Asset Protection Using an LLC

Case Study – Anthony and Dina

Client Background

Anthony and Dina Donfrio are 55 and 52 respectively. They have been married for 30 years, and have six children. They live a comfortable lifestyle, spending about $850,000 a year after taxes, and their annual income exceeds their spending. Currently, they pay just under $10M a year in income taxes, with that number expected to climb.

Anthony and Dina have assets worth approximately $200M and therefore have a substantial estate and income tax exposure.

Anthony owns and operates a company, Donfrio Construction, which he acquired several years ago in a purchase agreement with his parents. This business has continued to grow and produce significant income, which has caused some discomfort between Anthony and his brother.

Anthony’s brother is not involved in the business and the family has always had to find different ways to equalize his inheritance while Anthony’s business has flourished. At the moment, Anthony and Dina do not intend to pass the company on to any of their six children.InKnowVision Donfrio Case Study

Anthony and Dina are also very charitable. They make significant annual gifts to their favorite causes and would like to continue increasing those gifts since their annual cash flow allows it.

Most of Anthony and Dina’s wealth is currently tied up in Donfrio Construction. Valued at approximately $192M, this asset accounts for over 95% of their estate value. Net earnings for the company, after taxes and distributions, vary between $10M and $20M per year, depending on the general economy of the country.

Anthony and Dina have also formed a captive insurance company. The underwriting profits from the captive are split with Anthony’s brother in an attempt to help to provide some equalization.

Client Goals and Concerns

The Donfrios’ primary planning goals are to:

  • Ensure that they have sufficient funds to live on for the rest of their lives (approximately 850,000/yr. after taxes and gifts)
  • Ensure that in the event of Anthony’s untimely death, sufficient cash is available for Dina
  • Provide for increased charitable giving during life and a significant charitable gift of 75% of their estate at death
  • Provide an inheritance to their children of 25% of their estate
  • Reduce income taxes
  • Reduce or eliminate estate taxes

The Solutions

As with all our clients, integrated planning solutions vary from client to client. This situation used four different solutions, which were designed to meet all the client’s goals and mitigate as much risk as possible. We will look at one of the solutions used in this client’s plan.

Family Limited Liability Company

With significant cash building up inside of Donfrio Construction, Anthony wanted to begin distributing some of the excess cash out of the company. It made sense, for asset protection reasons, to have the cash held in a limited liability company.

This newly formed entity would help provide asset protection and ensure that in the event that something were to happen to Anthony, Dina would have easier access to cash that was distributed from the construction company. This strategy could also be coupled with future asset protection trusts, creating another layer of protection.

Annual Meetings and Maintenance

Our annual maintenance program helps Anthony and Dina to stay on track with monitoring their cash flow and lifestyle needs as well as the choices they made in the planning process.

Join us for our HNW Case Study Webinar on June 18th at 11 am CST – Click here to register

New Year’s Resolution – Change Your Message

Coming off of a very busy year and working up to midnight on New Year’s Eve has given us some insight as to what lies ahead.  We assumed that many of our colleagues had a last minute rush from clients to do quick fix year-end planning and perhaps there were many more who did not.  In large part it may have been due to the message planners were sending to their clients as well as the year-long media hype around the expiration of the tax cuts and fiscal cliff saga.  In any event, this insight may help you to choose a different message in 2013.

secret message

secret message (Photo credit: stargardener)

For InKnowVision’s advisors and their clients our message is always to plan for what you can control, leverage or mitigate today.  The crystal ball approach has never worked for us.  There is a level of planning risk from a client’s perspective that they are willing to tolerate and that risk can only be measured and decided on when clients can see the proposed results.  Things like increased current cash flow, income tax planning and asset protection are easily measured and monitored.  Having these in place can help build the bridge to estate, business and charitable planning.

We have found that education is key as are the advisors who serve HNW clients.  Our success has been driven by our message,  “Tell us what you would like to do today and we will do our best to design a plan that meets your goals and expectations. Every year we will measure, monitor and make adjustments, if necessary, to reflect your changing goals and current tax law.”  This message is the difference, in our experience, between success and failure.  Planning is about a client’s goals, not ours or government’s.

This month, take time to reflect on your successes and failures.  Break them down client by client. Be sure to acknowledge why your clients felt success or why they experienced failure and put the reasons on a white board where you and your staff can see them.  You may see a recurring theme evolve right in front of your eyes.

