Neal, Haytham and Marcy â
I met with some of my financial advisors yesterday and they told me about an exciting strategy for reducing expenses, reducing taxation and building wealth that I think you should take a look at for the law firm. Basically you can set up a separate firm called a Captive Insurance company. The law firm would pay the insurance premiums that you currently pay for various types of insurances ie, workmens compensation, liability insurance, errors and omissions and whatever other types are allowed to the captive firm, therefore paid with pre-tax money just like you do today. However, insurance companies are making about a 50% profit on premiums particularly with firms that rarely have claims (in 14 years I think I have had 1 workmenâs comp claim). Captives, like all insurance companies, have specific tax rules that allow them special benefits not available to other companies. It can invest the money it retains after expenses (known as reserve funds) and can accumulate these funds. You and I pay taxes on money we retain but the insurance company does not as it is retained for payment of future claims and the accumulation is necessity for payment. It can grow in a tax favored basis (dividend rates, capital gains rates, tax free). Gives you the ability to access the money on a most favorable tax basis while living and passing assets to your loved ones without gift and estate tax implications and many other benefits. I have book that he gave me titled âTaken Captiveâ by Wesley Sierk that I have already started reading it is very well written and an easy read.
This is very exciting to me for my business and I will be doing it for my business, I havenât yet figured out what all insurance premiums will go into it. Btw, if you have a claim that is larger than your fund that is covered through reinsurance (which your current insurance firms already do). We have already implemented in the last year some other estate planning, tax avoidance tools into my personal plan and you guys would have other things based upon your business and your lives that you would have available to you. So I would strongly encourage you to meet with Pete and Nancy regarding setting up plans and strategies for your business. You can set up special retirement pools with particular benefits for you as partners (that the other members of the firm donât participate in) on a tax free basis that is harder for me to do due to the different types of businesses that we run. Pete can give you specific guidance on this that would be tailored to your needs and goals. But basically securing your future in an uncertain world.
Pete Hibbard
443-276-0025
phibbard@columbiabenefits.com
USMC Vietnam vet, really an expert in his field who is constantly learning new things and tricks of the trade, he brings innovative ideas to the table like the captive insurance idea and other wealth building techniques.
Nancy Briguglio
nbriguglio@bwwealth.com
443-562-8296
Bright lady with a ton of experience in insurance and wealth building
Neither are lawyers so they can work with your legal counsel if you want to set up trusts. I have set up specialty trusts for my family due to our particular needs, your needs will of course be different. My trust lawyer is awesome and a leading expert and a national speaker on the topic. He is in Omaha which means he is cheaper (by far) than the same type of lawyers in the DC area.
I hope you donât mind my sending this idea to you but I just thought it was so awesome! Pete and Nancy are both bright and down to earth.
Sincerely â
Lisa N. Wolford
CSSS.NET
President & CEO
SDVOSB, 8(a)/SDB & WOB
202-639-5101 DC Office
402-393-8059 ext 145