By Lance Wallach
Reducing the amount of income taxes we pay is a goal shared by most business owners.
Are you interested in reducing your income taxes?
Do you want to pass your wealth tax-free to the next generation?
Is it important to protect your money from the claims of creditors?
Are you interested in getting tax deductions for things that are normally not deductible, like life
insurance?
You can accomplish all of the above and more with a VEBA.
The VEBA
Voluntary Employees Beneficiary Associations (VEBAs) are tax-exempt organizations that are described
in Section 501(c)(9) of the Internal Revenue Code. A VEBA usually provides for the payment of life,
accident, sickness and other benefits to members of the VEBA or their dependents or beneficiaries.
The simplest way to use the benefits of a VEBA is to join an existing, multiple-employer VEBA. VEBAs
are not subject to the rules for qualified retirement plans. For example, distributions can be made from a VEBA prior to age 59½ without penalties. You can contribute as tax-deductible much more than the $40,000 per year contribution limit of defined contribution plans. A VEBA contribution can be made in addition to a pension contribution. Furthermore, a business can make substantial VEBA contributions even if it is making maximum pension contributions. One program has nothing to do with the other.
A VEBA provides a number of significant business planning opportunities:
The program allows for large, flexible and fully tax deductible contributions.
Assets accumulate and compound on a tax-deferred basis.
Assets are protected from creditors.
Caveat emptor
Let the VEBA buyer beware. Trusts are available that look like VEBAs. However, these plans have not received letters of determination from the IRS, and many may not have applied for one.
The IRS is on the lookout for abusive plans, has challenged such plans, and will probably do so in the future.
Read more
No comments:
Post a Comment