American Society of Plastic Surgeons October 28, 2012 New Orleans Presented by Moskowitz, LLP

American Society ofPlastic SurgeonsOctober 28, 2012New Orleans

Presented by Moskowitz, LLP www.moskowitzllp.com

Seminar Presenter:

Stephen M. Moskowitz, Esq.; Tax Attorney; CPA; LL.M. [Tax]Senior Partner at Moskowitz [email protected]

www.moskowitzllp.com180 Montgomery Street San Francisco, CA 94104 (415) 394-7200

mailto:[email protected]

LEARN HOW TO PROTECT YOURSELF!

Doctors are targets.Everybody wants your money.Protect your assets and income from:

CreditorsSpouseTax – Federal and State


Asset Protection

Captive Insurance CompaniesForeign/Domestic – Migration ProvisionsDomestic Asset Protection Trusts [DAPT]

Grantor can be beneficiaryThird Party Irrevocable Trust

Grantor cannot be beneficiaryGrantor hires/fires trustee – including best

friend“Floating Spouse” Provision


Asset Protection-Con’t

Hybrid Domestic Asset Protection TrustGrantor not beneficiary but can be addedSurvives bankruptcyNot part of martial estate

Grantor can indirectly access with “floating spouse”

Trustee can split into separate trusts/LLCsThird Party Discretionary Trusts

“Sole & Absolute Discretion”


Fraudulent Transfer – 2 Year Statute of Limitations

Not available to spouse/creditor [divorce]Not available to pre-existing creditors – after

Statute of LimitationsGrantor retains veto power“Charging Order” – exclusive remedy

IRS Rev. Rul. 77-137 Who Pays Taxes?

Nevada Advantages


Captive Insurance Companies Lower Insurance Costs:

Enter reinsurance market – increase deductiblesCosts at wholesale not retail

Cash flow – investment income/loansWriting unrelated risks for profit

Competitive advantageAsset Protection – protected premium/different

nameDomestic or Foreign Location – IRC 953[d]“Rent a Captive”


Advance IRS APPROVAL

IRS Letter RulingsSafe Harbor RulingsIRS Rev. Rul. 2002-89: Captive Insurance

CompanyIRS Rev. Rul. 2002-90: Related Captives +

InsuranceIRS Rev. Rul. 2002-91: Unrelated Captives =

InsurancePresented by Moskowitz, LLP www.moskowitzllp.com

Insured Risks Examples

Loss of revenue – business/investment Crime/terrorismComputer system failure/data breachLitigation risks –

professional/employer/businessAuto/general umbrellaDisabilityLoss of significant supplier/client typeTax – change in law/audit defense


Income tax deduction – IRC 162 – unlike self insuranceIncome – tax free $1.2m or more IRTC 831[b]Deferral – as long as desiredInvestment income – 70% tax free – IRC 243[a]Ordinary income to capital gains – IRC 1[h][B]State taxes – 100% deduct – but can avoid payRetirement – capital not ordinary & no employer

match

TAX - Income & Estate


Income Tax Rates–Married

$0-17.4k $17.4k-70.7k

$70.7k-142.7k

$142.7k-217.45k

$217.45k-388.35k

Over $388.35k

0%5%

10%15%20%25%30%35%40%45%

10%

15%

25%28%

33%35%

15% 15%

28%31%

36%40%

2012 2013Presented by Moskowitz, LLP www.moskowitzllp.com

Income Tax Rates-Con’t

Long Term Cap Gains

Qual 5 Yr Cap Gains

Qual Div Income Ordinary Div Income

0%5%

10%15%20%25%30%35%40%45%50%

15% 15% 15%

35%

20% 18%

40% 40%

23.80% 21.80%

43.40% 43.40%

2012 2013 2013 including medicare tax


Gift & Estate Taxes

Provisions expiring 12/31/2012

Transfer $5.12m per donor without tax

Asset Protect – removing asset from grantorCaptive Insurance Company – transfer without

gift/estate tax


Estate Tax Rates - 2013

$1-1

.25

$1.2

5-1.

5

$1.5

-2

$2-2

.5

$2.5

-3

$3-1

0

$10-

17.1

84

$17.

184+

0%

10%

20%

30%

40%

50%

60%

41% 43% 45%49% 50%

55%60%

55%

*in millions


Life Insurance

Irrevocable Life Insurance Trust [ILIT]Remove value of life insurance from

estateSurvive 3 years after transfer

ILIT purchase additional insurance no 3 year rule

ILIT is beneficiary of insurance policyRetain control of payments to beneficiaries

Asset protectionCreditors/spouses


Qualified Personal Residence Trust

Exception – continue residence & pay rentDie before trust term expires – real estate in estateSplits title for value – appreciating asset

Asset protection

Removes home from estate

Continued residence 10-15 years

When trust term expires, real estate transfers to benefactor


Grantor Retained Annuity TrustTransfer Income Producing Property

Stock, rental real estate, businessReceive income, but asset to benefit at trust

termSplit titleAsset in estate if death before trust termAssets cannot be transferred without

grantor


Revocable Living Trust [Will]

Living trust offers many benefits a will does notAvoids probate

ExpensiveTime consuming [9 months – 2 years average]No privacyBeneficiaries have no control No protection if you become incapacitated – court

can take control of assetsJoint ownership only postpones probateAsset protection – special needs/creditors


Give beneficiaries ownership interests

Can keep desired interestCaptive Insurance CompanySplit titleManagement controlAsset protection

LLCs


Use Both ExemptionsHusband & Wife- Two Trusts

Portability Expires 12/31/2012


Converts appreciated asset into:Lifetime incomeIncome tax deductionAvoids gift/estate tax

Charitable Remainder Trust


Charitable Lead Trust

Removes asset[s] from estateIncome goes to charity for trust termTrust assets go to beneficiary after

trust termSplits titleAsset protection


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


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.


Thank You!

Documents

American Society of Plastic Surgeons October 28, 2012 New Orleans Presented by Moskowitz, LLP