Part I – Tax Planning
You
have heard that there are only two certainties: death and taxes. We will cover death extensively in parts IV and VI of the RFA.
Here, in part I, the questions are designed to help you reduce your
taxes. We have yet to meet a
client who thinks he is paying too little or “just the right amount”
of taxes. If you are like
every other client we have ever met, please pay careful attention to these
questions and the recommendations we give.
If you don’t want to reduce your taxes, please give us a call –
we’d love to meet you. |
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1. |
Is your household income greater than $50,000 |
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2. |
Is your household income greater than $200,000 |
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3. |
Is your household income greater than $400,000 |
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4. |
Is your household income greater than $600,000 |
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No
matter what you answered, you should read chapters 7 and 8 to learn how
you will be taxed on your income and investments.
Unless you don’t care how much you pay in taxes and are certain
the government will use your money wisely, you need to read these two
chapters, in addition to the others we will recommend.
If
you answered YES to any of the questions above, you should mark down that
you need to read Chapters 42-44 on retirement plans.
These can help you save up to $20,000 per year in income taxes. You may wish to peruse the rest of the income tax section for
other tidbits that may save you $5,000 here and $10,000 there.
If
you answered YES to any of the questions 2-4, you should read the income
tax saving chapter 12 on the deductibility of long term care insurance.
If
you answered YES to 3 or 4, you should read chapter 10 on Welfare Benefit
Plans.
If
you answered YES to 3 or YES to 4 and are part of a company with over
$2,000,000 in revenues, you should read Chapter 64 on Closely Held
Insurance Companies.
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5. |
Are you or your spouse over 45 years of age? |
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If
you answered YES to #5 and YES to #2, 3, or 4, you should consider reading
chapters 44 and 45 on defined benefit and 412(i) plans, in addition to the
retirement plan chapters (42-50). |
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6. |
Do you receive rental income from any real estate you own? |
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If YES, you may be paying too much in income taxes and not taking advantage
of some “income sharing” possibilities.
Please read Chapter 11 on income sharing.
You also should seriously consider reading the entire asset
protection section (Section V) and chapters 26, 27, and 30. |
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7. |
Do you have either a UGMA account, education IRA or a brokerage or
savings accounts that you intend to use for college costs for your
children or grandchildren? |
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If
you answered YES because you have a UGMA account or a separate brokerage
or savings account for you children, you are paying unnecessary taxes on
your investments. You could
avoid these taxes by implementing a 529 plan.
Please read chapter 14. If
you have an education IRA and you want to put more money away in annual
gifts, you should consider a 529 plan as well.
If you only put away $2,000 per year for your children, you
probably won’t have enough to send them to college. The 529 allows
$10-$20,000 per year (or more).
Also,
if you don’t want your children or grandchildren to be able to access
the money you left them for college to buy other things, you need to read
chapter 14 on 529 plans.
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8. |
Do you know that there is an 80% tax on your retirement plan? |
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If
you don’t even know the problem exists, you need to read chapters 7, 8,
and 15. You also need to
review section VII retirement planning (chapters 41-49, with special
attention given to chapter 48) and section VIII estate planning (chapters
50 – 61). If you are
familiar with this terrible tax threat, go directly to chapters 57 and 58. |
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9. |
Do you presently have a CPA, tax attorney or financial advisor? |
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If
YES, then you have to read chapter 16 – “Is your tax advisor helping
or hurting you?” When it
comes to tax advice, most people never pay for a second opinion. They just
assume that the advisors are doing what is best. Unfortunately, this is
not always the case. In some
instances, it can cost you more than you can imagine.
You’ll see how in chapter 16. |
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10. |
Have you ever had your financial and tax plans
reviewed by another professional? |
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If
NO, then you have to read chapter 16 as well. If YES, have you reviewed
your plan recently? This
exercise is well worth the time and money, as it can save you thousands,
if not millions, of dollars. |
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11. |
Do you own a business or professional practice? |
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If
YES, you should read chapters 7-12. You
should also read sections V, VII and IX on asset protection, retirement
and business planning, respectively.
There are so many options available to you to improve your personal
economy through proper Wealth Protection planning. |
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12. |
Do you have a charitable inclination? Would you give
to a charity to help reduce your taxes now, help a worthy cause, and
potentially help your heirs as well? |
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If
YES, you should read chapters 13 and 61 on charitable planning (After
reading chapters 7, 8, 50, and 51). |
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Part II – Investing
Most
investors get into trouble because they get greedy, take too much risk, or
just don’t understand what options they have.
Your answers to these questions will help us customize a reading
list that will help you achieve your investing goals.
