Top 10 Wealth Planning Secrets for Successful Business Owners and Executives

Wealth planning tips for business owners and executives

Secrets of Wealth Planning and Financial Planning

Today’s successful business owners and executives do not run their companies simply to generate more business for themselves. Most want to maximize their personal wealth while addressing most if not all the 5 cornerstones of wealth management and wealth planning for a complete financial picture:

Making smart decisions with money, beyond solely investing
Mitigating taxes
Taking care of their heirs, their legacy
Protecting their assets from being unjustly taken through litigation, divorce, or uncovered risks
Maximizing the impact of charitable works

As a business owner or executive, you most likely have similar goals.

Accomplishing even one of those goals can be challenging for driven business owners and execs. You have complex situations and many “moving parts” to your businesses and financial lives. Investment management solutions alone—even cutting-edge methods—simply can’t provide the tools necessary to capture the opportunities and mitigate the risks that you face.

That’s a fact well recognized by some of the most successful business owners today—the self-made super-rich, with a net worth of $500 million or more. Super Rich deliberately and consistently makes a point to seek out advanced solutions that go far beyond investment management into areas such as tax mitigation, asset protection, business succession planning, and charitable giving.

Based on our research of the Super Rich, we have identified the top 10 wealth planning strategies that these elite entrepreneurs implement (in partnership with their wealth management teams and virtual family offices) to pursue their most important professional and personal goals. You too can use these same strategies!

Will you need all 10 of these strategies in your life? Maybe not. But it makes good sense to discuss them with a qualified wealth manager and wealth management team who has the knowledge and skills to not only determine if a strategy is right for you but who can bring the right experts to the table when it is time to deploy the strategy. According to a recent study conducted by AES Nation, less than 7% of financial professionals are equipped to assist a client in this capacity, which makes choosing the right advisor the first step to achieving all that is most important to you.

1. Defined benefit plans

Too often overshadowed by more familiar defined contribution plans like 401(k)s, defined benefit plans can potentially offer much more significant advantages to successful business owners. Defined benefit plans can allow you to make larger contributions than are possible through other qualified retirement plan options, expand tax deductions and tax-deferred growth, and potentially receive a substantial share of the money contributed and the returns generated (while also rewarding employees).

For more: Read “A Benefit Plan That Can Really Benefit Business Owners”

2. Charitable trusts

Charitable trusts are very powerful tools for many philanthropic-minded entrepreneurs for a number of reasons. A charitable trust can be a way for you to eliminate capital gains when selling appreciated assets such as your business. If you gift some or all of the appreciated equity in your business to a charitable trust, and the trust sells it, the capital gains taxes on the equity will be eliminated. A percentage of the money in the trust can be used to provide you (or someone you designate) with an income stream, and—perhaps most important—a nonprofit organization of your choice will end up getting funding.

For more: Read “Five Ways to Avoid—Not Evade—Taxes” and “Take Care of Heirs and Charities with a CLT”

3. Trusts for freezing the value of a business

Using a trust to freeze the value of your company can help you pass on sizable sums to your heirs, free of estate taxes. These solutions can be flexible and tailored to your specific situation and goals. It may make sense to consider freezing the value of your company if you anticipate selling the company, you expect it to appreciate in value, you want your wealth to benefit your heirs, and you want to avoid paying gift and estate taxes.

For more: Read “To Eliminate Estate and Gift Taxes, Feel the Freeze!”

4. Captive insurance companies

captive insurance company, risk management tool, reduce income taxes

An important risk management tool, a “captive” is a closely held insurance company set up to insure the risks of the parent company. The owner of the parent company wholly owns the captive insurance company. That means the business owner controls the captive insurance company’s operations—including underwriting, claims decisions and the investment strategy (within set parameters and conditions). With captives, you can often reduce income taxes because the premiums paid into a captive insurance company can potentially be tax deductible. Most importantly, captives are a powerful risk management tool.

For more: Read “Harness the Power of a Captive Insurance Company”

5. Asset protection trusts and corporate entities

Unless you take steps to protect the assets you have worked so hard to build, you may jeopardize the financial security of yourself, your company and your family. Done right, asset protection strategies build a wall around your wealth that creditors, litigators, ex-spouses and others can’t easily breach.

