Everyone Else

The decision to spend the time and develop a formal plan is one of the most important steps you can take. An old adage states that achieving your goal is 90% preparation and 10% perspiration. In other words, preparing and planning to meet an objective are crucial to success.

In the personal arena, the keys to proper preparation are knowing what obstacles stand between you and your goals, then developing a plan to address those obstacles. For Americans, the greatest obstacles or threats to success fall into several categories:

Taxes

Without a doubt, taxes are the largest single expense for Americans. Studies have shown that we spend more on taxes than on food, shelter and clothing combined. Taxes take many forms, including income taxes, inheritance taxes, estate taxes, luxury taxes, and sales taxes (to name a few) that can deplete your hard earned money. Plain and simple, saving money means reducing taxes. ABA can help you do that.

Lawsuits

The second threat is more ominous - lawsuits. The reality of America's legal system is that it affords people the opportunity to sue virtually anyone for any reason. All too often we hear the story of someone losing their nest egg to a lawsuit, a claim by creditors. With success will come the temptation by others to try to steal your success. But if you structure your affairs properly, you can lessen the blow of a major lawsuit by limiting your exposed assets. Alternatively, you can avoid some lawsuits entirely by removing assets from your personal realm.

Estate Planning

One area of taxation that is of particular concern is the estate tax. In the summer of 2001, a major tax act was passed and signed into law. This act, the Economic Growth and Tax Relief Reconciliation Act of 2001, purportedly eliminated the estate tax. This simply is not true. The estate tax under the Act will be eliminated for the year 2010 only. More importantly, the field of estate taxes brings us squarely within the realm of estate planning, an area where most Americans are deficient.

Estate planning entails more than just reducing taxes on your estate. It encompasses a whole range of needs from medical care directives to guardianship provisions for minor children. A proper plan will address many different areas that affect your life beyond distributing assets upon your passing. If you think that a proper estate plan is not important, ask yourself these simple questions:

• Who will make medical decisions for me if I am unable?
• Who will care for my minor children if I become incapacitated or unable to care for them?
• Who will handle the transfer of my assets before and/or upon my passing?
• Will my life insurance proceeds be subject to estate taxes?
• If I become incapacitated, who will take care of my financial needs?

If you did not have a firm answer to one or more of these questions, you need to develop a plan. Anderson Business Advisors can help you address the issues related to those questions and can give you answers. This is all part of the planning process.

Depending on where you are in your journey, you may be more interested in preserving your wealth and passing it on to others than you are in creating wealth. Either way, Anderson Business Advisors can address your concerns and help you create a solid plan.

Much like an architect would contact a builder to determine how a project would be built, at Anderson Business Advisors, we view your financial plan as a financial blueprint from which we can determine what tools will be necessary to build your plan. All of these questions can become answers in a proper plan.

Typically, people are under the impression that building and preserving wealth require the same sets of tools. This is not the case. Preserving wealth takes a different set of tools just as building a house would require different tools from those needed to build a car. Proper planning requires finding and effectively using the proper tools to build your life-saving plan.

From a liability standpoint, a Limited Partnership or Limited LiabilityCompany are two finely crafted tools that can be used to protect your most valuable assets from overzealous creditors. These entities are often used to hold rental real estate, brokerage accounts, or other valuable assets. Why risk losing your most valuable assets when the tools necessary to protect them can be established easily and maintained with very little ongoing effort.

Why settle for liability protection only when tax savings are an added component of using these protective tools. Limited Partnerships, Limited Liability Companies, and Closely Held Corporations permit the owners to split income with lower-bracketed taxpayers. The net result for many families is annual tax savings ranging from a few to many thousands of dollars. In some instances, children can earn several thousand dollars tax free.

Living Trust

As with any plan, an exit strategy is just as important as your entrance and ongoing business operations. A proper estate plan is your exit strategy. The common misconception about estate planning is that people often believe that a simple will is all they need. A will, however, is only effective upon your passing and requires court involvement, known as probate. The probate process alone can liquidate between 4% and 10% of the gross value of an estate, not to mention the time your heirs will have to spend in the court proceedings (six months to two years is a conservative average). A will does not address issues such as medical instructions, gifting schedules, guardianship provisions, or other planning issues that should be broached while you are alive and well. However there is a document that will address all the issues from the time you implement it until the time your estate is distributed: A revocable Living Trust.

What to Do With Life Insurance?

If you are like most Americans, you also have life insurance. Did you know that life insurance proceeds are subject to estate taxes? If you own a $1,000,000 life insurance policy, it would not be uncommon for at least a third of the life insurance proceeds to be lost to taxes. This is true even for second to die policies because the monies received from the policy will still be a part of the surviving spouse's estate. However, like most of life's problems, there is a simple solution: an irrevocable life insurance trust.

Simple to create, an irrevocable life insurance trust holds the policy on your life. The use of the irrevocable life insurance trust removes the value of the policy from your estate. If the value of the life insurance policy is not part of your estate, it is not subject to estate taxes.

These are just a few of the financial tools that are available to you at Anderson Business Advisors. We will try to determine what tools are appropriate for you to use now and what tools may be of use to you in the future. If you follow the five-step ABA approach, the periodic review will be the time when it is determined whether or not new tools may be useful. We are here to help.

To speak with a representative, call us at 800.706.4741 or email us.