  • What message were you sending?
  • Were you telling them what to do because of the potential expiration of tax laws?
  • Were you asking them if any thing was keeping them awake at night?
  • Were they worried about cash flow or a troubled adult child?
  • Was their business at risk or were they contemplating a sale?

There are many unasked and unanswered questions. This year make it a point to start anew.  Find a message that resonates with your clients and motivates them to do great planning.  Be sure to share that message with your referral sources so they can use it too.  Make it a New Year’s resolution.

Do something unexpected.

View this InKnowVision November 2012 HNW Case Study Webinar from InKnowVision

Wishing you success in 2013,

Kim Hamilton

InKnowVision, LLC

Using Marketing Interns to Reach the UHNW

This week’s InKnowVision marketing webinar was directed at successfully finding and serving the fastest growing high net worth market segment,  individuals and families in the $30M to $49M in net worth range.  We delivered some insight, marketing messages and tools to help our advisor community begin the process of reaching this desirable market in 2013.

Chelsea Cagle and Jessy Crawford started as Interns with InKnowVision

Chelsea Cagle and Jessy Crawford started as Interns with InKnowVision








One of the suggestions during the 25 minute program was to immediately hire a marketing intern. This post today by KISSmetrics is an excellent read and provides insight on how the right intern can help you scale quality content in reaching this rapidly growing market.


We apologize for the small audio problem in the first minute.

Kim Hamilton



Construction Companies Manage Risk While Building Wealth

Purchasing insurance continues to be difficult and extremely expensive for construction firms. With the expected boom of construction on the horizon now is the time to plan ahead for risk mitigation and wealth creation. 

Captive insurance has become an excellent risk management and wealth building solution for many construction company owners. A captive insurance company can finance the risk of its owners or participants.  There are over 90% of the fortune 500 companies that use one or more captives to manage risk and increase their bottom line. The expansive growth of captives in the private business market is a key indicator that the use of captives is a good business tool.


Captive insurance is designed to save money on insurance premiums over time.  It is appealing to construction companies in that the company maintains control over

  • Costs
  • Services being provided from claims management to reinsurance
  • Choices for shareholder in the captive
  • How much risk and what type of risk the group wants to assume
  • Captive profitability

Today with razor-thin margins companies need captives to remain competitive in the marketplace.

Wealth Building

Aside from risk management the wealth building aspect of captives makes this business-planning tool very appealing.  InKnowVision works with many business owners whose main asset is their business. While the business has a lot of value and is employing many people, there is usually not a lot of disposable money and cash around.

They have come to learn that a successfully managed captive can be a great wealth accumulation strategy in terms of delivering value. Construction companies in down markets often face difficult financial struggles. Some end up going out of business with nothing to start over with. Building wealth outside of the company can help to alleviate this pain point. The use of captives provides an opportunity to grow wealth away from the business while maintaining thoughtful and well-planned risk management.

Favorable Tax Treatment

One of the key drivers in any captive is that the business owner is looking for ways to defer income taxes. Everybody knows by now there’s going to be future increased tax rates and here is where a captive looks even more attractive. Construction companies can save hundreds of thousands of dollars in annual taxes and enjoy the benefits of these compounded savings for years to come.

Increased cash flow will help a company owner decide where and when to spend or reinvest the savings.

Moving More Out Of Your Estate

Business clients also can use ownership choices for the captive to transfer significant amounts of money to children and grandchildren (and in some cases, to key employees). For business clients who have already used their $5 million exemptions, a captive can be a really good way of continuing to move money outside the taxable estate.

Asset Protection

A captive insurance company can also provide asset protection and it is one of the few things you can do that can minimize fraudulent conveyance claims while building wealth outside of your company. If someone gives their assets away and then goes bankrupt, creditors can come after the assets that were given away. However, one of the nice things about captives is that it fits into the exception of the general rule on fraudulent conveyance. The exception is that if someone pays for something and they get fair value for it, then it is not a gift so the creditors in all likelihood are not able to go after those transfers. When a business owner uses a captive, they are buying insurance coverage and are paying a fair value for it so it should be protected in an asset protection case from a fraudulent conveyance type of attack.

InKnowVision has a good understanding of the construction industry having served construction firms in the area of captive insurance planning and overall business planning. Our core focus is helping you, the construction company and its owner, capture increased cash flow, build wealth outside of your company, manage risk and protect what you’ve built. Learn what captive insurance can do for your construction company today.

View our Captive Insurance Channel to learn more.

Scott Hamilton is the CEO of InKnowVision. InKnowVision is a national advanced estate and income tax planning design firm serving high net worth individuals, families and business owners.

