As the Year Winds Down, Clients Finally Look to “Plan”

Jacob Stein Esq.
December 13, 2007 — 1,377 views  
Become a Bronze Member for monthly eNewsletter, articles, and white papers.
There is a commonality shared by all tax practitioners - procrastinating clients. If we are fortunate, the client call will come in at 3 p.m. on the day a transaction is set to close. In many cases, the call comes in after the transaction has been completed, some time next tax year. What is a tax practitioner to do? Tax clients have to be trained to anticipate undesired tax consequences of certain transactions. For example, the client has to be made aware that any time he sells an appreciated asset there will be a significant tax bite. The only way to reduce the tax is to plan ahead. Practitioners often give in to client requests and plan after the fact. This type of planning places both the client and the practitioner in jeopardy. More importantly, it is learned behavior for the client. They will never plan ahead of time. Force them to pay their liability in full, at least once, but also show them what they would have paid had they done their planning in advance. Works like magic. This time of the year, it may still be possible to implement certain more advanced year-end planning structures for those clients who are complaining (or is it bragging?) about their banner year. One is the tried and true defined benefit plan. These plans can be structured to accommodate very large contributions and may still be implemented before year-end. Another popular year-end planning technique is an offshore insurance structure. These are sometimes referred to as captive insurance arrangements, although most structures will not utilize a captive insurance carrier. These structures allow the client to benefit from an insurance premium deduction of any size that works for them under 162(a), flexibility of changing the deduction from year to year, and complete access to the funds contributed to the insurance structure. These structures can be implemented very quickly, even at the last minute, as most clients will simply need to accrue the deduction, and can then set up the actual structure beginning of next tax year. Procrastination is a common human trait, and is especially prevalent with tax clients. I am sure that 400 years from now our colleagues will be complaining about exactly the same problems. That does not in any way excuse the enabling behavior of tax planners who allow clients to wait until the last minute before planning. Teach them once, and reap the rewards for the remainder of your relationship with the client.

Jacob Stein Esq.


Mr. Stein is a partner with the law firm Boldra, Klueger and Stein, LLP, in Los Angeles, California. The firm's practice is limited to asset protection, domestic and international tax planning, and structuring complex business transactions. The firm's goal is to provide the highest quality legal work that is usually associated with only the biggest law firms, in a boutique firm setting. Jacob received his law degree from the University of Southern California, and his Master's of Law in Taxation from Georgetown University. Mr. Stein has been accredited by the State Bar of California as a Certified Tax Law Specialist and is AV-rated (highest possible rating) by Martindale-Hubbell.