Living the perfect tax-savings fantasy


Tax accountant

A common sport at our office is a bull session with the specific goal of creating new ways to beat up the IRS – but always legally.  The conversation invariably turns to an all-important question: How do we get our clients into a tax-free environment?

Over the years we have talked about creating the perfect tax fantasy: A strategy that would hit four back-to-back tax home runs.  Here’s our investment-like fantasy strategy: 1) the dollars you invest would be deductible on your tax return; 2) the investment would be guaranteed to make a profit; 3) the profit would be income-tax free; and 4) your original investment plus your profit would totally escape the estate tax.  And, oh yes, the Internal Revenue Code would say it’s all ok.  Pure fantasy?  Not anymore.

I wish I could take the credit for creating the voluntary employee’s beneficiary association (VEBA).  A VEBA is neither an investment nor a fantasy.  Few professionals know how to implement a VEBA.  But what you are about to read was taught to me by Lance Wallach, who has received a favorable letter of determination from the IRS for many VEBAs.  VEBAs have been around for years, but for most of us a VEBA is the new kid on the block.

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