InKnowVision delivers superior plan designs to mitigate risk and leverage opportunity while first securing cash flow and lifestyle needs.

InKnowVision does this in collaboration with the client’s team of professional advisors including estate and business attorneys, financial planners, and accounting firms to ensure that the client’s planning goals are met.

Estate Tax Does Not Matter When It Comes To High Net Worth Giving

This year’s  2012 Bank of America Study of High Net Worth Philanthropy was released and the findings were impressive and interesting.

Some of the key findings were:

Key Findings from Bank of America Study

There is a continued strong commitment to giving amongst the wealthiest donors.

Volunteerism is on the rise up over 10% from 2009.

Wealthy donors are motivated to give even if the estate tax or income tax reductions are reduced.

Wealthy donors have strong feelings about how the nonprofits they support should use their contributions and conduct themselves.

In addition, they have very little confidence that the government can solve societal or global problems.

The findings are in sync with what we see in our work with high net worth clients at InKnowVision. Advisors should be engaging in conversations about philanthropic giving with their high net worth clients. It is meaningful and important. It is an area of the advanced planning process that they control and can have a positive outcome.

Kim Hamilton


A Peace of Mind Coach – Advanced Planning

You can call it coach, professional or whatever you think will appeal to your HNW client or any client.  The truth is that in this day and age it is hard for clients to make difficult decisions without having a peace of mind.  If your client needs a peace of mind, hire someone who will provide it.

I recently posed a question to our audience about what they were doing in this last quarter to educate their client base on the potential tax changes expiring at year-end. I received various replies from different professionals and in almost all of the answers it was noted that they had sent letters outlining broad and generic consequences of ignoring the potential changes.

It would seem to me that unless we know our clients full picture a letter would simply fall into the waste can. Suggesting a client give away half or even a portion of their wealth because of the changes in the tax law is unrealistic. The peace of mind they have currently knowing that they have wealth that they control and want to hold on to it would stand to reason that they could not simply give it away.

Now to the contrary, if peace of mind was gained through educating clients on the benefits and potential risks to their “own” situation then perhaps planning for the transfer of some of their wealth today would make sense.

As Scott Farnsworth of CEO Sunbridge Legacy Advisors recently said to a group of attorneys, “ If you are asking about whether or not the estate tax is going to expire then you are asking the wrong question. We all have a larger wealth that goes beyond money and property. It includes the wisdom we acquired, the insights that have allowed us to make better decisions, as we get older, and our heritage. When you add that in with money and property, then you pass along real wealth.”  As you see Scott’s approach goes beyond the tax planning.

You want may consider removing the exemption conversation from your call to action. Instead take this time to meet with your clients and their advisors, together at the same table, and review their entire picture and include those things that are not on the balance sheet like wisdom and values.  Make sure that you have it drawn out and that they understand it. Once you have uncovered all their current risks and opportunities, they will have a working document to act on. They can then use your wisdom and their own to move forward.

Peace of mind is more than a $5M or $10M exemption. Peace of mind is priceless.

Kim Hamilton

InKnowVision LLC

How Annual Reviews Can Keep You Out Of Court- Advance Estate Planning

As luck would have it in a recent court case (Thomas Lane Keller, et al. v. United States, Case No. 10-41311 (5th Cir. Sept. 25, 2012)). coming out of Texas (not ours) the tax payer was victorious even though there were holes in the planning documents.  Victorious was an understatement to the tune of $115,375.59. Now that was some refund! 

I can only imagine the feeling the trustee had when he opened the letter from IRS demanding of $147 million in estate tax, chest tightening and stomach churning. How about the look on the advisory team’s faces when they received the news, pale and stunned?  Did they warn the client and the trustees about a potential audit? Maybe and maybe not.  Were they aware of the possible enormous malpractice claims that could come as result of potential negligence? Who knows.

Not to long ago we left it up to the advisory teams to schedule the annual estate and tax planning review meeting for clients that we created design plans for. That was until we started getting calls from advisors saying that their clients were being audited. It did not take long to realize that the plans we created, which the teams implemented, had no annual oversight.

Two years ago we made a change. We started by telling every new client and their advisory team that there would be a maintenance phase to the plan design and that it would be facilitated annually for a fee. This put us on a path towards much happier clients and very pleased advisory teams.

Clients today need to be prepared for the good, bad and the ugly. They also must know that they have a competent team to support them, one that is diligent about annual meetings, oversight and cares more about their clients than the fee they receive.

Kim Hamilton

InKnowVision LLC


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