We all know how important reducing taxes can be for our family finances, especially in these difficult times. But are some tax strategies better than others? Are there some that can provide benefits to our children for generations to come while others may actually hurt our loved ones when they need the money most?

The answer is a resounding yes!!! Most tax plans focus only on you and your current situation. Tax planners often don't take into account the trouble that a temporary tax plan can cause your spouse, your family or even yourself years down the road. Let me tell you a quick story to illustrate this point.

John, one of my early clients at ProVision, was advised to defer as much money as possible into his retirement years by contributing as much as possible to the pension plan of his corner grocery store. It seemed like a great idea at the time. But years later, when his family needed the money after he died a sudden death, they found out that they had to pay enormous taxes use the money in John's pension plan. In the end, this client's temporary tax plan ended up preventing his family from living the comfortable lifestyle they were used to.

This all could have been avoided and the family spared this crippling tax burden if the client's tax strategist had focused their efforts on permanent tax benefits. Don't let this happen to your family. A ProVision tax strategy includes several ways to permanently reduce taxes so spouses and family members are not subject to huge taxes when their loved one dies.

Permanent tax strategies can include employing children and contributing their nontaxable wages to a Roth IRA, using a corporation to make medical expenses deductible and converting taxable income from ordinary income to capital gains. For more on these strategies, visit our School of Tax Strategy at http://www.ProVisionWealth.com/products. And please let me know if you found this blog entry helpful to you and your family.

Remember that your family's financial freedom is closer than you think.

Warmest regards,

Tom

We are always asking for questions from our School of Tax Strategy students. Recently, we were asked the following question:

Q: "Hi Tom, If a person has a 401k still with a prior employer's plan, is it best to move that money into an IRA or something else? Anything that that person needs to keep in mind to ensure it's not a taxable event? Thank you!"

A: Here are a couple of quick tips to make this easy for you.

1. Ask yourself if you are happy with the amount of money the investment is earning in your 401(k). If the answer is yes, leave it there. If the answer is no, move it into a self-directed IRA.

2. To make sure the rollover from the 401(k) to the IRA is not taxable, do a "trustee to trustee" transfer. This means that you tell your former employer to directly transfer the investments in the 401(k) to your IRA.

3. If your former employer makes a mistake and writes you a check instead, it's okay. Just be sure to put the entire amount back into your self-directed IRA within 60 days.

Caution: If your former employer withheld taxes when they wrote you the check from your 401(k), you have to write your own check in the amount of the taxes to your IRA. The withholding is treated as a distribution to you, so you have to put that amount back into your IRA as well. You will get back from the IRS when you file your tax return.

Set up your self-directed IRA with a good trustee. We recommend both Sterling Trust in Texas and Entrust (offices around the country). For more information, visit Wealth Strategy U. It's FREE at http://www.provisionwealth.com/wealthstrategyu

Warmest regards,

Tom

Jerry, one of our new School of Wealth Strategy students, asks the following question about buying an aged company for credit purposes:

Q: Hello Tom I was on the Oct Wealth Strategy call, had signed up just the week before!, and now am doing all my homework for the Dec Massive Passive call. I am also currently 4 weeks into the Chris Wise Credit program with 4 more weeks to go. Just wanted to bring you up to speed on where I stand. My question is regarding the purchase of an aged company. My goal is to purchase an aged company sooner than later so that I can access a business line of credit soon. The next step is to use that capital to purchase more growth assets and sources of passive income. I plan on the company ultimately being a real estate investment business but not for holding the actual properties. Therefore, should I purchase an LLC, S-corp or C-corp? I do not plan on employees and I have no kids (only a dog!). I will want to be able to maximize all the tax benefits of the corporation. Hopefully this is sufficient info. Thanks for your time and reply Jerry Durham.

A: There are two issues here. The first is which type of entity is best from a credit standpoint. I will refer you back to Chris for this part of the question. (Alwaystake maximm advantage of your mentors for their expertise.) The second question is a tax question and the answer to all tax questions is, "It depends." Tax planning depends largely on your long-term wealth strategy. And the best answers always come from the most information.

However, there is an entity that will give you the flexibility you need until you have your wealth strategy in place. This is an LLC, or limited liability company. LLC's can be taxed any way you want them to be taxed. Just be sure when you purchase the LLC, that an entity election has not already been made for the company. Also, I would suggest that you also set up a holding company to own the purchased LLC. The reason for this is that purchased companies always come with skeletons. You don't want to purchase assets inside of a company that already has a history, included potential lawsuits.

Instead of making your investments directly from the purchased company, make them from a sister company that you have set up. For more information on entity set up, please see our School of Tax Strategy modules on Entity Fundamentals and Building Your Perfect Foundation at http://www.provisionwealth.com/products.

Warmest regards,

Tom