First
of all, you all should read chapters 17, 18, and 19. This is required
reading. It will explain what
investment options exist, identify some pitfalls, explain how taxes and
inflation are commonly overlooked by investors, and set the table for the
rest of the section.
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13. |
Did the events in the last few years cause you to take
some of your money out of the market? |
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14. |
Are you unsure when you should invest in the stock
market again? |
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If
you answered YES to either of these questions, then you should follow up
your reading of chapters 17-19 with chapters 20-24.
Chapter 20 shows you how to get back into the market and chapters
21-24 offer investments that have some bells and whistles that can reduce
your risk, without sacrificing all upside investment potential. |
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15. |
Are you satisfied with all of your investments? |
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16. |
Are you sure your investments are not subject to large
swings in the market? |
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If
you answered NO to either of these questions, then you should read
chapters 17, 18, 22, 23, and 24. The
strategies covered in these chapters offer benefits you may not know
exist. |
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17. |
Are you comfortable paying 32%-50% in taxes on your
investment gains? |
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18. |
Are you comfortable paying taxes on mutual funds even
when their values go down? |
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If
you answered NO to either of these questions, then you need to read
chapters 19, 21, 22, and 23. These
chapters offer strategies for reducing taxes on investments.
This can have a significant impact on the amount you accumulate for
future use. |
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19. |
Do you need income from your investments, but want
upside potential that is greater than bonds? |
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If
YES, you should read chapter 24 on convertible bonds. |
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Part III -- Asset Protection
There are millions of lawsuits filed every year in
this country. Only in 21st
century America can a burglar successfully sue the owner of a home he
burgled for an injury he received on the premises or a customer sue a
restaurant for coffee that is too hot.
Combine these cases with insurance companies who seemingly always
look to deny coverage based on the “fine print” and one has a
liability nightmare. Whether = cases like these seem foolish or even
ridiculous, those of us who don’t protect ourselves may prove to be the
fools. Remember that it was
David’s uncle’s asset protection that saved him from losing
everything!
Therefore,
everyone must read chapters 25 & 26. |
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20. |
Are you afraid of being sued and losing your assets? |
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If YES, please read chapters 25-27 to
start, then commence with the remainder of the section. |
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21. |
Are you or will you ever be married? |
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If
YES or maybe, please read chapters 26 (problems with joint ownership) and
34 (divorce). |
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22. |
Do you own valuable assets in your own name, in the
name of a spouse, or in the name of your living trust? |
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23. |
Do you own any valuable assets jointly with a spouse
or another person? |
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If
YES, please read chapters 26 (problems with joint ownership), chapters 52
& 53 (living and A-B trusts), and chapter 29 on family limited
partnerships and limited liability companies. |
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24. |
Do you believe insurance will take care of any
potential losses you might have? |
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If
YES, please think again. There are so many exclusions in insurance
policies and jury awards are climbing at an alarming rate. Please read
chapter 27 on insurance and read the other necessary chapters in this
section. |
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25. |
Do you own rental real estate? |
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If
you answered YES to any of these three questions, you must read chapters
25-27 and especially chapter 29 on Family Limited Partnerships
(FLPs) and Limited Liability Companies (LLCs). |
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26. |
Do you own a business? |
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IF
YES or you intend to own a business in the near future, please read
chapter 66 on corporations, 26 on ownership forms to avoid,
29 on FLPs and LLCs, 30 on trusts. |
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27. |
Are you a physician,
attorney, real estate developer or contractor? |
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IF
YES, you have extremely high liability exposure.
We have written books exclusively on asset protection for you.
Please make it a point to read the entire section on Asset Protection
(Chapters 25 – 34). |
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28. |
Do you have more than $100,000 of equity in your home
or is it worth $300,000 or more? |
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If
YES, go to chapter 33 on protecting your home. |
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29. |
Do you have more than $100,000 in liquid assets and
non-real estate investments (stocks, bonds, mutual funds, CDs, money
markets? |
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If
YES, you should read chapters 28, 29, and 30. |
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30. |
Do you own anything you would like to leave to your
children? |
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31. |
Are you concerned that your children or grandchildren
may lose the inheritance you left them to a lawsuit or divorce? |
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If
you answered YES to either question, you should read chapters 28, 29 and
30, chapter 34, and section VIII on estate planning.
