iCLAT Interview w/ Brad Gornto

{8 minutes to read}

Michael Fliegelman:

Previously, we discussed in detail, qualified plans — IRAs, 401(k)s, pension plans — and how these may be great tools to accumulate wealth, which is like the first chapter in financial planning. Chapter 2 is when we hit retirement age and take a distribution, and Chapter 3 is wealth preservation.

And while a qualified plan gets an A+ rating in accumulation, it only gets maybe a C+ in distribution, and even a D- in wealth preservation. In wealth distribution, all of the money coming out of the IRA is taxable as ordinary income. And at death, there is no step-up in cost basis, and all of that asset has to go through both income and estate taxes, before being used by the beneficiary,

So, one of the things we talked about last week was the potential to convert these assets with large account balances from a regular IRA into a Roth IRA. So, if I had a million dollars in my IRA and I converted it to a Roth IRA, I would have to pay all the income tax on that million dollars, which at that amount will be at the top tax bracket of 37%. This means I would have to come up with $370,000, which many people might not want to do.

Last week, I said I was going to introduce a potential solution to this issue of coming up with the money to pay the tax.
About a year ago, I was introduced to Brad Gornto, who is an estate planning & tax attorney in Florida. Brad is with us today and I’m going to interview him and allow you to learn about an innovative charitable planning tool, which his firm and many allied professionals across the country refer to as an iCLAT. I think this tool can be very helpful for many folks who are considering ROTH IRA conversions because iCLATs greatly mitigate the resulting income taxes. So Brad, tell me a little bit about your firm and who would be a good candidate for utilizing your services to create an iCLAT.

Brad Gornto:

Well thanks, Michael, and thank you for the opportunity to speak with you today. In addition to practicing estate planning/tax law in Florida for 21 years, I am also the CEO and owner of iCLAT Solutions, LLC, which specializes solely in the creation of iCLATs.

There are multiple ways to reduce taxes from Roth conversions, depending on the client’s particular situation and goals. For those clients who support various charities on a recurring annual basis, the iCLAT is a compelling tax mitigation solution for them to consider. Simply stated, iCLATs work extremely well for someone who already gives between $10,000 to $100,000 per year to one or more charities

The sole purpose of an iCLAT is to strategically capture the tax savings from annual charitable giving in the current year – when the client needs it the most, often because of a ROTH conversion or other spike income event. Technically speaking, iCLATs generate a massive immediate income tax deduction in the current tax year which is equal to the “present value” of its annual payments to charity. This immediate charitable deduction is then available to greatly mitigate the taxes otherwise incurred by the large taxable event, which in our current discussion would be a large Roth IRA conversion.

Every day we receive calls and emails from financial advisors, accountants, and attorneys who have clients who are already annual donors to charity and need immediate tax savings.

Most of the work we’re doing now is for referrals who are doing ROTH conversions or otherwise realizing income from their qualified plans.

Michael:

Well, that’s terrific, Brad. I know that we have a mutual friend in a CPA that we both work with. Before I got to know you, he shared with me glowingly, how your firm was able to promptly assist 4 or 5 of his clients with iCLATs late last year in December alone. Can you share a little bit about that?

Brad:

Sure thing Michael. First, iCLATs are relatively simple to explain, establish, and administer, particularly in comparison to traditional CLTs.

The clients that our mutual CPA colleague referred to me each had fairly common fact situations. One person received a very large bonus, one was a surgeon who had a very profitable year, and another had sold his interest in a company and think was at the tail end of his salary continuation payout. Importantly, all of these people were already annual givers to charity, so the iCLAT was immediately attractive to them.

In most iCLAT engagements, clients simply open a new investment or account, as the trustee of their iCLAT, and fund it with a certain amount of cash, marketable securities, and/or other assets. The client, as trustee of his or her iCLAT, will continue to invest the assets in the iCLAT account with their current financial planner over its specified term of years, which could be for 5 years, 10 years, 20 years, or even longer. Then, each year the iCLAT will make its specified annual charitable distribution to the client’s preferred charities. Finally, at the end of the term of the iCLAT, all of its assets will be distributed back to the client in a “reversionary” non-taxable transaction. It is this “reversionary” distribution back to the client that greatly distinguishes the iCLAT from the vast majority of traditional CLTs.

Michael:

Well, that is very valuable information. If it would be possible, I’d like to request that you create an illustration for our readers to see how it would work. After that, we could do another meeting and share the mechanics behind it and the numbers, so that people can see it. But if you could forward to us an example, maybe that $30,000, or if somebody had a $1,000.000 traditional IRA and they wanted to consider a ROTH conversion, and how an iCLAT could benefit them. Some of our readers may be analytical and say — Well, this sounds good, but let me see it.

Brad:

Will do Michael. Also, we have several tools on our website, which is www.iclat.net, that allow advisors, accountants, and potential clients to run some quick numbers and also request FREE customized iCLAT illustrations. It is a very easy process and it only takes a few minutes.

Michael:

Do you have anything else that you think our readers will benefit from learning from you today as we bring this call to an end?

Brad:

One final important point is that as interest rates start to rise with inflation, the immediate tax savings from iCLATs will decrease. For that reason, we are encouraging folks NOT to wait until the end of the year to establish their iCLATs.

Registered Representative offering Securities through American Portfolios Financial Services, Inc. (APFS) Member FINRA/SIPC. Investment Advisory Services are offered through G&G Planning Concepts, Inc. which is not affiliated with APFS. Strategic Wealth Advisors Network and Gassman Financial Group are not affiliated with APFS.

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