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More than 90 percent of my contact with readers of this column concerns specific questions that can be answered using the “Magnificent Seven” (M7). What is the M7? It consists of seven separate strategies designed to answer tax questions and at the same time save huge amounts of estate tax or create huge amounts of wealth (usually tax-free). Using just one M7 is fun; using two or more is even better.

Let’s go through the questions I receive and explain how each of the M7 strategies can answer them.

M7 1— “How can I get my family business (Success Co.) out of my estate and transfer it to my kids, yet keep control for life?” Answer: create voting and non-voting stock, then transfer the non-voting stock to your business kids. You can also use these strategies for a recapitalization to create the non-voting stock and an intentionally defective trust to transfer the stock. The voting stock, which you keep, maintains your control. All the strategies are tax-free: to you, your kids and Success Co.

M7 2— “How can I earn large returns every year without risk?” Answer: invest in senior settlements/transferable insurance policies (TIPs). The average TIP rate of return per year is in the 12- to 14-percent range, and these policies are available from a 14-year-old company that is public (on the NASDAQ). However, the minimum investment is $50,000 for qualified investors.

M7 3—“How can I avoid the double tax (income and estate) that hits all qualified plans such as an IRA or 401(k) profit-sharing?” Answer: use a subtrust. The tax collector can get up to 73 percent of your plan funds (that’s $730,000 per $1 million). Your family gets only $270,000. A subtrust allows you to use plan funds to buy life insurance (usually second-to-die). One reader turned $240,000 into $4.5 million of tax-free life insurance.

M7 4—“How do I know if my completed (or proposed) estate plan is done and done right?” Answer: quite simply, you must be able to answer ‘yes’ to the following two questions. Do you have, and will you continue to have, absolute control of your business and other assets? Will all of your wealth pass intact—every penny of it—to your family when you die? “All” means that if you are worth $6 million, the entire $6 million (fill in your own net worth number) will go to your family. If you can’t answer ‘yes’ to these two questions, then get a second opinion from an independent professional.

M7 5—“I have significant excess cash or cash-like assets (for example, municipal bonds, certificates of deposits and so on). I’m conservative and hate risk. Are there any tax-advantaged investments for me?” Answer: yes, conservative investment life insurance (CILI) is really a conservation investment. The insurance company agrees to guarantee you that, upon your death, your heirs will receive the sum of the following: 1) all premiums you paid (for example, if you paid $20,000 per year for 20 years, then your heirs would get back the entire $400,000); 2) a guaranteed rate of return on all premiums paid (usually around 3 percent); and 3) the death benefit as a bonus (let’s say $1 million, but it could be more or less depending on your age and health). Get a personal quote;you’ll be delighted. And yes, all three items are tax-free.

M7 6—“Is there a way to reduce the value of my business for tax purposes?” Yes, by taking advantage of the three discounts allowed by the tax law: 1) lack of marketability; 2) minority interest; and 3) non-voting stock that is worth less than voting stock. The result is, that after discounts, a $2 million business is worth between $1.1 million and $1.2 million.

M7 7—“Is there any way to finance the cost of life insurance to significantly reduce the out-of-pocket cost of the insurance?” Yes, it’s called premium financing. The strategy is easiest to explain by example. A 60-year-old reader got $5 million worth of insurance with a total cost (to be paid over his life) of $368,000. A 56-year-old man with a 56-year-old wife bought $5 million worth of insurance with a total projected outlay of only $79,000. You must be worth a minimum of $5 million and be 65 years old or younger.

Perhaps you would like more information or maybe you have a question. Will the strategy work for you, your family and your business? Contact us and provide the following information: 1) the M7 strategy you want to learn about; 2) your name, address and all phone numbers where you can be reached; 3) your birthday and the birthdays of other family members if insurance is involved; and 4) a short statement describing your specific situation. Fax all the information to 847-674-5299 or e-mail the information to me at wealthy@blackmankallick.com with “M7 query” in the subject line.

I’ll summarize the best responses (while withholding all identities) in future columns.