substantially discounted roth-conversion 03-25-2015 fl-cle new presentation

Securities offered through Financial West Group (FWG) - member FINRA/SIPC. Securities are NOT FDIC INSURED and MAY LOSE VALUE. Atlantic Financial Advisors, LLC, Registered Investment Advisor not FWG affiliated. The information contained

herein is based on sources we believe reliable but is not considered all-inclusive.

Scott L. Olson, President Atlantic Financial Advisors, LLC, Registered Investment Advisor President, InsuredIncome, LLC, Estate Planning, Wealth Transfer & Insurance Agency

3682 North Wickham Rd, Suite C Melbourne, FL 32935

email: [email protected]

(321) 751-5599 office (800) 779-4744 toll-free (321) 543-7709 cell

• 36 years experience in Financial and Estate-Planning, Wealth Preservation and Wealth Transfer. • Popular speaker across the U.S. to groups of Attorneys, CPAs, Financial and Estate Planning professionals. • Provides Continuing Education to Attorneys, and CPAs licensed in Florida. • Provided Continuing Education Credit to financial advisors in all 50 states. • Presented at Caesar’s Palace, Las Vegas, for the International Forum, and to several of their professional study groups. The

Forum is an invitation only financial services organization, limited to 400 advisors nationwide. • Presented at First Financial Resources, llc, annual conferences and several national study groups. FFR is an invitation only

financial services organization. Popular Topics; o Not just Roth-Conversion, but tax-free, or “Substantially Discounted Roth-Conversion” o Annuity Arbitrage, a tax-favored income and leveraged estate-tax free wealth transfer technique. o ACTIVELY Professionally Managed Portfolios for low risk (Beta) and high return (Alpha) o Alternative, non-correlated assets, the Endowment Model and Energy as a Diversification and Hedge

Follow the Roth-Conversion conversation and other financial and estate planning concepts with us at

About Your Speaker

mailto:[email protected]

• Reduce income-tax (in many cases to get under Obama-tax thresholds)

• Convert highly taxed IRA income into tax-free Roth income

• Reduce Roth-Conversion tax (by 40% to 75%, or more)

• Pass along tax-free income to spouse and family

• Eliminate the RMD (or reduce it by up to 75%, or more)

• Reduce IRA related Estate-Tax (by up to 75%, or more)

• Reduce Medicare Part B Premium (MAGI reduces w tax-bracket)

The Substantially Discounted Roth-Conversion

FMV Roth-Conversion Traditional Roth-

Conversion

IRA/SEP value $500,000 $500,000

IRA taxable conversion value na $500,000

Fair Market Value (1) $123,000 na

Taxes Due at 48% ($59,040) ($240,000)

FMV Conversion Tax-Savings $180,960

FMV Savings over Traditional Conversion 75.4%

Oil & Energy related Roth-Conversions completed 12/30/2014 received FMV of 24.5% or 75.4% discount for tax purposes. Generally, Oil & Energy FMVs have averaged from 40% to over 80%, REITs and other non-liquid, non-correlated assets have had FMVs of30 to 65%


Lack of understanding of tax and wealth transfer benefits Incorrect assumption that wealthy taxpayors cannot convert Conversion taxes could be confiscatory Procrastination Lack of education of/by Investment and Tax Advisors Have not yet seen the Substantially Discounted Roth-Conversion


Lack of understanding of tax and wealth transfer benefits Roth Conversion* - Tax-free income for life, spouse’s life, kids - Eliminate highly taxed IRA RMDs - Allow truly TAX-FREE growth ( vs. only tax-deferred w/ IRAs ) - Reduce MAGI ( reduces Medicare Part B Premium ) - Allow postponing income - allowing it to accumulate truly tax-free for

spouse and beneficiaries - Offer control of WHEN the taxpayer chooses to commence tax-free

income - Allows tax-free funding of ILIT (Irrevocable Life Insurance Trust) for 3-5

times risk-free, leveraged, estate/wealth transfer, w elimination of estate taxation

Please consult QUALIFIED tax and financial advisor for details. Be aware of both 5 yr rules and all other applicable rules


Incorrect assumption that wealthy cannot convert - No limitation of income or net-worth


Conversion taxes would be confiscatory - Traditional Roth-conversion adds entire converted value to ordinary

income - Fully taxable in the highest brackets (Up to 52% in some states) - Increases MAGI

The Substantially Discounted Roth-Conversion may reduce conversion tax by 40% to 75%, even up to 90% in some cases. For example, converting a $1 million IRA to Roth would normally add $1 million to taxable income, however, using the Substantially Discounted Roth-Conversion with certain Alternative Assets (non-correlated and non-liquid) this conversion may add taxable income of only $246,000; saving tax on the difference of $754,000.


