Good News On Taxes!

by Robert Nein

Make no mistake. Taxes are one of the most vexing problems facing today's business owner.

Of the many forms of taxation, estate taxes are considered the most unfair-and the most unavoidable. Here's a way, however, for the owner of a business to avoid both capital gains and estate taxes:

Set up an Employee Stock Ownership Plan (ESOP), giving the stock to a charitable remainder trust. The trust sells the stock back to the ESOP and the trustee (you) invests the stock proceeds wherever desired. The trust pays the proceeds from this investment to you and your spouse for your lifetimes. After the second death, proceeds are paid to the private charitable trust that you've designated.

Your children or heirs of the business owner become the trustees. Five percent of the trust principle must be paid to a charity each year. The remainder, or difference between investment income and 5%, is paid to the trustees.

The result: No capital gains tax, and no estate taxes on the proceeds of selling the business. This is the best of all worlds!