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Financial Planning > Tax Planning


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Make sure you take these precautions when checking out the latest tax shelter.

o Read everything! Don’t rely on the sales presentation and reassurances of the promoter. Ask to read the advisor guides, the client material, the plan documents, opinion letters, the basis for actuarially determinations, everything. Today’s plan promoters are much more concerned about toning down promises and providing disclosure.

o When the lady doth protest too much, your antennae should go up. If the promoter’s package spends an inordinate amount of time defending the plan’s “substantial legal authority,” assume the law is not settled in this area.

o Get a second opinion. Tax opinion letters written to the promoter do not protect you or your client. Provide the tax letters and other tax-related materials to the client’s independent tax advisor for review.

o Check out the promoters’ history. You may be surprised that they were proponents of discredited techniques such as charitable reverse split dollar.

o Size up the promotional materials. Were these materials professionally done? Some of the materials may have been created by a less knowledgeable broker looking to add sales sizzle. Note the author and creation date on the materials. Be wary of sales presentations using words like “safe,” “guaranteed,” or “little to lose.”

o Understand the client’s expectation. If the client believes he is deferring compensation until retirement and can control when and how he will receive the plan’s assets, he may not receive the tax benefits he is looking for.


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