There is much you can do to protect your heirs and the inheritance
you may leave them. |
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32. |
Are you a partner in a partnership of any kind? |
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If
YES, you must read chapters 26, 29 and 34. |
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33. |
Are you interested in offshore planning? |
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34. |
Do you have relatives in other countries? |
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If
YES to either question, then you should read chapters 31 and 32. These chapters will explain what you can and cannot do with
offshore planning. It is not
just for the rich and famous. Offshore
is very helpful for people with over $100,000 of liquid assets. |
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Part IV – Insurance
No
matter how much many any of us acquire, we undoubtedly value our lives
(and our ability to make more money) as being worth much more to us than
what we have. For those of us
who have to support loved ones (spouses, children, or even parents), our
lives are even more important -- as our heirs can’t recreate or replace
us when we pass on. Remember
what happened when Tom died? Chris’
mother was left in a terrible situation.
These
questions are designed to determine (1) if you have enough life insurance
to cover the costs of living and educational costs for your children or a
spouse you support, (2) enough disability coverage to replace your income
if you are to become disabled, and (3) enough coverage to provide for the
exorbitant medical costs if you your parents or in-laws need long term
care.
This
section requires few questions, as almost everyone needs to read the
majority of this section for the following reasons:
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You
will die someday |
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2. |
You
or your spouse are 70% likely to become disabled during your
lifetime |
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3. |
There
is less than a 1% chance that neither you, your spouse, your parents
or your in-laws will need long term care at some time. |
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For
these reasons, everyone must read chapters 35-38. |
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35. |
Do you own life insurance? |
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If
YES, you may want to understand your options. There is probably a way for
you to reduce your costs or increase your coverage for the same price.
Read chapters 35 and 36 |
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36. |
Are you paying for your insurance with after tax
dollars? |
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In
over 99% of the cases, the answer is NO. If you are like most people, and
are paying for insurance with after tax dollars and you have a retirement
plan or your own business or practice, you should read chapters 10, 43,
44, 48, 57, and 58. |
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37. |
Would you buy more insurance if your health were
better and the insurance were cheaper? |
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If
YES, then you should read chapters 39 and 40.
These chapters show unique ways to getting insurance on people with
poor health and ways to reduce the out-of-pocket cost of insurance. |
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38. |
Would your family be able to get by if the breadwinner
stopped making money? |
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If
NO, then you must read chapter 37 on disability insurance. |
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39. |
Do you get a tax deduction for your disability
insurance premiums? |
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40. |
Does your employer pay for your disability or do you
have a group disability policy through an association? |
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If
YES to either of these questions, you may have fallen into a tax trap or
may have insufficient coverage. Please
read chapter 37. |
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41. |
Would your parents or in-laws have enough saved to pay
for Nursing Home costs of $300 per day for years if they became sick? |
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If
NO, please read chapter 38 on long term care.
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42. |
If YES, would it be acceptable if they spent your
inheritance on their medical bills if you could have saved that amount?
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43. |
Would it be ok for your parents AND in-laws to move in
with you if they couldn’t afford nursing home care? |
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44. |
Would you and your wife have enough saved to cover
medical bills of $300/day if you became sick
(assuming no health insurance) |
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If
you answered NO to any of the questions (42-44), then please mark down
that you should read Chapter 38 on long term care.
Long term care has become very popular as a way to protect against
high medical bills, reduce income taxes today, protect an inheritance from
being depleted, and serve as an estate planning tool. |
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45.) |
Do you own a business, a practice or have equity in
your home and a desire to buy more insurance at a reduced cost? |
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If
YES, then you may have a means to what we call “free” insurance. It isn’t really free, but it may be something you can
purchase for $0 out-of-pocket, and provide a significant benefit to your
family. Please read chapter
40. |
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Part V – Retirement
Do
you work to live or live to work? Most
Americans work to live and have their eyes on the prize at the end of the
rainbow…retirement! Despite
this typically-common goal, wee see a great fluctuation in clients’
abilities to retire. Even
among clients with the same incomes, their ability to retire early or with
as much money as they had hoped is usually a function of the quality of
their retirement plan. If you
want to retire early, or retire wealthy, or retire happy, please take the
time to read these questions and the recommended chapters.
It will be very beneficial to you.
Everyone
must read chapters 41, 42 and 49.
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46. |
Do you have brokerage or savings accounts that you
intend to use for retirement |
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If
you answered YES, you are probably paying too much in taxes. Did you know
that the average mutual fund has a 32% tax associated with its gains? If you don’t want to give away a third of your
appreciation, you should read section VII (especially chapters 41, 45 on
variable annuities and 46 on life insurance).
You should also read chapters 17-19, and 21-23 in the investment
section. |
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47. |
Do you participate in a profit sharing, pension,
401(k) or IRA? |
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If
YES, then you should know what you are able to do under the various rules.
