Back to School

I could be one hundred years old but it seems like I can’t shake the recurring nightmare of having a final exam that I didn’t study for except  that in my case seems to be more reality than fiction. I recall more than a few classes in college where I arrived to take the final exam and wondering once the teacher passed out the final exam, if in fact I had taken that class during the semester!

My youngest just started her senior year of high school. There is something about kids going back to school that also refocuses the parents.I haven’t posted on Taxman.com for awhile although it seems in my absence that it has been well visited. In the meantime I have been trying to post a new article each week on JD Supra. Separately I try to write three or four articles to publish each year in tax periodicals. The JD Supra articles are 1500-2000 words. The tax periodical articles are usually 5,000-7500 words. A person only has so many words in them. The reality is that my articles have been well read on JD Supra in spite of the fact that they can be targeted niche topics. 

The new goal is to blog 2-3 times per week with with short technical comments and posting my JD Supra articles. Short and sweet! With school back in session my year end focus is on a few key projects. First, i continue to promote my discriminatory defined benefit program. I maintain that every business owner would love to have a defined benefit pension plan if only they didn’t have to contribute for their employees. I have the Plan. Yes, your employees have to unionize but it is worth it. The tax rules allow for it and unions have been legislatively favored. Why not point the “gun” back at the federal government and exploit this “black and white” provision to your benefit. The union (or at least my union) has no interest in a corporate takeover of your company plus my collective bargaining agreement does not allow for it. If you can think of a more straight-forward tax benefit than a qualified plan contribution, let me know. A fifty year old business owner can achieve a 250-300k tax deductible contribution for himself and double the benefit by adding the spouse to the plan.

It may be a radical idea for most for a business owner to unionize his employees but it is a “win-win” situation for the business owner and the employee. The business owner achieves greater benefits for himself while the employee receives better benefits for himself under the union plans.

I like the captive insurance solution for a business owner but the pension plan administration costs are much lower than the costs of captive administration. Also, the pension plan has lower audit risks than a small captive in my opinion.

My other areas of focus include how to get “gringos” to retire in Puerto Rico instead of expatriating. The PR adopted cutting edge tax incentives that are very attractive in my view. Move to San Juan instead of Boca or Orlando!

I also have another part of my practice focused on tax reduction and deferral strategies for trial attorneys with contingency fee income along with the tax treatment of settlements and damages. This is an area that continues to intrigue. Civil settlements and judgments total approximately $250 billion per year with trial  attorney compensation in the $80-100 billion range. Very few attorneys take advantage of the ability to defer their contingency fee income because the fixed annuity product looks uninteresting from an investment standpoint. I have been advocating the use of private placement variable deferred annuities as an additional solution in order to remedy the option. 

I read a law review article by top tax law professor bemoaning the fact that lawyers have this income deferral solution without any cap. The problem is that most attorneys don’t even know that they have this option. 

in closing, you will hear from me more often (my apologies in advance) but the “light bulb” does go off frequently with a good thought or idea without having to write a technical dissertation each and every time. 

See you in the schoolyard!

About gerrynowotny

I am a tax and estate planning attorney with a JD and LL.M in estate planning from the Univesity of Miami School of Law. I have worked in the life insurance industry for twenty three years and the last eleven in private placement life insurance.
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