Business owners and other high net worth individuals are very interested in minimizing income taxes. They are motivated to create wealth but often do not focus on estate planning which can help preserve their legacy for the benefit of their families or favorite charities. Visit http://www.cbiz.com for more information.

1. Estate Tax Minimization & Liquidity Planning
“…in this world nothing can be said to be certain, except death and taxes”
Benjamin Franklin (November 13, 1789)
Business owners and other high net worth individuals are very
interested in minimizing income taxes. They are motivated to create
wealth but often do not focus on estate planning which can help
preserve their legacy for the benefit of their families or favorite
charities.
A recent study showed that of the high net worth individuals surveyed
(with assets from $5 million to $25 million) less than one-third have
an estate plan.
Absent new legislation, which is less likely in an election year, the expanded $5,120,000 lifetime gift exemption will revert
back to $1,000,000 after December 31, 2012 and the top estate tax rate will increase from 35% to 55%.
Many individuals have estates that would not be taxable at the 2012 exemption level or would have a larger part of their
estate subject to tax next year at a significantly higher rate.
Estate taxes can be minimized through a variety of simple and advanced techniques that effectively use the expanded
lifetime exemptions available this year. This requires quick but deliberate decisions and action steps so that the planning is
complete by year end.
Once the estate tax minimization planning is underway, a related but separate analysis should be performed to determine
how to best plan for the liquidity needed to pay the reduced estimated estate taxes.
Larger Estates are often composed of illiquid assets (e.g., residences, commercial & industrial real estate, businesses, etc.).
In addition to Federal estate taxes, other transfer costs due at death may require additional estate liquidity, [including or for
example]:
(1) Debts of the decedent;
(2) Probate costs & fees (if applicable);
(3) Administration fees (executor & trustees fees, Legal, Accounting, etc.);
(4) Decedent’s final income taxes; and
(5) State death taxes (if applicable).
There are six main sources available to generate funds to pay estate taxes. These are listed on the next page (including a
general discussion of advantages and disadvantages of each). Please consult with your CBIZ tax advisor and your estate
planning attorney to determine what actions are appropriate to achieve your specific goals and objectives, as each
taxpayer’s situation should be evaluated individually.
CBIZ Trusted Advisors with extensive experience are available to assist you with your estate planning needs. Please
contact Stephen Kunkel at 310.268.2040 or skunkel@cbiz.com at CBIZ MHM, LLC for more information.
CBIZ MHM, LLC

2. Planning For Estate Tax Liquidity
Sources Advantages Disadvantages
Liquidity Is Provided Exactly When Needed. Requires A Current Obligation To Pay Life
Fund Estate Tax Completely Or Partially Proceeds Payable At Death When Estate Tax Insurance Premiums Which Are Typically Gifted
With Life Insurance Proceeds Becomes A Fixed Obligation. If Properly To An Irrevocable Life Insurance Trust (Ilit).
Structured, The Death Benefit Is Income Tax And
Estate Tax Free.
It May Be Necessary To Sell Illiquid Assets
(Residence, Commercial Real Estate, Business
Sell Or Liquidate Estate Assets No Current Funding Obligation. Interests) At A Price Well Below Market Value To
Be Able To Pay Estate Taxes When Due. Timing
May Not Be Ideal To Sell Marketable Securities
(Bear Market/Bad Economy).
Accumulating A Lump Sum To Be Available At An
If Sufficient Liquid Funds Have Been Accumulated, Unknown Date In The Future Is Problematic. If
Sinking Fund-accumulate Cash/Cash Funds Are Accumulated Based On Life Expect-
Equivalent Reserve In Advance Of Need There Would Be No Need To Liquidate Other
Assets Or Borrow Funds To Pay ancy There Would Be Insufficient Funds In The
Estate Taxes When Due. Case Of A Premature Death. Current Returns On
Cash/cash Equivalents Are At Historic Lows.
Continual Funding Obligation.
This Simply Replaces One Liability With Another.
There Is No Guaranty That A Bank Will Be Willing
Borrow Estate Taxes From No Current Funding Obligation. To Loan The Estate Sufficient Funds To Pay
A Commercial Lender Estate Taxes Especially In Light Of The Estate Tax
Lien On The Estate Assets. Future Interest Rates
Are Unknown.
Specific Requirements Must Be Met In Order To
Make This Election. If Qualified, The Deferral
Installment Payment Applies Only To The Estate Tax On Business
Of Estate Tax On Business Assets No Current Funding Obligation. Assets (Excludes Passive Assets). Includes
(If Estate Qualifies Under Irc Section 6166) Restrictions On Sale Or Refinance Of Business.
Other Liquidity Must Be Available For Personal
Assets (E.G. Residences, Marketable Securities &
Non-qualified Businesses).
Redemption May Be Prohibited By Local State
Estate Owned Corporation Shares No Current Funding Obligation. If Qualified, Law Limiting Amount Of Redemptions Based On
Redeemed By Corporation (If Transaction Available Corporate Liquidity Can Be Used To Earned Surplus. Even If Allowable Under Tax And
Qualifies Under Section 303 Redemption Redeem Stock Owned By The Estate To Provide Corporate Law Use Of Corporate Liquidity For
And Local State Law) Cash To Pay Taxes. This Purpose May Impact Corporate Working
Capital (E.G. During Bad Economy Or Period Of
Limited Bank Lending Activity).