Procrastination - Help your clients learn the tax, estate planning, and wealth transfer

benefits of converting NOW! - 2015 may be the last year for unlimited Roth-Conversions* - Income-tax rates up from 28% max to 44% - Future tax rates expected to skyrocket to pay for debt and entitlement

programs

* Obama 2016 “tax-the-rich” proposal


Lack of education of/by Investment and Tax Advisors - Few attorneys, CPAs and financial advisors understand the full

benefits of Roth-Conversion - Even fewer understand Fair Market Value (FMV) Roth-Conversion,

aka “the Substantially Discounted Roth-Conversion” - A very small percentage of financial advisors are licensed and/or

appointed to offer Alternative Assets helpful in “Substantially Discounted Roth-conversion”


What is Fair Market Value (FMV)?

Fair market value (FMV) is the price that property would sell for on the open market.

It is the price that would be agreed on between a willing buyer and a willing seller, with neither being required to act, and both having reasonable knowledge of the relevant facts.

IRS Publication 561 http://www.irs.gov/publications/p561/ar02.html


http://www.irs.gov/publications/p561/ar02.html

Rev Rul 59-60, Sec. 4.02, 1959-1 CB 237 (77-287, 80-213, 83-120) ¶P-6351. Valuation discounts for minority interest, lack of marketability, and lack of liquidity. Minority Discount A minority discount is a reduction in the control value of the partnership interest that is intended to reflect the fact that a minority owner cannot control the daily activities or policy decisions of an enterprise, thus reducing its value. The size of the discount will depend on the size of the interest being valued, the amount of control, the owner's ability to liquidate the company and other factors. Minority discounts have averaged between 21.5% and 30.8%. Marketability Discount A discount for lack of marketability is used to compensate for the difficulty of selling shares of stock that are not traded on a stock exchange, compared with those that can be traded publicly. If an investor owns shares in a public company, he or she can pick up the telephone, call a broker, and generally convert the investment into cash within three days. That is not the case with an investment in a closely held business. Therefore, publicly traded stocks have an element of liquidity that closely held shares do not have. This is the reason that a discount for lack of marketability will be applied. It is intended to reflect the market's perceived reduction in value of not providing liquidity to the shareholder and can range from 10% to 35%.

www.IRS.gov


http://www.irs.gov/

http://www.irs.gov/

What assets qualify for substantial valuation discounts ( Rev Rul 59-60 ) ?

Valuation discounts REQUIRED for minority interest, lack of marketability, and lack of liquidity ( ¶P-6351 )

• REITs (Real Estate Investment Trust) • Direct ownership of Real Estate • Leasing Programs • Oil & Gas Drilling Programs • Oil & Gas Royalty Programs • Single Premium Immediate Annuities (SPIAs), aka Pension Annuities


http://www.IRS.gov/pub/irs-pdf/i1099r.pdf


http://www.irs.gov/pub/irs-pdf/i1099r.pdf

www.IRS.gov/pub/irs-pdf/f5498.pdf


http://www.irs.gov/pub/irs-pdf/f5498.pdf

http://www.irs.gov/pub/irs-pdf/p590.pdf


http://www.irs.gov/pub/irs-pdf/p590.pdf

www.irs.gov/Retirement-Plans/Valuation-of-Plan-Assets-at-Fair-Market-Value

www.irs.gov/irm/part4/irm_04-041-001-cont02.html


http://www.irs.gov/Retirement-Plans/Valuation-of-Plan-Assets-at-Fair-Market-Value

http://www.irs.gov/irm/part4/irm_04-041-001-cont02.html

www.finra.org/notices/15-02

www.finra.org/Industry/Regulation/Notices/2012/P125772


http://www.finra.org/notices/15-02

http://www.finra.org/Industry/Regulation/Notices/2012/P125772

Every taxpayer, Attorney, CPA, and Enrolled Agent would be well

advised to set-up a Roth by age

54-½, to start the 5-year clock running.

Tip for Astute Advisors


substantially discounted roth-conversion 03-25-2015 fl-cle new presentation

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