American Society of
Plastic Surgeons
October 28, 2012
New Orleans
Presented by Moskowitz, LLP
www.moskowitzllp.com
Seminar Presenter:
Stephen M. Moskowitz, Esq.;
Tax Attorney; CPA; LL.M. [Tax]
Senior Partner at Moskowitz LLP
steve@moskowitzllp.com
www.moskowitzllp.com
180 Montgomery Street San Francisco, CA 94104 (415) 394-7200
LEARN HOW TO PROTECT YOURSELF!
Doctors are targets.
Everybody wants your money.
Protect your assets and income from:
Creditors
Spouse
Tax – Federal and State
Presented by Moskowitz, LLP
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Asset Protection
Captive Insurance Companies
Foreign/Domestic – Migration Provisions
Domestic Asset Protection Trusts [DAPT]
Grantor can be beneficiary
Third Party Irrevocable Trust
Grantor cannot be beneficiary
Grantor hires/fires trustee – including best friend
“Floating Spouse” Provision
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Asset Protection-Con’t
Hybrid Domestic Asset Protection Trust
Grantor not beneficiary but can be added
Survives bankruptcy
Not part of martial estate
Grantor can indirectly access with “floating spouse”
Trustee can split into separate trusts/LLCs
Third Party Discretionary Trusts
“Sole & Absolute Discretion”
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Nevada Advantages
Fraudulent Transfer – 2 Year Statute of Limitations
Not available to spouse/creditor [divorce]
Not available to pre-existing creditors – after Statute
of Limitations
Grantor retains veto power
“Charging Order” – exclusive remedy
IRS Rev. Rul. 77-137 Who Pays Taxes?
Presented by Moskowitz, LLP
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Captive Insurance Companies
Lower Insurance Costs:
Enter reinsurance market – increase deductibles
Costs at wholesale not retail
Cash flow – investment income/loans
Writing unrelated risks for profit
Competitive advantage
Asset Protection – protected premium/different
name
Domestic or Foreign Location – IRC 953[d]
“Rent a Captive”
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Advance IRS APPROVAL
IRS Letter Rulings
Safe Harbor Rulings
IRS Rev. Rul. 2002-89: Captive Insurance Company
IRS Rev. Rul. 2002-90: Related Captives + Insurance
IRS Rev. Rul. 2002-91: Unrelated Captives = Insurance
Presented by Moskowitz, LLP
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Insured Risks Examples
Loss of revenue – business/investment
Crime/terrorism
Computer system failure/data breach
Litigation risks – professional/employer/business
Auto/general umbrella
Disability
Loss of significant supplier/client type
Tax – change in law/audit defense
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TAX - Income & Estate
Income tax deduction – IRC 162 – unlike self insurance
Income – tax free $1.2m or more IRTC 831[b]
Deferral – as long as desired
Investment income – 70% tax free – IRC 243[a]
Ordinary income to capital gains – IRC 1[h][B]
State taxes – 100% deduct – but can avoid pay
Retirement – capital not ordinary & no employer match
Presented by Moskowitz, LLP
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Income Tax Rates–Married
45%
40%
35%
30%
25%
20%
15%
10%
5%
0%
25%
15%
28%
28%
31%
33%
36%
39.60%
35%
15% 15%
10%
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2012
2013
www.moskowitzllp.com
Income Tax Rates-Con’t
50%
45%
40%
35%
30%
25%
20%
15%
10%
5%
0%
43.40%
39.60%
23.80%
20%
15%
Long Term Cap
Gains
15%
15%
Qual 5 Yr Cap Gains Qual Div Income
2012
Presented by Moskowitz, LLP
21.80%
18%
2013
43.40%
39.60%
35%
Ordinary Div
Income
2013 including medicare tax
www.moskowitzllp.com
Gift & Estate Taxes
Asset Protect – removing asset from grantor
Captive Insurance Company – transfer without
gift/estate tax
Provisions
expiring
12/31/2012
Transfer $5.12m
per donor
without tax
Presented by Moskowitz, LLP
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Estate Tax Rates - 2013
60%
50%
41%
40%
43%
45%
49%
50%
55%
60%
55%
30%
20%
10%
0%
2013
*in millions
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Life Insurance
Irrevocable Life Insurance Trust [ILIT]
Remove value of life insurance from estate
Survive 3 years after transfer
ILIT purchase additional insurance no 3 year
rule
ILIT is beneficiary of insurance policy
Retain control of payments to beneficiaries
Asset protection
Creditors/spouses
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Qualified Personal Residence Trust
Removes home from estate
Continued residence 10-15
years
When trust term expires,
real estate transfers to
benefactor
Exception – continue residence & pay rent
Die before trust term expires – real estate in estate
Splits title for value – appreciating asset
Asset protection
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Grantor Retained Annuity Trust
Transfer Income Producing Property
Stock, rental real estate, business
Receive income, but asset to benefit at trust term
Split title
Asset in estate if death before trust term
Assets cannot be transferred without
grantor
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Revocable Living Trust [Will]
Living trust offers many benefits a will does not
Avoids probate
Expensive
Time consuming [9 months – 2 years average]
No privacy
Beneficiaries have no control
No protection if you become incapacitated – court can
take control of assets
Joint ownership only postpones probate
Asset protection – special needs/creditors
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LLCs
Give beneficiaries ownership interests
Can keep desired interest
Captive Insurance Company
Split title
Management control
Asset protection
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Use Both Exemptions
Husband & Wife- Two Trusts
Portability Expires 12/31/2012
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Charitable Remainder Trust
Converts appreciated asset into:
Lifetime income
Income tax deduction
Avoids gift/estate tax
Presented by Moskowitz, LLP
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Charitable Lead Trust
Removes asset[s] from estate
Income goes to charity for trust term
Trust assets go to beneficiary after trust term
Splits title
Asset protection
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Qualified Domestic Trust [QDOT]
Defers estate tax owed by non-citizen surviving
spouse
Qualifies for full estate tax marital deduction & will
not be taxed at death of citizen
Presented by Moskowitz, LLP
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Conclusion
Asset protection, including captive insurance
companies and income & estate tax planning, can
create a safe haven for your assets; while legally
saving incredible amounts of income, gift, and estate
taxes. Take advantage of the expiring tax provisions
before they disappear forever on 12/31/2012. Benefit
from the same laws that wealthy individuals and large
corporations have for years.
Presented by Moskowitz, LLP
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Thank You!