Thought You'd Like to See This:
Doing a Tax and Planning Checkup:
Things to Consider

We’ve seen instances lately where business owner clients and individuals have problems related to taxes, life insurance or investments that need to be fixed.

For business owners:

• All business-related life contracts issued after August 17, 2006, need to meet special requirements. If the requirements are not met, the death benefit received by an employer from life insurance will be income taxable to the extent the death benefit exceeds premiums paid. On the other hand, if the rules have been followed, the death benefit can still be tax free
  
  In addition, the IRS requires business owners to report the existence of all such policies that it owns.

• Certain kinds of employee benefits are now subject to Internal Revenue Code Section 409A. If benefit plans subject to 409A do not follow the rules, employees who participate in such plans will get an unexpected acceleration of income tax, plus an extra penalty tax.

• Business owners with buy sell arrangements may not have had their agreements reviewed recently. As a result, the buyout price may be stale, the buyout triggers may need to be updated or the funding arrangements may need to be enhanced.

For individuals:

• Life insurance, pension or annuity beneficiary designations don’t match the estate planning objectives of individuals. For example, perhaps the children are named contingent beneficiaries. If those children are minors or spendthrifts, naming them beneficiaries may be unwise. It may be smarter to name a trust created under your will as the beneficiary—so more controls are in place.

• Existing irrevocable trusts need to be reviewed. If such trusts aren’t working properly, gifts to the trust may be subject to unnecessary gift taxes. Further, more severe problems may mean that the insurance proceeds payable to the trust will be unexpectedly included in the taxable estate of the insured.

We strongly recommend that our business owner and individual clients talk with their professional advisors to make sure their existing plans are correct.

 

Please contact Tracy at 504-212-3440 or estateplanning@lawealthplan.com to set up an appointment with Todd or Chip to discuss tax planning or other matters of financial concern.