simplified Employee Pension (SEP-IRA)..................................................178
-Savings Incentive Match Plan for Employees IRA (SIMPLE-IRA)..........178
-Solo 401(k).................................................................................................178
-Next Level Profit Sharing Plan................................................................179
-“DASH” 401(k).........................................................................................181

Section 2
Non-Qualified Deferred Compensation Plans (NQDC)..........................................183
The Section 162 Bonus and Double Bonus Plans........................................184
The Leveraged Bonus Plan (LBP)............................................................185

Section 3
The ABC Plan*.......................................................................................................187
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Section 4
Accounts Receivable (A/R) Leveraging..................................................................192

Section 5
Defined Benefit Plans and 412(i) DB Plans .........................................................193
-The Perfect Retirement Plan...................................................................193
-Discrimination...........................................................................................196
-Carve Out Planning..................................................................................198

Section 6
Charitable Planning...............................................................................................202
Charitable Gift Annuities..........................................................................202

Section 7
Section 79 Plan.......................................................................................................208

Section 8
Employee Stock Ownership Plans (ESOPs)............................................................211

Section 9
Deferred Compensation for Non-Profits..................................................................221

Section 10
Long Term Care Insurance (LTCI).....................................................................225

Section 11
Welfare Benefit Plans (419A(f)6 and A(f)5 Plans);
Voluntary Employee Benefit Plans (VEBAs) (Post 2002 IRS Regulations)........229

Summary and Thoughts on Income Tax Reduction...........................................231

Chapter Four
Personal Finances
(Understanding Your Investments and if there are Better Options Available)

Introduction..............................................................................................................233

Section 1
Section 529 Plans....................................................................................................233

Section 2
Life Insurance..........................................................................................................235

Section 3
Annuities..................................................................................................................236
-Fixed Annuity.............................................................................................237
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-Variable Annuity........................................................................................238
-Guaranteed Equity Indexed Annuities (EIAs)*.....................................242

Section 4
The Maximizer
-Return nearly double what the S&P 500 earns with 90% protection.248

Section 5
Equity Harvesting..................................................................................................254
-1% Cash Flow Option Arm Mortgage Program...................................255

Section 6
Principal Guaranteed Investment Products..............................................................259

Section 7
Stock Protection Strategy
(How to hedge the downside risk of individual stocks)...........................................263

Section 8
Life Settlements......................................................................................................271

Section 9
Private Placement Life Insurance (PPLI)................................................................275

Section 10
Hedge Funds............................................................................................................279

Section 11
Ponzi Schemes........................................................................................................281

Chapter Five
Business Management
(Ways to Run a More Efficient and Financially Sound Business)

Introduction..............................................................................................................287

Section 1
Choice of Entity—(Should your Business be a C or S Corp or LLC or P.C.?)......287

Section 2
Retained Earnings Rescue.....................................................................................292

Section 3
The Perfect Corporate Structure for Professionals..................................................295

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