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BUSINESS & RETIREMENT

Income Tax Savings. In today’s world — at least at the present time — the avoidance of estate tax is not a concern for the vast majority of individuals living in Florida. The federal estate tax impacts far less than 1% of the population; and there is no state estate tax for one living in Florida. However, the careful structuring of your affairs can have a sizable impact upon your incometax exposure. If you are a professional or entrepreneur, careful structuring of your business can be critical in this regard, including choices as to the form of your business (e.g. sole proprietorship or LLC or S corporation or Partnership). The careful structuring of your business is even more critical after the Tax Cuts and Jobs Act of 2017, which made massive changes in previously existing federal income tax statutes. For example, should your business be bifurcated into more than one entity, in order to best take advantage of the new “qualified income” deduction which can insulate as much as 20% of the income which you earn, or which your business earns, that was formerly subject to taxation? Substantial opportunities, as well as pitfalls, exist as a result of the new tax law.

Succession Planning. If you are a business owner, or a professional, careful planning for the succession of your business or professional practice can determine the income tax impact of such succession on yourself and those who succeed to your business or professional practice.

Additionally, if you wish one or more of your descendants to take over your business, how do you equitably treat other descendants? What will be the relationship of a descendant whom you wish to inherit your business with other individuals who have been loyal employees? The careful drafting of a succession agreement, often referred to as a “buy-sell agreement,” as well as careful planning for life insurance on your life that may be necessary to fund the purchase by another of your business upon your death, can be very important.

Retirement Plans. If you are approaching retirement, careful planning as to how you structure your IRA or other retirement accounts, whom you designate as beneficiaires, and whether or not you designate that your retirement account(s) shall be held in trust for future generations, will have substantial income tax consequences for you and for your beneficiaries after your death. If you do not wish to leave your IRA or other retirement account outright to a descendant, and thereby risk that that descendant will immediately liquidate that retirement account to buy his or her favorite expensive vehicle, or engage in other extravagance, you may wish to leave that account to a trust. Doing so, and thereby preserving the ability of the retirement account to continue to accrue income and grow free of income tax so long as the assets remain in the retirement account, can be very advantageous. At the same time, the provisions of the trust which you have designated to hold that retirement account must be drafted very carefully so as to meet IRS requirements that enable the retirement plan assets to remain in the retirement account, accruing earnings tax-free, for as long as the life expectancy of the beneficiary, while leaving to the Trustee of the trust you have created the discretion to withdraw from the retirement account and distribute to your descendant as little as the minimum distribution required by the IRS in each year, or as much, over and above that required minimum distribution, as the Trustee of the trust you have created wishes to distribute.