textfiles-politics/politicalTextFiles/seven.txt

          
          
                     ASSET PROTECTION AND TAX SAVINGS
          
               While it is very nice to save on estate taxes,
          most would be much more interested in saving taxes this
          year, right now while you are still alive.  The "estate
          plan", when properly implemented has the delightful
          side effect of making excellent use of your children
          before they thought they could, or were inclined to be,
          helpful.  Remember that children over the age of 14
          have their very own tax brackets which start at 0% and
          linger at 15% for a time or so, just as yours did, and
          only after more income than they will make or than you
          need to give them for their support jump up to the
          higher tax brackets.  It is possible, especially for
          the self-employed,to cut the total tax bite in half by
          simply spreading the tax liability among family
          members.
          
               At this point you say, "Now just a minute, I know
          what you are about to say, and I assure you that giving
          assets or income to my children at this stage of their
          teenage lives is a type of suicide that I do not
          contemplate."  You are right!  Let me assure you that
          no one is foolish enough to suggest that any assets or
          income should be put under the "control" of children,
          who at the age of 16 think that a 944 Porsche turbo
          something or other is an appropriate investment.
          
               The Family Limited Partnerships, and Children's
          Trusts allow income to be attributed to the children's
          tax brackets while leaving the "control" and "use" to
          more responsible parties.  In the case of the Family
          Limited Partnership, the more responsible party would
          be you.  In the case of the Children's Trust, that
          person would be a trusted other.  However, the children
          and their guardians, and once again, you, would be able
          to have lower tax bracketed dollars available for
          luxuries such as family trips, piano lessons, math
          camp, private schools, college, medical school, etc.
          
               Consider this:  Mr. and Mrs. Business Partners set
          up a Children's Trust for their children and funded it
          with real estate in which their business was housed.
          The kids wanted the building to be a retail space
          suitable for an ice cream parlor, but since they were
          not in charge of the decisions, the building purchased
          was an 80,000 square foot steel and block industrial
          building suitable for the parent's manufacturing
          business.
          
               The business, which had a good profit picture and
          cash flow, paid rent to the Children's Trust, thereby
          writing off the lease payments at a higher tax bracket
          than the children's tax bracket and accepting the
          payments in the lower children's bracket.  Tax savings
          were realized each year.  In addition, Mr. and Mrs.
          Business Partners suggest to the Children's Trust,
          that, with the profits from the lease, it could buy
          office equipment which it could lease to the business
          on a "one year renewable lease" for market lease
          payments, i.e., 75% of the value of the equipment each
          year.  More tax savings were realized.
          
               It is only incidental to this discussion on the
          advantages of the "estate plan" to mention that when
          Mr. and Mrs. Business Partners went out of business
          because the widgets which the parents were
          manufacturing were replaced by a new super duper better
          thing, the Children's Trust survived the parent's
          bankruptcy and with the appreciated value of the real
          estate and value of the still owned equipment, sold its
          assets and loaned Mr. and Mrs. Business Partners
          $500,000.00 to start a new business.
          
               The above examples are illustrative of the old
          adage, "divide and conquer."  If they only file a joint
          return, no married couple will ever get ahead tax wise.
          If through a proper estate plan additional entities are
          created the serve the dual purpose of providing lawsuit
          and asset protection while dividing income into lower
          tax brackets.  Creating additional entities does itself
          provide a record keeping and filing burden. It is bad
          enough facing April 15th each year with one
          incomprehensible form!  However, if you are unwilling
          to pay attention to the details there are others who
          will do it for a fee.  Failure to care may result in
          exposure to judgments and the possible greater burden
          of "starting over."