High-Net-Worth Business Key Takeaways • One of the biggest opportunities is to become a wealth advisor offering an array of services to help wealthy individuals develop optimized plans. • More than 8 million families in North America are estimated to have a net worth. •
individuals need help from capable tax and advisors who can facilitate the transfer of ownership and cash rights while also equipping the next generation to manage and control transferred assets.
• Most clients need help choosing which of more than services will best 200 help them achieve their goals.
Wealthy Clients Need Help Managing Their Legacies By Tim Voorhees Insurance producers face an explosion in the number of new opportunities to serve clients. One of the biggest opportunities is to become a wealth advisor offering an array of services to help wealthy individuals develop optimized plans. You can do this by providing valuable services to public accountants, lawyers and other professionals in your community. You will generate more referrals, offer more complete planning solutions and build a more career for yourself. More than 8 million families in North America are estimated to have a sevennet worth. More than 10 percent of these families have estates valued at more than $10 million, and approximately 1 percent have accumulated more than $100 million. These wealthy people control much of the $41 trillion to $136 trillion of wealth that will transfer to family and charitable over the next 30 years. The government plans to tax a great percentage of this wealth transfer unless advisors implement plans to reduce or eliminate the taxes.
Many people pay too much in taxes because they have not taken the time to establish appropriate trusts and business structures. The failure to create these entities is typically rooted in a lack of clarity about the purpose of these entities.
Affluent individuals need help from capable tax and financial advisors who can facilitate the transfer of ownership and cash flow rights while also equipping the next generation to manage and control transferred assets. Affluent individuals typically turn to certified public accountants, charitable development officers (CDOs) and attorneys for help with tax reduction. These advisors can serve clients with less than $10 million of assets; but the deci-millionaires often prefer to work through a multifamily office or MFO, which you can set up. Many people pay too much in taxes because they have not taken the time to establish appropriate trusts and business structures. The failure to create these entities is typically rooted in a lack of clarity about the purpose of these entities. Beneath this ambiguity is lack of clarity about the purpose of wealth and, at the deepest level, about how a client wants to use wealth to achieve financial independence and then make the maximum contribution to family and favorite charities. In short, what starts as a conversation about taxes very often goes deep into discussions about spiritual and emotional commitments to relationships and ideas that most inspire the client. Clients typically say, “Charity begins at home.� But as they learn they can give away money without reducing retirement income or transfers to children, clients often find new freedom and joy in the funding of favorite causes. Advisors can build a successful business with literally hundreds of high-net-worth clients who have been referred by lawyers, CPAs, CDOs and MFOs. Here is a five-part model for how to structure such a business.
Climbing the Pyramid Enhances Tax Efficiency Taxes on Employee Withdrawals
Taxes on Contributions Minimal Tax on Contributions
6) Advanced Tax Efficient Lifetime Income Solutions Capital Split Dollar Charitable LLC Family Retirement Account
Minimal Withdrawal Taxes
Moderate Tax on Contributions
5) Specialized Plans with Tax Efficient Funding and Tax Free Withdrawals Super Clat Section 79 Plan Section 162 Plan
Moderate Withdrawal Taxes
Moderate Tax on Contributions
4) Specialized Plans with Pre-Tax Funding Partially Taxes Withdrawals Charitable Remainder Trust Gift Annuities Pooled Income Fund
Moderate Withdrawal Taxes
Moderate Tax on Contributions
3) Non-Qualified Deffered Comp SERPS 409(A) Plans Traditional Deferred Comp
Heavy Deferred Income Tax
Heavy Current Income Tax
2) Qualified Plans Profit Sharing Defined Benefit 401(K) 1) Traditional Compensation Heavily taxed with payroll taxes going in and ordinary income coming out
Heavy Withdrawal Taxes
Heavy Withdrawal Taxes
Heavy Withdrawal Taxes
One-Stop Family Office Services
These clients are looking for the most tax-efficient way to help their spouse, their children and their charities realize a compelling vision.
Most clients need help choosing which of more than 200 financial services will best help them achieve their goals. A family office should provide all necessary resources through a one-stop planning process. Many MFOs operate as a registered investment advisor while maintaining close affiliations with CPA and law firms. Insurance and investment professionals fund trusts and business entities. Each client is served by an advisory team that appoints one advisor to act as a wealth counselor and wealth coach who coordinates all the other advisory team members. The advisor in the coach role must work as a fee-based fiduciary to maximize client trust and help ensure objectivity. Zero-Tax Planning Family office staff members need expertise with zeroing out unnecessary transfer taxes while reducing capital gains, income and alternative minimum taxes. Family offices should provide reports to show clients how to reduce taxes while increasing what is available for family needs, retirement security and favorite charities. Whereas most CPAs are comfortable promoting retirement plans, few know how to illustrate the use of insurance in IRA leverage and pension rescue programs. CPAs know how to reduce taxes with standard business expenses, but few know how to integrate captive insurance programs into tax planning and riskmanagement programs. Vision Funding Most people, especially those over age 55, are actively thinking about legacy and “casting a shadow beyond the grave.� These clients are looking for the most taxefficient way to help their spouse, their children and their charities realize a compelling vision. The family office should create and update simple bar charts illustrating how tax savings can fund a vision for providing more resources to family and charity. Wealth Counseling Parents appreciate the wisdom of passing on their values to their heirs before they pass on the value of what they own. This requires that the family office unite the father and mother around a shared vision for passing ownership, management and control responsibilities to heirs. Studies show that four
out of every heirs of wealthy families will not manage their inheritance should provide access to wealth counselors who can wisely, so a family help heirs beat the odds. Wealth counselors use proven techniques to help clients resolve and unite family members around a shared vision for using wealth to leave a lasting legacy. Wealth Blueprinting
About the Author Tim Voorhees, JD, MBA, is a principal partner at Matsen Voorhees Law in Costa Mesa, CA. As an estate planning attorney for over 35 years, Tim has helped clients save millions of dollars in taxes while transferring their legacy to their families and favorite charities. His planning book on is described at www.ZeroTaxCounsel.com. Feel free to email Tim at tim@vfos.com.
A typical client wants to work with advisors who can integrate any of more than 300 tools to achieve a broad array of personal goals. Ideally, the chart with all necessary solutions should be summarized on a one-page supporting calculations and explanations. Advisors must have a way to update the chart in response to changing tax laws, goals, asset values or cash The planning process should recommend the optimal mix of planning tools, identify the best assets to fund each planning tool, and chart that describes summarize all planning recommendations on one how the blueprint will support a family’s vision.
Matsen Voorhees Law LLP 695 Town Center Drive, 7th Floor, Costa Mesa, CA 92626 Phone: 800-447-7090 or 949-878-9400 • Fax: 866-447-7090 Email: info@MatsenVoorhees.com
Readers of this document should consult with independent advisors regarding the tax, accounting and legal implications of the proposed strategies before any strategy is implemented. Nothing in this presentation is intended to offer securities or investment advice. Above numbers are based on a hypothetical fact pattern. Tax and regulatory rules affecting strategies in this document may change often and have varying interpretations. To ensure compliance with requirements imposed by the IRS under Circular 230, we inform you that any U.S. federal tax advice contained in this communication is not intended or written to be used, and cannot be used, for the purpose of avoiding penalties under the Internal Revenue Code or for promoting, marketing or recommending to another party any matters published version may differ. addressed herein. This draft is dated 10/5/2013. The