Meyer Family Wealth Goal Achiever - Advanced Estate Planning Case Study

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Case Study – James Myer

Background

James is 64, and a few years ago started up a Consulting Company (Consulting Corp) with his business partner Dave. They have acquired some lucrative contracts over the last couple of years, and after spending frugally his entire life, James is starting to enjoy his newly created wealth. James is divorced and makes alimony payments in the amount of $100,000/yr. on top of his $500,000/yr. in living expenses. Because the wealth and income generated by the company is recent, James has not accumulated much in the way of liquid assets yet, but the company value is significant and future profits look very promising.

With increasing company profits, James is faced with a growing income tax exposure and also wants to begin planning for his expected retirement in the next 5-7 years. He has one son who works in the business and has shown interest in taking over James’s role next to his younger partner, Dave. No firm planning or discussion regarding the transfer of James’s interests to his son has taken place. Planning has to provide for the build up of cash/assets for James to retire, reduce income tax exposure and create the opportunity to pass the business interests onto his one son if he remains in the business, while also creating an equal inheritance of non-business interests for the son and daughter not involved in Consulting Corp.

Assets

James’s interests (59%) in Consulting Corp are valued at approx. $15M today. He also has about $750k in liquid assets as well as a 59% interest in a Captive Insurance Company that he and Dave set-up in 2011.

Goals

The primary planning goals are to:

• Make sure that he has sufficient funds to live on for the rest of his life (approx. $600,000/yr., including alimony, after taxes and gifts).

• Reduce income taxes.

• Maximize the inheritance that he leaves to his children and grandchildren. Consider passing his business interests to his children involved in the industry while providing an equal inheritance of non-business interests to those that are uninterested.

• Assure that he has sufficient liquid assets available at his death to eliminate the forced liquidation of his business assets.

• Eliminate or reduce estate taxes.

The redacted case delivers the client goals and helps the lega, financial advisor and the CPA implement a plan that works and can be monitored annually.

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