Tax Minimization Strategies


Rising taxes may be a concern for many individuals approaching retirement. It may be important to incorporate tax planning into your financial decisions.

Here at Texas Financial Advisory, we offer a wide variety of advanced tax & wealth planning solutions to fit your comprehensive financial needs.

1. Multiple Entity Planning: This is a strategy that involves the creation and utilization of viable separate entities to optimize qualifed plan allocations and benefits for business owners.

– By identifying and separating various revenues within a business, the business owner is able to reduce risk and mitigate tax liabilities.
– Cost savings derived from reduced tax costs and liability insurance fees can have significant impact to the organization’s bottom line profits.

Benefits and tax planning opportunities can be expanded dramatically using proper business and entity planning. It’s critical to make sure all rules pertaining to controlled groups and/or affiliate service groups are followed carefully.

2. Split-Funded Qualified Plans:
A qualified defined benefit plan that enables a business owner to put away as much as 50% or more income vs. a traditional defined benefit plan.

– Higher tax deductible contributions.
– Guaranteed to become Self Completing plan due to life insurance element

3. Traditional Defined Benefit, Defined Contribution, Profit Sharing, 401(k), and Self-Directed IRA Plans:
Every business is unique, and sometimes a traditional tax-deferred plan is the perfect answer.

– Employers may receive tax deductions for plan contributions, while attracting & retaining high-quality employees.
– Employees are able to defer paying taxes on a portion of their income that is invested in such a plan, while providing retirement savings for the future.

4. Section 79 Plans: Flexible contributions and liberal participation rules make this a valuable retirement plan in addition to or as an alternative to traditional qualified plans.

– Plan is voluntary and flexible for business owners and employers
– Contributions are 100% deductible by the business
– Participant reports only 55% to 65% of company contributions as personal income
– Proceeds are accessed tax-free
– The plan is self-completing due to life insurance element.
– Personal, permanent, portable benefits

5. Non-Qualified Deferred Compensation (NQDC) Plans: These can be a great planning tool for highlight compensated employees (HCE), who want to defer part of their compensation.

– Participants can elect to defer a portion of their compensation (income, bonus, etc) and not be taxed on the income until they receive it in the future.
– Typically, these plans are structure so that participants elect to receive the deferred income during retirement years, when their overall compensation is theoretically lower (thereby reducing their tax liability)

6. Advanced Cost Segregation: This is the IRS approved method or re-classifying components and improvements of a commercial building resulting in a reduced income tax liability an an increased cash flow. Cost segregation can be a powerful tool that is applicable to both owners and lessees. TFA’s cost segregation specialist bring a meticulous attention to detail to their craft, making their work stand out above their competition.

– TFA’s cost segregation specialists will conduct an engineered study of commercial property to see what portion of the property
– Net tax benefits typically range from 10 to 30 times the net cost of the study

7. Asset Protection: Planning is becoming more important than ever, given that so many people in dire financial straits are looking to victimize others to replenish their bank accounts. The TFA Asset Protection TEAM is the best in the country, and is utilized by many of the most prominent attorneys in Southern California, due to their specialized expertise in this field.

– Asset & rick insulation
– Domestic asset protection
– Offshore asset protection

8. Alternative Qualified Solutions (AQS): There are two primary AQS strategies.

– Alternative Roth Solution (ARS) – A strategy that provides for the roll-over from any qualified plan into an attractive alternative to a ROTH IRA and financing the taxes due- (including excise taxes if applicable)
– RMD Remedy – Enables an owner of an IRA< Defined Benefit Plan, or other qualified plan to replace Required Minimum Distributions with a flexible tax-free income stream, with little to no out of pocket outlay. AQS Solution Highlights: - Ideal for those who are 60 years of age and under, as well as thoe that are 75 or older - RMD Remedy is ideal for candidates who are 60 years of age or older. - Both ARS & RMD Remedy Solutions benefits include not having to pay roll-over taxes out of pocket. Those taxes can be paid using the funds that are transferred out of the qualified environment 9. Premium Finance Strategies (efficient Estate Tax Mitigation): Access to the country’s most efficient Premium Finance Life Insurance platforms, whereby the end-user has a number of creative strategies to choose.

