Last month I wrote about “what is asset protection?” and gave you some examples about mortgage modification and how clients are significantly reducing monthly mortgage payments while increasing family cash flow of approximately $1000 per month.

I want to give you another example of asset protection and cash flow and how it can relate to what we call a “doubling effect” strategy.

In this example Joe Craft CPA, CFP personally completed and prepared one year of tax returns for a client’s corporation and personal tax return. Preparing them in combination allows a Certified Public Accountant to evaluate both planning and tax objectives in a combined manner. The result was as follows:

In 2007 the client’s gross income from business was over $250K and in that year his last accountant prepared the returns for this individual which resulted in federal and personal income taxes over $30,000.

In 2008 the client came to our firm Adams, Ewing, Craft & Barry, LLC our accounting division and now the client’s gross income from business was now over $300K a larger problem. As a result of good business planning, deferral and over all tax planning the client now paid a combined federal and state income tax of $232.

That is a huge difference.

Now what if the client could do this year after year and what would be the expectant result. Well first the client could pay down their mortgage. Not a bad way to go and the home mortgage would definitely go down due to compounding principal monthly payments, however there may be a better way to go.

Possibly a better strategy would be for the client to loan the money to his Nevada Corporation, create an IET – Income Estate Trust which would invest into a qualified fund earning 36% per year. This now allows his company to create a monthly cash flow of approximately $1000 per month. The client could now take a secured loan from the company as a Director and lien up the real estate all the while paying down the principal debt of $1000 each month. This strategy is much more effective and creates asset protection.

We would further recommend that the client “double strap” up the home by setting up a Family Limited Partnership with a Life Tenancy Residential Trust removing the property out of the family personal name of the client and create another IET for the benefit of the client and beneficiaries. Again more cash flow. As you can see this is very, very effective!

So wishing you the best in safety,

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