Scenario One
An affluent couple came to our office, asking if there was a way to avoid taxes on his $2 million IRA Account. They had no need for additional income from his IRA to support their retirement lifestyle. He only accepted required minimum distributions (RMDs) to avoid income tax penalties from the IRS. Their hope was to grow his IRA Account to maximize its inheritance value for their children and grandchildren.
We designed and facilitated the exchange of his IRA account that would eventually be subject to ordinary income taxes, for a $4 million guaranteed tax-free inheritance for younger generations, requiring no added out-of-pocket cost from the couple.
Scenario Two
The compensation committee of a public company asked our office to see if we could produce a more innovative and tax-effective way to deliver incentive compensation to their highly compensated CEO. The committee was also concerned about the company needing to disclose the increasing liability for the CEO’s deferred compensation benefit, in the coming proxy statement.
Since the CEO was already extremely wealthy and had no need for additional taxable income in retirement, we designed and facilitated the exchange of his multi-million dollar (and growing) deferred compensation account that would eventually be subject to ordinary income taxes, for an exceptionally large income tax-free and estate tax-free guaranteed life insurance benefit for the CEO’s heirs.
For the company, our innovative transaction resulted in exchanging significant (and growing) liabilities for a growing asset on the employer’s balance sheet. Also, the required proxy disclosure language became more palatable to stockholders. At the time, our innovative transaction was thought to be the first of its kind ever adopted at a public company.