Newport Beach Estate Planning Attorney Shares Tips on How to Plan Like a Billionaire

8:48 pm Asset Protection, Estate Planning, Tax Planning

estate plan 150x150 Newport Beach Estate Planning Attorney Shares Tips on How to Plan Like a BillionaireAn excellent post yesterday at Forbes.com by financial writer Deborah L. Jacobs examines the estate planning strategies used by billionaire tech executives like Mark Zuckerberg of Facebook to transfer wealth and protect assets from taxes and creditors.

The post is lengthy, but worth your time.  Here is a list of the strategies Jacobs has gleaned from watching the estate planning moves made by these wealthy individuals (especially relevant information for anyone involved in a pre-IPO situation):

Gather an “A” team of financial and legal advisors.  Choose advisors for the long-term and use members to provide checks and balances, with one acting as quarterback for the group.

Exercise options strategically.  Not paying attention to options until they become highly valuable can be a costly mistake.

Pre-pay tax on options.  Some companies allow for exercising options before the end of the vesting period.  Usually associated with an 83(b) election, this allows the option holder to report the income and pay taxes before the options vest.

Use gift tax exemption wisely.  Making gifts at the pre-IPO stage when asset values are lower allows you to pack more into gift tax exemption limits.

Capitalize on no-risk or low-risk wealth transfer strategies.  A grantor retained annuity trust (GRAT) allows you to bet on the upside potential without downside risk.

Sell assets instead of giving them away.  Using an installment sale to an irrevocable grantor trust allows older family members to sell assets to a trust to benefit younger generations.

Build in flexibility.  Uncertainty should not delay planning.

Build in protection against creditors.  Asset protection trusts – both foreign and domestic – can help shield assets from creditors.

Offset spikes in income with gifts to charity.  Donating company stock to a charity avoids capital gains tax.

Help is available to you by contacting your Southern California financial planning experts today.

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