- The Story
Robert*, a seasoned real estate mogul and business owner, had spent decades growing a substantial real estate and investment portfolio within his holding company. As he neared estate planning, he faced a major financial challenge: ensuring his heirs inherited his wealth without being burdened by excessive taxation or forced asset sales. With a massive estate tax liability looming, Robert needed a structured plan to cover taxes efficiently, preserve liquidity, and maximize wealth transfer.
Developing a tax efficient estate plan
Stone Owl implemented a multi-layered estate planning strategy that integrated an Immediate Financing Arrangement (IFA), corporate-owned insurance, and pipeline planning. The key elements of this plan included:
Instead of withdrawing corporate cash to fund an insurance policy, Holdco purchased a high cash value whole life insurance policy. This provided tax-sheltered growth within the corporation, a tax-free death benefit to cover estate taxes, and collateral for an Immediate Financing Arrangement (IFA) loan, preserving liquidity for investments.
To avoid tying up capital, Robert secured a loan against the policy’s cash value, ensuring that he maintained access to capital for ongoing real estate projects without disrupting cash flow.
At death, Robert’s estate would have faced a large capital gains tax bill due to the deemed disposition of corporate shares. Instead of triggering a taxable dividend, a pipeline strategy converted corporate retained earnings into a lower-tax capital gain, ensuring a more tax-efficient transfer of wealth to his heirs.
The death benefit payout created a capital dividend account (CDA), allowing tax-free share redemptions. The capital loss generated by the pipeline transaction was applied retroactively against the capital gains tax, further reducing estate tax liabilities.
A closer look at wealth preservation and liquidity
By implementing this structured approach, Robert successfully ensured that estate taxes were fully covered without needing to sell properties, corporate liquidity remained available for future real estate investments, the pipeline planning structure minimized tax leakage and optimized wealth transfer, and the real estate empire remained intact, providing generational financial security.
The power of integrated estate planning
With Stone Owl’s guidance, Robert transformed his estate planning into a tax-efficient, liquidity-preserving strategy. By combining IFA-backed corporate-owned insurance with pipeline planning and capital loss carry-back, he successfully structured his wealth transfer in a way that safeguarded his family’s financial future.
Today, Robert’s heirs stand to inherit a fully intact real estate empire with minimized tax exposure. His case exemplifies how strategic financial planning can optimize wealth preservation while ensuring a smooth estate transition.
* We take our clients’ confidentiality seriously. While we’ve changed their names, the results are real.
