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Readers of this column often call me to ask the following (or similar) two questions: “Irv, can you really beat the estate tax?” and most of the time (after a simple, “Yes” to the first question), “How do you do that?”
The answer is with our System, to be exact with our Comprehensive System. Originally, our System (45 years ago) was designed to reduce the estate tax, but over the years, our System evolved to focus on keeping all of a client’s wealth. Because our System keeps all of your wealth in your family, it automatically kills the estate tax.
Note: Why the word “our” in front of “System”? Should the truth be known, Irv Blackman is just not smart enough to know it all. But most clients need a group of professionals that together know it all.
So I, Irv, have put together a network of professionals — lawyers, insurance agents and others — who are called upon, as their expertise is needed. Hence, the word “our.”
Let's use an example: If you are worth $16 million, the entire $16 million goes to your family (all taxes paid in full); if you are worth $46 million (it can be more or less), the entire $46 million goes to your family. Stop! Jot down what you are worth today. Better yet, jot down the amount you think you might be worth when you get hit by the final bus. That’s the amount the estate tax monster wants to get at. Our System guides you (step-by-step) to keep every dollar of your wealth in your family.
But to be effective, your estate plan must be comprehensive, which required us to develop a Comprehensive System. Just what does comprehensive mean in this context?
Well, experience has taught us that the typical client wants not only an estate plan (really a death plan), but also a lifetime plan that at a minimum accomplished the following:
Now, let’s follow how our System was implemented by Joe, a reader of this column. Our System is highly organized into eight specific (sometimes more or less) steps, as follows:
Step #1: Joe (married with three kids, two in his business) sent me, as I requested, an information package consisting of financial data and other information about his family, business and goals.
Step #2. I reviewed the package. Then, Joe and I had a short phone meeting to answer my questions.
Step #3. I prepared a “Discussion Agenda” that detailed every strategy that might apply to Joe’s situation for the two plans to be created: (1) an estate plan (really a death plan); (2) a lifetime plan (from today until Joe gets hit by the final bus). The two plans dovetail.
Step #4. Joe and I discussed the agenda and agreed on the plans (death and lifetime) that now needed to be turned into documents.
Note: Sometimes the client and I get together for an eye-ball-to-eye-ball conference.
Step #5. It’s time for my “network” to go to work. I wrote a detailed report for the network lawyer. Joe sent his current estate plan documents to the lawyer, who kept the documents that were compatible with the new plans and amended or rewrote the rest. Then, I informed my network insurance consultant to review Joe’s life insurance policies.
Step #6. The lawyer wrote a “concept” letter — that I reviewed — explaining every strategy to be used in the new plans. The purpose of the letter is always the same: to put in one place all the details of the plans that Joe (me and the lawyer) had agreed to in easy to understand language.
Step #7. The lawyer drafted the necessary documents for the two plans: lifetime and estate. At our suggestions, Joe had his local lawyer review the documents and Joe signed them in his lawyer’s office.
Step #8. The network insurance consultant prepared many proposals (from different insurance companies) and explained them to Joe. The amount of insurance purchased (here $3.45 million) was determined by Joe and me.
The result of using our System: Joe (or his family) will not pay even one cent to the tax monster and his family will get an extra $3.45 million in tax-free life insurance.
The number of months from my first contact with Joe until the plans were finally done was just over five months. How much time did Joe actually spend? When I asked him he didn’t know exactly, but his best guess was a total of between three and four hours.
One final thought: Whether your estate plan is done or about to be done, check with your advisor to make sure your estate plan will deliver all your wealth to your family and that you have a lifetime plan that works with your estate plan.