If not, and you want to participate, you should know what you can do. In either case, please read chapter 42. |
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48. |
Are you concerned you won’t have enough saved for
retirement? |
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This
is very common. If you want
to put more money away for retirement, you should read chapters 42-46. These chapters will show you many ways to put more money away
each year and help you achieve your retirement goal. |
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49. |
Are you retired already or about to retire? |
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50. |
Would you like to have “guaranteed income” during
retirement so you don’t have to worry about stock market returns or
interest rate fluctuations? |
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If
you answered YES to either question, you should read chapter 47. This
chapter shows you how to use life annuities (very different from variable
annuities) to “lock-in” income during retirement.
You should also read chapter 44 to learn how to achieve a
guaranteed retirement income. This
is a very important tool for retirees. |
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51. |
Is there one breadwinner in your family who is saving
for both spouses? |
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If
YES, then you have a serious risk. If
the breadwinner dies or becomes disabled, the other spouse will be left
with no retirement. To avoid
this problem, please read chapters 44, 46, and 49. |
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52. |
If you are married, or soon to be married, do you have
more than a 10-year age difference or a 10-year life expectancy
differential? |
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If
one spouse is much older than the other or one is sick and the other is
not, then there is a serious risk that medical bills may decimate the
retirement savings of the younger or healthier spouse.
To avoid this problem, you must read chapters 49 (long term care)
and 46 (life insurance). Overlooking this problem can cause a financial
disaster. |
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53. |
Are you potentially responsible for the financial well
being of your parents or in-laws? |
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If
YES, you must read chapters 49 and 60.
By purchasing long term care insurance on your in-laws and parents,
you can protect your retirement savings (and potentially your inheritance)
from being spent on medical expenses. |
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54. |
Do you want to retire before age 59 ½? |
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If
YES, you must read chapter 46. There
are ways to use life insurance as a retirement tool.
This must be considered, as it is the only way to save for
retirement on a tax-deferred basis and to take money out for retirement
expenses before age 59 ½ without a 10% tax penalty. In fact, withdrawals
can be 100% tax-free! |
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55. |
Do you think you might accumulate at least $500,000 in
retirement plan assets at anytime in your life? |
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If
YES, you may be subjecting your heirs to an 80% tax trap without even
knowing it. This is the most
overlooked part of any financial plan.
You should read chapters 48, 57 and 58 to learn how to avoid it. |
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Part VI – Estate Planning
Every
year billions, if not trillions, of dollars are paid unnecessarily in the
form of estate taxes and probate fees.
80% of businesses don’t reach the second generation because of
poor inter-generational planning. In
Chris’ mother’s case, poor planning led to her bankruptcy. Don’t let oversights, bad planning, or a procrastination
ruin your life, or the lives of your heirs.
Everyone
must read chapters 50-52
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56. |
Do you believe that estate
planning is a waste of time because of the estate tax repeal of 2001? |
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If YES, you must read chapter
51. This is integral to your
planning success. |
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57. |
Are you, or do you anticipate
being, worth more than $100,000 at any time during your life? |
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If
YES, go to Chapter 52 on wills and review the appendix on intestacy laws. |
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58. |
Are
you, or do you anticipate being, worth more than $1,000,000 at any time
during your life? |
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If
YES, please go to chapters 53 on AB Trusts.
Otherwise, you will probably cost your family hundreds of thousands
in taxes and probate fees unnecessarily. |
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59. |
Do
you own life insurance? |
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If
YES, you must read chapter 55 on Irrevocable Life Insurance Trusts. Did you know that without an ILIT, up to 50% of your
insurance will never reach your heirs?
If you want to avoid that problem, read chapter 55 |
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60. |
Do
you pay for your life insurance with after tax dollars? |
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Most
likely, the answer is YES. If
you want to have the government pay for up to 50% of your estate plan,
please read chapters 47, 57, 58 and 59. |
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61. |
Are
you, or do you anticipate being, worth more than $3,000,000 at any time
during your life? |
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If
YES, you should read the entire section on estate planning.
