Example #2: Private Equity Partners. We also work with a small private equity firm managed by two partners, and they also set up a benefit-focused plan. Again, they were looking at a miniscule deduction of around $30,000 each per year with various qualified plans. By using the benefit-focused plan, they were able to take tax deductions of more than $600,000 in each of ten years. At the same time, they were able to use nearly $2 million dollars in life insurance to fund the buy/sell agreement between them if one of them were to die. In this case, it helped that they could choose who would be part of the plan and who wouldn't be. While there are 12 additional people working at the firm, only three of them were included in the qualified retirement plan structure, and in the end, the two main partners will receive nearly 90% of the benefits from the plan when they retire at age 65.

Example #3: Celebrity. A celebrity client we work with decided to use this plan for his loan-out corporation. With other types of qualified plans he could not receive any significant deductions, but with the benefit-focused plan, he's able to deduct about $450,000 per year for ten years. All the other retirement plans he had looked at limited him to around $50,000, thus he hadn't seriously considered them. With this plan, however, he will receive about 85% of the monies that come out of the plan-which will have grown tax-deferred. His brother, meanwhile, will receive the remaining 15%. In case of his death, the life insurance proceeds are earmarked to pay off the mortgage on his third house. At the same time, his wife would receive his benefits from the plan.

Example #4: Single Family Office. We worked with the executive director of a third-generation single-family office that had more than $600 million under management. Other types of qualified plans did not make economic sense to the family. The entire family office consists of eight people, five of whom are family. With the benefit-focused plan in place they, were able to take more then $700,000 in deductions each year for ten years. The life insurance proceeds will be used to pay a portion of the executive director's estate taxes.

Again, the major consideration for these wealthy business owners is their inability to personally benefit from qualified retirement plans, and under the right circumstances, the benefit-focused retirement plan is the solution they've been looking for and one that few advisors have discussed.   

Alan S. Kufeld, CPA, is a tax principal in the Rothstein Kass Family Office Group, specializing in the federal, state and local tax matters affecting high-net-worth individuals.

Richard J. Flynn is principal of the accounting and business management firm Rothstein Kass and head of the RK family office group.

Frank W. Seneco is the principal of Seneco & Co., a Connecticut-based advanced planning operation that specializes in high-end life insurance solutions for the ultra-affluent and their advisors.