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Benjamin Dyches
- Apr 12
- 2 min
80
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The Aegis Tax Deferral Trust
(ATDT)
If you're selling a valuable asset like a property or business, The Aegis Tax Deferral Trust may offset capital gains taxes using IRC §453. The result can yield significant tax savings.
Preferred Installment Trust Partner
The Attorneys at Aegis Lion are proud to be the preferred Installment Trust partner for The Fortune Law Firm clients. The Fortune Law Firm makes wealth-building and asset-protection strategies accessible to its clients.
Maximize Your Investment with the ATDT
When selling a high-value asset, it's not just about managing your capital gains tax; it’s about optimizing the full potential of your investment. The ATDT Deferred Sales Trust won't eliminate your tax bill, but it can be deferred, allowing you to invest the entire amount immediately.
Aegis Lion attorneys focus on taking the heavy lifting out of complex legal tax planning. We start with a no-charge consultation to explain the process and determine whether the ATDT is a potential fit for your scenario.
1. Establishing the Aegis Tax Deferral Trust (ATDT)
To qualify for an ATDT, sellers must own high-value assets with significant capital gains potential, such as real estate or closely-held businesses. The process begins with selecting a qualified trustee experienced in managing such trusts, ensuring compliance with legal regulations. Establishing an ATDT requires two main legal documents: the Trust Agreement, which outlines the trust’s terms and the trustee’s responsibilities, and the Installment Sale Agreement, which details the terms of the deferred sale, including purchase price and payment structure.
2. Mechanics of the Aegis Tax Deferral Trust
Once the trust is legally established and the asset transferred, the trustee sells it on behalf of the trust. The proceeds from this sale are then reinvested into a diversified portfolio of assets, ranging from stocks to real estate, creating a sustainable source of income. This setup allows for the deferral of capital gains tax, spreading the tax liability over the duration of the Installment Sale Agreement rather than incurring it in the sale year. This strategic management not only preserves capital but also enhances potential returns through reinvestment.
3. Financial Benefits and Distribution
ATDT offers flexible payment structures tailored to the seller’s financial needs, including interest-only payments or combined principal and interest payments. These can be disbursed monthly, quarterly, or annually, based on the seller’s preference. The deferred payments allow sellers to potentially lower their immediate tax burden, spread their tax liabilities over time, and possibly even reduce their overall tax rate. Additionally, the structure of these payments ensures that capital remains productive, with the deferred tax amount working to generate further income, thereby optimizing financial outcomes over the long term.
CASE STUDY 1
Dental Practice Transaction
The practice transacted for $5,000,000. Rather than receiving the entire sale proceeds upfront and facing a hefty capital gains tax, the orthodontist chose to defer the taxes and spread the income over a longer period using the trust.
The practice seller is taxed on the profit from the sale only when he receives an installment payment from the trust. Thus, in years 1 and 2, no taxes are due on the profit from the sale. The $1,190,000 in taxes that would have gone to the federal government were invested for two years at a 10% annual return, yielding $238,000 ($119,000 per year). This investment return is taxed as any investment return is taxed.
By deferring the payments, the orthodontist reduced his tax bracket and tax rate, resulting in significant tax savings. The trust funds were used to purchase additional assets, such as real estate or stocks, further diversifying his portfolio.
Immediate Tax Deferral
Instead of an immediate loss to taxes, the $1,190,000 that would have gone to taxes was invested, generating an additional $238,000 over two years through strategic investments.
Enhanced Investment Returns
Over the initial two years, the orthodontist enjoyed a net investment gain of $181,356 after taxes, thanks to the deferred payment structure of the trust, compounding the benefits over time.
Long-term Financial Planning
From the third year onwards, the trust distributed $500,000 annually, enabling ongoing savings on taxes and investment gains. In just the third year, the practice seller realized an additional net gain of $81,610 after taxes.
An Aegis Tax Deferral Trust is a strategic financial tool designed for sellers of high-value assets like real estate or businesses. It allows sellers to defer capital gains taxes by transferring their assets into a trust, which then sells these assets on their behalf. The proceeds are reinvested into various income-producing investments, providing the seller with a steady stream of payments over time while effectively managing tax liabilities.
Understanding Aegis Tax Deferral Trusts:
A Guide for Sellers
First, ensure you meet the criteria for an Aegis Tax Deferral Trust by owning assets like real estate or businesses that have significant potential for capital gains.