A few hours of your time could save over a million dollars in
unnecessary taxes and fees. You
need to read chapters 57 and 58, if you don’t want to lose 80% of your
retirement plan to taxes at death. |
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62. |
Do
you own anything jointly with your spouse or another person? |
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If
YES, this could be a disaster. This
is how children and spouses are unintentionally disinherited every day. Please read chapters 26, 52, 53 and most importantly 55 if
you want to avoid this problem. |
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63. |
Do
you own rental real estate? |
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If
YES, go to chapter 56 on gifting with FLPs/LLCS. This could help you save taxes every year and avoid
unnecessary estate taxes without losing any control of your assets. |
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64. |
Do
you own a business or professional practice? |
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65. |
Will
your intend to leave it to your heirs or sell it and leave them the
proceeds of the sale? |
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If
YES to 64 or 65, read chapter 65 on buy-sell agreements and the
entire estate planning section. |
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66. |
Do
you have more than $500,000 in a retirement plan or IRA? |
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67. |
Do
you have a stretch IRA or hope to use a stretch IRA to avoid taxes at
death? |
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68. |
Did
you know that 80% of your pension, 401(k) or IRA could be taken by taxes
when you die? |
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If
YES to either 66 or 67 or NO to 68, you must read chapters 57 and 58.
Otherwise, you may inadvertently leave 80% of the plan assets to taxes at
death. The stretch IRA is a
very big tax trap we recommend against in most cases. You need to know
your alternatives. |
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69. |
Do
you own stocks worth over $2,000,000? |
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If
YES, then you should read chapters 13,58 and 61. |
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70. |
Would
you do your estate planning for half the price if you could? |
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If
YES, then you should consider the 419 in chapter 59 or the advanced
strategy discussed at the end of chapter 58.
If the government will give you a break, you should take it |
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71. |
Are either your parents or your in-laws still alive? |
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If
YES, read entire estate planning section and get them a copy of this book.
It may add hundreds of thousands, if not millions, of dollars to
your inheritance. |
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72. |
Do
they have an adequate amount of LTC? |
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If
NO or Maybe, read long term care for estate planning – Chapter 60 |
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73. |
Do
they have a current living trust and is it funded? |
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Anything
but YES and it is current, read the living trust chapters 52 and 53. |
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74. |
Do
your parents or in-laws have life insurance? |
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If
NO or Maybe, read life insurance chapter 36, chapter 55 on ILITs, chapter
34 on divorce, and chapter 60 on long term care. |
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75. |
Is
there a family business? |
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If
YES, read business section, especially chapters 63 and 65 |
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76. |
Do
your parents or in-laws have a retirement plan
or IRA? |
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If
YES, read chapters 57 and 58 and give copies of those chapters to them as
well. If they don’t plan, you may lose 80% to taxes at their death. |
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77. |
Are
your parents or in-laws living on the interest of their bonds, money
markets, stock dividends or retirement distributions? |
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If
YES or Maybe, read chapters 47, 56, 57, and 58. |
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78. |
Are
you afraid of leaving an inheritance to your family and having them lose
it if they get divorced? Are
you concerned about losing your inheritance if you get divorced? |
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If
YES to either question, read chapters 30, 34 and 55. |
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79. |
Do
you have a charitable inclination? Would you like to like
to leave something to a charitable organization? |
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80. |
Would
you consider leaving something to a charity if it helped reduce your taxes and help your family? |
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If
YES to either of these questions, please read chapter 61. |
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Part VII – Business
Planning
Starting
and running your own business is very difficult.
Believe us, we know. We have two businesses ourselves.
There are risks that others don’t have.
We need to address those risks so you don’t lose what you have
worked so hard to achieve. Luckily,
in return for all the craziness you put up with in running a business,
there are some benefits that only you can realize.
This section helps explain some of those benefits as well.
We
encourage you read every chapter of the business section.
However, we provided a few questions to help direct those of you
who are short on time and can’t afford to read all 5 chapters.
Everyone
should read the opening, chapter 62.
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81. |
Do
you have partners in your business? |
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If
YES, you need to have a buy sell agreement. Please read chapters 65 and 63
(a way to fund the buy sell). |
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82. |
Are
you a partnership, sole proprietorship, or just a person with a business
and no legal entity? |
|
|
If
you have done nothing in the way of filing for legal status, you must read
chapter 66 on corporations. Operating
as a sole proprietor or a partnership puts you at too much risk to
lawsuits and doesn’t give you any real tax advantages.
This is an important chapter (66) for you to read. |
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83. |
Does
this business have more than $250,000 in annual profits? |
|
|
If
YES, then you should read chapter 63. This may help you “kill two birds
with one stone,” as you can get benefits for you and your employees
while reducing taxes. |
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84. |
Does
the business have more than $1,000,000 in profits annually |
|
|
If YES, you should consider chapters 63 and 64.
These are very advanced strategies that offer very sizeable
benefits – to those who qualify. |
|
|
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85. |
Are you concerned about losing what
you have (your business) to lawsuits. |
|
|
If YES, you should
read chapter 67 on advanced asset protection strategies.
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