Tom Archer, Insurance Advisor To The Rich And Famous

Company Founder/CFO says the changes are needed to avoid double taxation and will allow heirs to retain investments.

Much remains to be seen about the potential impacts of the new Tax Reform Bill, but one thing is clear – the estate tax cuts that are included in the bill will more than double the taxable threshold from the current $5 million to now $11 million per individual ($10M to $22M per married couple). According to Tom Archer of The Archer Financial Group, this, coupled with life insurance death claim payouts, could help foster continuous future investing among a person’s heirs and will help ensure that real estate and businesses remain in the family.

As the estate tax law currently stands, an individual’s estate is typically double-taxed. The first instance at the time it is earned and again after the earner’s death, when the heirs pay estate taxes. Most often, wealthy individuals will purchase large insurance policies to pay estate taxes. However, in many cases, the heirs ultimately need to sell assets, including static investments, real estate or family business, which may result in a loss of value and further depletion of the estate. Those in support of the estate tax cuts argue that this multi-taxing is unfair and that the repeal is essential to ensuring that future generations will be able to sustain a family’s financial position.

Under the latest bill, the new taxable threshold will remain in effect until 2025, when it will then ultimately be reset to current standards with an index for inflation. “What this means for families whose net-worth is below the new threshold is that they may not need to worry as much about having the funds available to pay inheritance tax on a family property, such as business or vacation home,” explains Mr. Archer. “It also frees up finances – whether that which they earned or that which they inherited – to be turned into future investments in property, businesses, trading and more.”

With more than 3,000 families expected to benefit from this repeal in 2018 alone, the overall financial benefits will likely be seen in the near future. Mr. Archer specializes in working with high-net worth individuals, business owners, professional athletes and well-known celebrities. Mr. Archer, who is credited with having written the largest life insurance policy on-record, says he expects to see continued demand for those products, largely due to the fact that:

  1. $22 million is still a relatively low threshold for many of his clients.
  2. There have been plans to eliminate estate tax before, and those have ultimately occurred.
  3. In many states, there will still be a need to pay out significantly to cover local estate taxes.

For example, in New York State, where The Archer Financial Group is based, there is a 16% estate tax rate on the largest estates. Though exclusions were changed in 2014 gradually increase from just over $2 million to the federal government’s current $5 million threshold by 2019, an estate worth even just $6 million today would result in nearly $100,000 to be paid out in estate taxes. For an estate worth $100 million, the taxable figure would amount to nearly $16 million.

“As most of most of my clients pay taxes in states with high estate taxes, such as New York and California, I suspect that I will continue to write policies that are intended to cover an heir’s estate tax obligations”, adds Mr. Archer.

December 20th, 2017
Written by Hank Russell