10. Employee Stock Ownership Plan (ESOP): An ESOP can be an extraordinary financial tool to accomplish corporate goals and generate tremendous tax savings for both the corporation and its shareholders. AN ESOP’s primary purpose and mandate is to acquire stock of the sponsoring corporation and the ESOP is permitted to borrow money to accomplish this goal. There are many flexible uses and benefits

– Creation of a liquid marketplace for closely held stock which provides a viable tax advantaged exit strategy for shareholders under Section 1042
– Sell some or all of the privately held stock and still maintain control

11. Captive Insurance Company: When a business’s growth beings to accelerate, income taxes and overall risk begin to accelerate as well. A Captive Insurance Company may be the answer for the business owner.

– A growing business can choose to pay tax deductible premiums to its own Captive Insurance Company, instead of a 3rd party, saving itself the profit margin that would otherwise have to be paid to that 3rd party.
– Tax deductible premiums can generate tremendous bottom line savings to the business.
– Overall reduction in insurance costs can be an additional benefit to bottom line profitability
– Reduction in risk exposure is a possible benefit, as well, since the Captive Insurance Company will protect the business form its precise exposure to applicable risks, that may not otherwise be insured by a 3rd party.

12. Investment Grade Life Insurance: This valuable asset is created when one maximum funds (pays maximum premiums as fast as possible, using a minimum death benefit by IRS standards) a specifically designed life contract from a highly rated (AA or better) carrier.

13. Alternative Investments Direct Participation Programs: Whereby investors can participate in the profits of leading companies, in growing industries, and enjoy similar risk/reward benefits & potential as the management team enjoys.

– Imagine participating in growing companies, with tremendous business models, but not have your investment exposed to the downside of stock market exposure
– Imagine having your investment produce the same results as that of the management team of a leader in a growing industry
– Examples: Imagine being able to purchase distressed real estates directly from the FDIC at approximately 70% below current market value and sell those same properties to end-users or to investors at 30% below current market value (these numbers are approximations and based on 2011 opportunities).

14. Traditional Long Term Care: An Important component of Today’s most carefully designed Comprehensive Retirement Plans: Non Traditional Alternative Long Term Care Solutions – Designed to be Flexible and offer options. Designed to work in concert within a well balance retirement plan, in order to protect the retirement savings from being depleted unnecessarily.

– If someone pays for this brand of flexible LTC coverage and is lucky enough to not need it, they can take their premiums back and spend those dollars on whatever they want.
– If they don’t need the LTC coverage and they have plenty of liquidity, they can choose to multiply their original investment by converting the LTC coverage into a tax free death benefit.

15. Corporate Disability Insurance (Buy-Sell): What happens if a business partner becomes disabled, but does not pass away? How can his partner buy him out of the company efficiently?

– Corporate Disability Insurance within a Buy-Sell Arrangement provides the ability to protect the company from a catastrophe like this.
– We can mitigate this risk with the help of Uncle Sam by using pre-tax dollars to pay for this.

16. In-House Bookkeeping Team:

17. Asset Valuation:

18. In-House Medical Underwriting When one of your clients requires a solution that involve insurance, it is always best to qualify for the highest rating and therefore cheapest cost.

– TFA has secured the services of one of the country’s most respected physicians, who reviews cases where there could be potential iusses, and writes an opinion that carries a lot of weight with the underwriters that make this important decision.
– In some cases, this arrow can mean the difference between someone qualifying for a solution or not. In other cases, this arrow can save a client tens of thousands in unnecessary expenses.

19. Health Insurance Efficiency Audit (HIEA): As health insurance costs continue to spiral out of control, business owners are their employees are left to deal with this increasingly growing problem. TFA offers a Health Insurance Efficiency Audit that can save as much as 50% of unnecessary insurance expenses.

– Many companies are paying for “Rolls Royce” health insurance for their employees, buy they are not taking advantage of all the benefits provided.
– The HIEA enables our TEAM to see if a custom designed Health Insurance Solution would provide the benefits that the company wants and needs at a price that may be 50% lower than what they are currently spending.

20. Professionally Manged Money: TFA works closely with some of the top money managers in the world. There are a handful of money managers, who make up the top 0.1% of all managed money, who consistently outperform their competition and have demonstrated that they can follow their systems religiously. Our analysis focuses on their specific strategies and how well they play defense.

