A family sold their legacy real estate portfolio for $120 million, creating a tax liability of $25 million.

They were prepared to pay the tax with no better options available. 

When asked, the client was willing to consider making a charitable donation to mitigate the taxes payable and preserve the family wealth. 

How it’s done:

A Private Family Foundation is created at minimal cost

The client’s initial deposit of $50 million generates a $50 million charitable receipt, mitigating the $25 million tax liability and turns the $25 Million of tax into $25 Million of charity!

A $50 million joint-last-to-die basis Life Insurance policy is structured to restore the donated funds and an IFA Strategy (Immediate Financing Arrangement) is used to fund the insurance in the most cost and tax-effective way without affecting the company cash flow.

When the parents die, the insurance will repay all the IFA borrowed money and the family will receive the $50 million death benefit tax-exempt.

Bottom Line:

The $25 million tax liability gets mitigated by the $50 million charitable donation – converting $25 million of tax into a $50 million family charitable legacy.

The eventual Life Insurance payout replaces all of the donated money, and the family is made whole again, it was just a “timing” issue.

As advisors, there is no better feeling than helping clients create legacies and go from success to significance.

We are often the gatekeepers to our client’s wealth.

So next time you hear that someone is selling their business, investment real estate or appreciated securities, let them know that beside it being the year they will have their biggest tax bill, it’s also the year that they can make their biggest donation to charity to offset the taxes and create a significant family legacy.

Let’s work together.