Summary
Voluntary employee beneficiary association, type of employee benefit plan
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Extract
Are VEBAs worth another look?
A dynamic planning vehicle for closely held businesses.
EXECUTIVE SUMMARY * A VEBA MAY BE A GOOD WAY FOR CERTAIN BUSINESSES to cut taxes, provide benefits for employees--including owner-employees--and protect assets from personal and business creditors. VEBAs also can provide other benefits, including the opportunity for substantial estate tax savings. * A VEBA TRUST CAN PROVIDE A VARIETY OF BENEFITS, including life (death benefits), sickness, accident and other benefits related to the welfare of employees, their dependents and beneficiaries. Benefit payments are not based on the passage of time, but rather are triggered by a specific event. * A VEBA MUST HAVE AT LEAST TWO PARTICIPANTS. Benefits are based on annual compensation and age. The plan must comply with several provisions of ERISA and the nondiscrimination provisions of IRC section 505, which require-that benefits not discriminate in favor of highly compensated employees. All VEBA assets must be held by an independent trustee for the benefit of plan participants. * CPAs CAN HELP VEBA PARTICIPANTS STRUCTURE survivor benefits so they are not subject to income or estate taxes. Plan participants can make an irrevocable beneficiary designation, usually an irrevocable trust for family members. Such a designation also could avoid having the funds included in the surviving spouse's estate. * A VEBA DOES NOT FIT ALL SCENARIOS. CPAs should recommend it to profitable businesses tha...See the full content of this document
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