Joe is a business owner who started as a salesperson. He is 60 years old and plans to sell his business in 10 years. According to the professional valuation, the market value of the business in 10 years will be $50 million, and it is predicted that the tax liability will be close to $13 million using today’s tax rate. Joe has worked hard for 35 years and thinks that the capital gains tax is too burdensome, and would like to know his options to legitimately reduce the tax payable amount.
In order to effectively prepare for the huge tax liability upon selling the business, we recommended using life insurance to accumulate sufficient cash value to meet the need for tax liability and to pass down part of the wealth to the next generation. The timing of adopting this plan is very critical. If he starts after 10 years when he sells the business, its effectiveness will be greatly reduced. But if he starts now, Joe will face tight cash flow issue. In the end, we solved Joe’s cash flow problem through integrating a bank loan, enabling this plan to be implemented immediately.
Under this tax reduction and inheritance strategy, Joe will save several millions in capital gains tax. After his death, his family will receive a payment of $15 million through the insurance policy.
In the end, we solved Joe’s tight cash flow issue through integrating a bank financing program, enabling the successful implementation of this exit strategy.
Having an effective exist strategy as part of Joe’s holistic wealth transfer plan, Joe will save several millions in capital gains tax leaving higher wealth to be transferred to the next generation. Further more, after his death, his family will receive a payment of $15 million through the insurance policy.