– When most mutual funds and hedge funds are down 40% or more, the money mangers we are attracted to show losses of less than 10%
– When everyone is doing well, these same money managers are outperforming their competition by at least 10% or more

21. Lifetime Income Solution: As a large portion of the US population enters retirement during what appears to be very uncertain economic times, they are looking for a predictable, “risk-free” retirement income stream that outpaces inflation and lasts for the rest of their lives.

There is only one instrument that delivers lifetime income guarantees, and that solution comes in the form of an Annuity Contract from a strong carrier. Each contract can be designed to provide different benefits, so understanding and matching the universe of options with a client’s needs is critical.

– Imagine a 10% or 20% bonus just to get started, plus an 7% yearly income guarantee that comes form a highly rated insurer with over $45 Billion of excess assets beyond their liabilities.
– Imagine earning up to 22% per year with the upside of the stock market, without any downside risk to principal

Imagine taking income for life, and having that guaranteed income grow when the market is up, and when the market is down, the income stays at its high point, so it always stays two (2) steps ahead of inflation.

22. Research & Development Credits: Businesses that bring in new products and ideas to the marketplace are specifically encourage to do so by specific sections in the Tax Code. One of those sections has to do with R&D credits, which when property accounted for and documented, enable the business owner to enjoy a direct (1 to 1) reduction in taxes owed by the cost incurred.

– Instead of just writing off the costs to develop the product or derive against the revenues generated, R&D credits can simply reduce the amount of taxes owed by the amount of credit.

23. Charitable Lead Annuity Trusts (CLAT): Given the currently low interest rate environment, CLATs have gained in favor recently as a tool to reduce income and estate taxes efficiently. A CLAT can be set up to pay a charity a set amount for a set number of years, and those amounts are based on interest rates. Whatever is left over in the trust is transferred to the heirs.

– If a client want to reduce their income tax liability chooses to make a gift to fund a CLAT, they will receive a tax deduction for that contribution, which will reduce his tax liability
– That CLAT will have to make a payout to a specific charity in an amount based on interest rates.

The lower the interest rates, the lower the payout. Whatever is left in the CLAT beyond that specific payout amount will be transferred to the heirs of the originator of this plan.

24. Life Settlements: An Innovative Retirement, Estate Planning, Philanthropic and Liquidity Generation Tool Life Settlements is another name for the secondary market for life insurance policies, which works like an over the counter stock exchange, except the assets are typically A+ rated or better and their final value is set as the death benefit amount. What is not kown are the exact date of maturity and how much more in premium must be contributed

– Some people may decide that they do not need their life insurance policy any longer. Whether it is a convertible term, a whole life, or universal life policy, the life settlement marketplace will give us the very best valuation.

25. Corporate Planning & Risk Management for Emerging Growth Companies: Many young growing companies are under capitalized, under-resourced and are in a constant state of guessing and reacting. One of TFA’s arrows is an experience corporate strategist and former chairman of a publicly traded international technology firm, who specializes in helping these companies to plan effectively, to provide resources that efficiently address their challenges, anticipates them, so that there is less business improvisation and better outcomes. Nothing can take the place of experience, and that is exactly what TFA delivers with this arrow.

26. 1031 Exchange Platform: While you may be aware of the 1031 exchange rules for selling and buying real estate, TFA provides access to a web-based platform that makes the process of exchanging properties simple for the end-users and their advisors.

– Instant exchanges created 24/7 for all types, including: reverse, standard and improvements
– On-line appointment created at your convenience for higher level of service
– Security through instant creation of “qualified trust” which requires signature for bank to move funds once account is funded
– Professional directory for CPA to feature firm benefits and qualifications for thousands of investors to review

Please note that withdrawals will reduce the contract value and the value of any protection benefits. Additional withdrawals taken within the contract withdrawal charge schedule will be subject to a withdrawal charge. All withdrawals are subject to ordinary income tax and, if taken prior to 59½, may be subject to a 10 percent federal additional tax. 

Your investment advisor is not permitted to offer, and no statement contained herein shall constitute tax or legal advice. You should consult a legal or tax professional on any such matters.