Determine Eligibility
From asset protection to compliance with state and federal regulations, we provide peace of mind that potential financial risks are managed proactively.
Risk Management
Every financial strategy we develop is personalized, combining our legal and tax expertise to fit your specific situation, ensuring optimal outcomes for your practice’s growth and your personal wealth.
Customized Strategies
Unlike other financial services that require you to coordinate multiple consultants and service providers, we offer a comprehensive suite under one roof—reducing complexity and enhancing efficiency.
Select a Trustee and Prepare Documents
An Aegis Tax Deferral Trust allows sellers to defer capital gains taxes by transferring their assets into a trust, which then sells these assets on their behalf. The proceeds are reinvested into various income-producing investments, providing the seller with a steady stream of payments over time while effectively managing tax liabilities.
Key Steps in the Aegis Tax Deferral Trust
With our in-depth understanding of the healthcare sector and tax law, we confidently guarantee tax savings that at least match, and most often exceed, the cost of our services. Our expertise pays for itself.
Tax Savings Guarantee
The trustee reinvests the sale proceeds into diversified investments. You will receive payments according to the agreed structure, which can be either interest-only or a combination of principal and interest, providing a steady income while deferring taxes.
Reinvest and Receive Payments
Officially transfer the ownership of your asset to the trust, which will then handle the sale to a buyer, effectively placing the asset under the trust's control
Transfer the Asset
Choose a qualified trustee experienced in managing these trusts and prepare the necessary legal documents, including a Trust Agreement and an Installment Sale Agreement.
Select a Trustee and Prepare Documents
Resources
Testimonials
"Ben listened to my concerns, provided me with timely and thoughtful analysis, made recommendations, managed my expectations, helped with negotiations, and guided me through this dispute. The result was that he helped me through this challenge and the outcome was better than I expected."
Alan Peet, DDS
Olympic Peninsula Oral Surgery
"I am extremely grateful to Ben for his caring, nonjudgmental nature, and the way he was able to encourage, support and help me to continue to feel hope when emotions and discouragement were weighing me down. I would definitely recommend his services and count him as an extremely important legal and professional advisor in my professional life. You have made a huge impact on my life and the future of my family!"
Nathan Tanner, DDS, FAGD
Tanner Dentistry
"Ben has been wonderful to work with during difficult and stressful circumstances. By being able to help me stay calm and offering wise counsel, he has guided me through challenging circumstances and accomplished very positive outcomes."
A. V.
Plastic Surgery
Get in touch
At Aegis Lion, our mission is to provide our clients with the best possible legal representation available, while ensuring their voices are heard. Our attorneys have a wealth of experience in a wide range of legal areas, providing hands on counsel and representation. If you’re in need of legal services, our team is available during the weekdays from 9-5 to assist you. We make it a point to respond to inquiries within a day and appointments can be scheduled directly with us.
CASE STUDY 2
Real Estate Transaction
A real estate investor sold a property for $15 million. Instead of facing hefty immediate capital gains taxes by accepting the full sale amount, the seller strategically received $5 million upfront and allocated the remaining $10 million to an Aegis Lion Tax Deferral Trust.
This move deferred taxes on the $10 million, which otherwise would have incurred approximately $2.38 million in taxes (at a 23.8% rate). The deferred funds were invested, yielding an annual return of 10% or $238,000 before taxes. This approach not only reduced the investor's tax bracket and rate but also allowed for reinvestment in diverse assets, enhancing the portfolio beyond traditional real estate holdings.
By choosing the Deferred Sales Trust over a 1031 exchange, the investor benefited from greater investment flexibility and improved cash flow management, tailoring financial strategies to meet long-term goals.
Strategic Tax Deferral
By placing $10 million in the Aegis Lion Tax Deferral Trust, the investor deferred approximately $2.38 million in capital gains taxes.
Increased Investment Flexibility and Returns
Unlike a 1031 exchange, the Deferred Sales Trust allowed for the $10 million to be invested in a diversified portfolio, enhancing returns through exposure to different asset classes.
Enhanced Long-Term Wealth Accumulation
Over the extended term of the trust, the compounded returns on the reinvested $10 million significantly enhance wealth accumulation. For instance, reinvesting the annual returns at the same rate compounds the investor’s gains, providing a substantial revenue stream over time.
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