Discriminatory Defined Benefit Plan – The Certain Way to Reduce Taxes for the Business Owner in 2013

Chances are you have not been able to focus on your client’s 2013 taxes until they filed their 2012 taxes. Chances are also pretty good that your clients just filed your 2012 taxes this past week. The question is with two and half months remaining in the year, what are you going to do to reduce your client’s tax burden in 2013? If you ask yourself, when was the last time my client’s CPA provided him with a tax idea that saved the client any money in taxes, you may be not be able to think that far back?

Here is an idea to consider without raising the eyebrows of our friends at the IRS – a discriminatory defined benefit plan. Ordinarily, the “discriminatory” part would raise the eyebrows except for the way that we are going to it is right from the IRS playbook – the Internal Revenue Code. If you business owner clients or a professional practice, with 20 or fewer employees than this strategy is for you. You can set up a defined benefit plan and exclude the rest of the company employees from participation in the Plan. Additionally, the business owner can still participate in a 401(k) and profit sharing plan. in many cases a defined benefit plan will allow the business owner to make tax deductible contributions that are 3-5 times the defined contribution limit. If the level of deduction is still not enough, the business owner can add the spouse to the plan and double the benefit.

The magic is found in IRC Sec 410(b)(3)(A) of the Internal Revenue Code. I have created a turn key solution designed to maximize this solution. I have been ranting and raving about this for sometime already. The same strategy allowed a financial advisor to lead a major life insurer in sales for 15 years in a row. If it is good enough for him, why isn’t good enough for you?

Unless you and your clients are singlehandedly trying to resolve the federal deficit on your own, you should be calling me to get a head start on how this strategy works and the details for implementation. 

Drop me a line and we can do a short webinar to bring you up to speed. Happy hunting!

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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