If you have an active business, the largest, safest
deduction available may be under Internal Revenue Code §831(b).bThis allows a
small insurance company to exclude up to $1,200,000 per year of premium income
from its taxable income. Large corporations have been setting up their own
“captive” insurance companies for decades. Now there is a move to have closely
held businesses set up their own “captive” insurance companies, and these are
referred to as “wealth” captives. A wealth captive is likely to be owned by a
dynasty trust for the benefit of the heirs of the owner of the operating
business. The operating business will write a check for an insurance premium to
the captive owned by the heirs’ trust. The check is deductible by the operating
business and not taxable income to the captive insurance company. The check is,
in essence, a gift by the parents – who own the operating business – to the
heirs who are the beneficiaries of the trust, which owns the captive insurance
company. And the funds in the captive insurance company are protected from
creditors of the parents, of the operating business and of the heirs. There are many
rules, of course, to be followed, so that the captive insurance company
qualifies both for purposes of the Department of Insurance of the state in
which it is located, typically Vermont, Delaware or Utah, and for purposes of
the Internal Revenue Code. However, in the right situation, this is a
spectacular business, and tax as well as, creditor protection result.
Whether you are a CPA, a professional, or a potential client,
contact Givner & Kaye to see how we can help you make more money, save
taxes and gain peace of mind over all your estate and asset protection needs. www.GivnerKaye.com
(310) 207-8008
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