Instead of trying to fight it out with you in court for months or years and risk losing, the litigant sees that the only reasonable option from a legal standpoint is to settle for pennies on the dollar—or, ideally, to walk away empty-handed. The ability to use trusts and corporate entities can be very effective in dealing with frivolous or unfounded lawsuits.

For more: Read “Asset Protection: Five Smart Ways to Build a Moat Around Your Wealth”

6. Longevity with financial planning and wealth planning

wealth planning, financial planning, registered investment adviser

Medical advances mean you may live to 100 or beyond—but your wealth may not be positioned to last nearly as long. Due to longer life spans, many successful business owners and other wealthy families should rethink their existing estate and financial plans and even their entire mindset about wealth management and wealth transfer. Indeed, the potential to live much longer can create a financial planning and wealth planning minefield for you and your advisors.

For more: Read “The Case for Advanced Longevity Planning: Are You Ready to Live to 100?”

7. Insurance to pay debts

Various types of insurance can help fund certain taxes and other potentially hefty bills. For example, premium-financed life insurance can possibly help your family more economically pay estate taxes upon your death, while also enabling you to free up significant amounts of cash to reinvest in your business today. Likewise, key person insurance provides a business with money to handle financial losses that can occur when a person who is vital to the company’s success prematurely dies—helping ensure the business remains viable.

For more: Read “Borrowing to Buy: Why Premium-Financed Life Insurance Makes Sense” and “How Key Person Life Insurance Can Keep Your Business Afloat”

8. Life insurance to generate income

A permanent life insurance policy allows you to accumulate money in the policy’s cash account that can be used to pay for future expenses. The money in the cash account normally grows tax-deferred but you might be able to do even better and avoid paying taxes at all (even on the gains in the cash account) if you set up the policy in a certain way. For example, many successful entrepreneurs use this approach to deal with various concerns such as cash management issues for their business, and to enhance their retirement incomes.

Meanwhile, another type of life insurance—private placement life insurance—can potentially mitigate the tax bite from a variety of different types of investments and make it possible to eliminate all income and capital gains taxes. It can also give entrepreneurs greater control over the investments in the policy.

For more: Read “How the Super Rich Avoid Paying Taxes on Their Investment Income—Legally— Using Private Placement Life Insurance” and “Using Life Insurance to Help Fund Retirement Needs”

9. Reduce or eliminate taxes on the sale of the business

vtax professional, financial future, retirement planning, tax management

Entrepreneurs looking to sell their companies or divide up business interests can explore several powerful options. Tracking partnerships, for example, can enable some businesses with multiple owners to split up ownership interests in tax-advantaged ways. Here again, so-called freezing trusts can be used to potentially save business owners millions of dollars in estate taxes when they sell. There are also trusts that can help you manage the capital gains taxes when you sell.

For more: Read “To Eliminate Estate and Gift Taxes, Feel the Freeze!” and “Fed Up with Your Business Partner? Consider This Tax-Smart Tool to Go Your Own Way”

10. Foundations

Affluent business owners who want to support charitable causes in tax-efficient ways—and do so with the maximum amount of allowable control over that process—might consider setting up their own private foundation. A private foundation is a not-for-profit organization that is funded primarily by a person, family, or corporation. The assets in a private foundation—the endowment — are regularly invested to produce income used to make grants to other charities as well as to support the operation of the private foundation. These types of giving vehicles can be complex to set up and run. Alternatives to private foundations are donor advised-funds and a certain type of charitable trust depending on the objectives of the entrepreneur.

For more: Read “Philanthropic Giving: How Much Control and Complexity Do You Need?” and “What Private Foundations Could Teach You About Being a Better Philanthropist”

If you would like access to the articles listed or explore how these wealth planning or tax planning strategies can help your financial goals, contact our office at 715-544-1610 or via email at service@silvertreeplan.com.

Schedule a call with one of our financial advisors to discuss your unique investment decisions or to learn more about our financial planning with purpose and virtual family office.

About the Author

This material is intended for educational purposes and does not constitute a solicitation to purchase a security or advisory services. Jason Glisczynski and Silvertree, LLC. has retained CEG Worldwide to conduct research and prepare informational materials for their use.

This material has been researched and prepared by BSW Inner Circle and its affiliates, CEG Worldwide, LLC and AES Nation, LLC. Jason Glisczynski is a member of CEG Roundtable and pays an annual fee for these services. Jason is involved in these activities through Silvertree, LLC.