Lifetime planning with a twist

July 1, 2009
How to create a lifetime plan with a tax-saving twist.

For years this column has hammered away at the concept of needing two plans — an estate plan and lifetime plan. My point has been, and still is today, that even a perfect traditional estate plan, “a death plan,” only takes care of your affairs after you get hit by the final bus.

What about the rest of your life? Suppose the good Lord decides he wants you around for another 10, 20, 30 or more years. Go ahead, and figure out the number of years you think you may be around.

Whether you think you will live for 10 or 40 more years, doesn't common sense tell you that your lifetime plan, tax and economic, for those years should be put into place now (at the same time as your estate plan)?

Almost every telephone call from readers, ever since the economy started to head south, is regarding lifetime planning. Most readers have been hit in two ways: their Wall Street portfolio is down (losses average about 30%), and their business is down from prior years, yet still makes a profit. Suddenly, they want to talk about lifetime planning and estate planning.

For about 40 years, this column has beat up on the IRS and saving taxes, primarily estate taxes. But in keeping with these tough economic times, we will now add a new area of interest to this column: How to create a lifetime plan with a tax-saving twist.

Let's get started with an exciting strategy that helps solve two continuing problems: Wall Street losses and tax costs on gains when the good times roll. Simply put, cut the losses and taxes.

This is an investment strategy that takes advantage of a tax-free opportunity in the Internal Revenue Code. It's called Private Placement Life Insurance (PPLI), a legal way for wealthy investors to make their investment gains tax-free. Gains are shielded from income taxes during life and at death. The death benefit from the policy is not only income tax free, but can be set up to escape estate taxes.

This is not a fancy concept, just investments held in a life insurance wrapper. These types of investments are wide-ranging, including hedge funds, derivatives, real estate investment trusts and many others.

Think you might need some cash down the road? A PPLI can be set up so you can take tax-free loans from the policy. If you are uninsurable, a neat wealth-building strategy is to use PPLI on a younger member of your family. Compounding earnings — tax-free — is a real wealth builder.

If you are a high-net worth investor, PPLI is a must-look-at technique. Just make sure you work with experienced professionals.

And finally, I want to remind my readers that nobody — especially your author — knows it all. So, how does this column authoritatively cover such a wide array of subjects? It covers subjects with the help of a large national network of experienced and knowledgeable experts. We are constantly exchanging ideas and helping solve clients' and readers' problems.

We want to expand our network to include more experts, so come on readers — join our how-to-make-it, how-to-keep-it club. Show this article to everyone you know — we want their ideas. Of course, we'll give them credit and write about their best ideas in this column.

Send your ideas or your own special needs for lifetime/estate planning to me (Irv) via fax at 847-674-5299, or email me at [email protected]. Together we'll prosper.

Irv Blackman, CPA and lawyer, is a retired founding partner of Blackman Kallick Bartelstein LLP and chairman emeritus of the New Century Bank. He can be reached at 847-674-5295, e-mail [email protected], or at

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