You Need Wealth Protection Planning

Again, this is a bold statement we are making about your present advisors... and we haven't even met them (or you) yet.  "What is our basis for making this statement?", you may ask.  We will give you three reasons.

1. Most people's advisors do a poor job, and they don't even know it.

You may feel that your present advisors are excellent, if not competent.  How can you tell?  By their education? The size of their firm?  Their reputation?  Certainly, these are good places to begin in screening an advisor, but they really don't tell you how he is doing for you once he is hired.  How can you tell whether or not that trust you have will achieve the tax benefits it is supposed to? How can you evaluate whether this insurance product was really the best one for your situation?  How can you tell if you paid too much in taxes this year because you neglected possible tax-saving strategies from your business?  Often, there is no way for the client to truly evaluate any of these issues effectively.   A new client of David's law firm recently discovered this costly lesson, although the ending was be a happy one.

Case Study: David's Client: Real Estate Developer
A few years ago, David's law firm was retained to perform a self-imposed tax audit on a client. The client, an extremely successful businessman and real estate developer, was concerned when one of his business colleagues was found liable for back taxes and penalties because of mistakes by his accounting firm.  Nervous that he might become an IRS target soon, David's client hired his law firm to do an audit of his income taxes for the past 5 years, both personally and for his various businesses. What David and his tax partners found was shocking.

Even though this client had used 4 different accounting firms for his various returns (including a well-known national 500+ person firm), the taxes he had paid were far from what he owed.  Luckily for him, it was an overpayment.  While, at the time this goes to press, we do not know what the final numbers will be, we can write confidently that this client will deserve a refund of AT LEAST $5 million.

That is correct. Because of the self-imposed audit which David's law firm oversaw, the client will file for a seven-figure refund from the IRS and state tax agency.  Lucky for the client, he was concerned enough about poor tax advice to spend the money to hire David's firm to perform the audit.   He did so only because he was concerned that the IRS would find a substantial underpayment.  Never did he think his returns, prepared by a team of prestigious accounting firms, would prove to be putting millions of dollars in the IRS' pockets unnecessarily.  But that's exactly what had been happening for the past 5 years.

The key question from this case is the following one: How many of us would spend thousands of dollars (or hundreds of thousands in this case) in a self-imposed audit, just to see if our advisors had missed something?  The answer: few, if any of us.  Yet, if we aren't willing to have our professional's work reviewed by third parties, how can we ever know how well our interests are being served.

2. Even our societies wealthiest, most prominent families get poor advice every day

If our society's leaders and prominent families can be caught in the trap of poor planning, can't any of us? Let's examine a couple of quick examples.

• Elvis' family lost over $8 million because of poor legal advice
  Elvis Presley, one of the most famous celebrities of the 20th century, was a person who you would think would have top legal talent advising his family on estate planning.   In fact, the Presleys lost over two-thirds of their net worth to estate taxes and probate fees when Elvis died, all costs that could have been avoided with the proper planning.  In this way, poor planning cost Elvis' family over 65% of their net worth.  If this doesn't have Elvis singing blues from his grave, then we don't know what would.
     

• The Kennedys - why Jackie's kids had to sell personal items of JFK - to fund a clt?

• Wrigley family lost Cub's stadium, team, land all over the world ...

• Willie Nelson

• Lawsuit victim

3. Even with top professionals, advice is rarely coordinated into one plan

In the next chapter, you'll learn why proper Wealth Protection planning must be implemented by professionals from different disciplines - from law, tax, finance, insurance, and others.  You will also be exposed to a key diagnostic question which  always shows how well an individual or family has their planning coordinated.  The question is this: Do your accountant, lawyer, insurance advisor, broker, and financial planner all meet together at least once annually to review your particular situation? 

If you answer "no" to this question, then our first two points are moot.  In other words, even if your existing advisors are competent, or even excellent, in their own fields, if they are not coordinated, then your plan is lacking.  If this is so, you need Wealth Protection planning, if for nothing else than to coordinate your existing planning and fill in the gaps where the lack of coordination has left holes.

Throughout the introduction and this chapter, we have used the term "Wealth Protection planning" repeatedly.  From our own family stories in the introduction and the various references here, you may have a sense of what we mean by this term.  However, if you are going to get the maximum benefit from this book, it is important that you have a specific knowledge of what Wealth Protection really means.  Let's examine this on the next page.

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