Exposed Deferred Comp Option .


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Bare Deferred Comp Option . Copyright 2005 Dwight Drake. All Rights Reserved.Business Planning: Closely Held Enterpriseswww. drake-business-planning.com. 9-11. Pay BenefitsPer Agreement. Organization . Official. Nothing subsidized Executive General Creditor Executive exhausted on receipt of advantages Company gets finding when official saddled.
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Slide 1

9-10 Problem 9-A: Go Fly Delivery Plan components Document deferral before year deferral starts – nothing retroactive. Indicate payout choices to conform to 409A – no circumspection or squirm room. Genuine financial advantage, in addition to duty deferral. Organization gets conclusion when salary perceived by Burt. Brilliant cuffs – ideally not. Development on deferral – others may demand be humble. Hardship withdrawal rights – others may protest General bank hazard – guaranteed, business must succeed. . Copyright 2005 Dwight Drake. All Rights Reserved. Business Planning: Closely Held Enterprises www. drake-business-planning.com

Slide 2

9-11 Naked Deferred Comp Option Company Nothing supported Executive General Creditor Executive saddled on receipt of advantages Company gets reasoning when official exhausted Pay Benefits Per Agreement Executive Copyright 2005 Dwight Drake. All Rights Reserved. Business Planning: Closely Held Enterprises www. drake-business-planning.com

Slide 3

9-12 Mitigating the Non-Payment Risk Third Party Guarantee – parent organization, larger part shareholder. Underwriter can not be in the business. Surety Bond – just if acquired and supported by official. In the event that organization does it, will be viewed as financed plan. Rabbi trust Secular trust with Crummey sort official withdrawal powers. Organization claimed life coverage program. Part dollar protection subsidized program Bonus protection program . Copyright 2005 Dwight Drake. All Rights Reserved. Business Planning: Closely Held Enterprises www. drake-business-planning.com

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9-13 Rabbi Trust Option Company Insolvency Reversion Rabbi Trust Company reserves Agreement to pay benefits Executive Benefits paid in the interest of organization Copyright 2005 Dwight Drake. All Rights Reserved. Business Planning: Closely Held Enterprises www. drake-business-planning.com

Slide 5

9-14 Rabbi Trust – Why? Organization\'s will to pay blurs – Rabbi organizations doesn\'t anticipate installment load – Rabbi organizations\' administration doesn\'t acknowledge expenses of plan – Rabbi organizations goes under – Rabbi doesn\'t help Copyright 2005 Dwight Drake. All Rights Reserved. Business Planning: Closely Held Enterprises www. drake-business-planning.com

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9-15 Requirements of Rabbi Trust Sole reason to give arrange benefits, with the exception of return on organization chapter 11 or indebtedness. Obligation to advise trustee of liquidation or indebtedness. Trustee must stop all installments when told. State law can not allow official any need rights in trust over different leasers. Trust can\'t be subsidized with securities of manager. No bankruptcy trigger or other arrangement that could disappoint privileges of general lenders of organization. Copyright 2005 Dwight Drake. All Rights Reserved. Business Planning: Closely Held Enterprises www. drake-business-planning.com

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9-16 Life Insurance Tax Benefits T hatchet conceded inside develop in strategy – no wage assess on development of sum in arrangement. Tax-exempt getting benefits against money surrender esteem. Organization can use to take care of after-duty expense of installments amid retirement. Tax-exempt passing advantage – organization can use to subsidize after-expense cost of residual advantage at representatives demise or to recover sums effectively paid out under arrangement. Alleviate monetary proclamation affect – strategy appears as developing resource. Copyright 2005 Dwight Drake. All Rights Reserved. Business Planning: Closely Held Enterprises www. drake-business-planning.com

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9-17 Life Insurance Structuring Options Straight Corporate Ownership Rabbi Trust Ownership Split Dollar – Executive has passing advantage that can be domain charge secured through ILIT Executive Bonus Insurance with Gross-Up Copyright 2005 Dwight Drake. All Rights Reserved. Business Planning: Closely Held Enterprises www. drake-business-planning.com

Slide 9

9-18 Company Owned Insurance Option Policy Death Benefit Company Policy credits Insurance Policy Premiums Pay benefits per understanding Executive Copyright 2005 Dwight Drake. All Rights Reserved. Business Planning: Closely Held Enterprises www. drake-business-planning.com

Slide 10

9-19 Rabbi Owned Insurance Option Excess Policy Proceeds Company Insolvency inversion Rabbi Trust Company stores Agreement to pay benefits Death Benefit Pays benefits Premiums Policy credits Executive Insurance Policy Copyright 2005 Dwight Drake. All Rights Reserved. Business Planning: Closely Held Enterprises www. drake-business-planning.com

Slide 11

9-20 Split Dollar Insurance Option Company Policy Loans Premiums Insurance Policy Pay benefits amid life to official Imputed wage Gross-up? Demise advantage over money esteem Executive ILIT Imputed blessing Crummey Copyright 2005 Dwight Drake. All Rights Reserved. Business Planning: Closely Held Enterprises www. drake-business-planning.com

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9-21 Bonus Insurance – Poor Person Trust Restrictive support – pre-retirement Company Insurance Policy Contingent reimbursement commitment Comp for premiums Plus gross-up Premiums Executive Loan withdrawals Death advantage Copyright 2005 Dwight Drake. All Rights Reserved. Business Planning: Closely Held Enterprises www. drake-business-planning.com

Slide 13

9-22 Problem 9-B: Jurden Windows Plan components Company financed, all forward looking, settled retirement advantage forever (solid motivation) Strong brilliant cuffs – if Justin drops, all is lost. Perfect for organization would be execution criteria – extremely hard to offer. Deferral ought to be secure with investigation to maintain a strategic distance from all traps. "Teeth" to show advantages will be subsidized could be taken care of with protection. Organization\'s inclination: corporate claimed arrangement. Justin inclination: Split dollar or reward protection. Conceivable trade off: Rabbi-possessed protection. . Copyright 2005 Dwight Drake. All Rights Reserved. Business Planning: Closely Held Enterprises www. drake-business-planning.com

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