Using Structured Installment Sales to Reduce Capital Gains on the Sale of a Professional Practice

Today I'm going to be talking about the topic of whether a professional practice can be sold and take advantage of a structured sale so as to spread out a tax hit and lock in cash flow as lawyers, accountants, doctors and others start to retire and transfer their professional practices. Most people think of structured sales for just real estate, but you can use them for the sale of a professional practice and reap many of the same benefits provided you are properly organized and prepared at time of sale. 

Now when I talk about a structured sale, let's keep in mind that it's essentially a very common tax strategy called an installment sale. Installment sales have been enshrined in the US Tax code since just about forever, the process is well understood by just about every CPA and tax professional, as well as business brokers who work with you to sell professional practices. Just because someone decided to brand these as "structured sales" doesn't mean they take on some mysterious tax strategy, in fact it's just the opposite. It's pretty vanilla at it's core.

Where it does differ from an installment sale is that instead of the seller relying upon the credit worthiness and business acumen of the buyer to make the future payments, a structured installment sale TRANSFERS that obligation for the payments to a secure third party institution such as a life insurance company or trust company. This assignment of liabilty is a pretty simple process and essentially transfers the obligation to the third party with no strings attached to the buyer. That's a simple explanation but for now if you want to know more on the mechanics of that, go to my web page at Wahlstrom & Associates and you can see in greater detail how the assignment works. 

However, this video is about selling your professional practice so lets hit the three key points quickly that you need to know. They are Qualify, Notify and Planning. 

1. What is your business entity organized as? Sole proprietor, single member LLC, multiple member LLC, S Corp, etc. All of this matters big time as to how the IRS will classify the sale of your practice, so the first step before you even consider a structured sale is get top level tax advice as to the best entity organization for your company ahead of your exit strategy or asset sale. This has to be done first so you know what, if any, parts of your business qualify as capital assets. 

2. Is the buyer on board with you selling in an installment sale basis and agreeing to the assignment of the obligation to make payments to a third party. So many people wait until the very end to raise this with a buyer, who in many cases gets spooked by their unfamiliarity with the concept and refuses to execute the assignment or installment sale. I can't stress enough the importance of NOTIFYING the buyer early you intend to use this concept. 

3. Have a clear plan for your distribution of the installment payments. By this I mean look at the rates offered by the life insurance company on the funds held, decide how long you want payments to be spread out over time, but most importantly how you plan to reinvest or use those assets once they arrive each year. Map out your post retirement expenses, investment plans or estate planning and maximize the value of each year's payments to insure you leverage this tax planning tactic to it's maximum value. 

Ok that's it. You can, with careful planning and consultation with your tax professional and business broker, create a safe, secure tax advantaged cash flow on the sale of a professional practice if that's what you want. If you have questions, go to my web page at Wahlstrom & or call my office at 480-478-0183. I'm happy to help you and your team of advisors understand how to make structured installment sales work for you. 

Posted on March 6, 2019 .

What you need to know to make structured sales of real estate work for you in 2019

Structured sales of real estate, or as I prefer to call them, guaranteed and secured installment sales, have been seeing a surge of interest as baby boomers begin a massive conversion of real estate assets into financial assets as they approach retirement. 

What do you need to know in 2019 under the new tax rules and rates to make this safe, secured installment sale work for you by spreading out capital gains taxes and putting 100% of your sale proceeds to work for you?

Let me give you the THREE key points for you to consider if you are selling real estate, business property, a closely held corporation of any other capital asset this year.


While I won't steal the thunder of the life insurance company that has announced they are going to enter the structured sale market in early 2019, suffice it to say it is a major brand name and represents a dramatic upgrade in the options for investors large and small. If you have a property you are selling in 2019 make sure you call or email my office ( my contact number is on the screen and will be on the end of this video as well) so that I can inform you when this company is commencing new business operations in structured sales. 


A lot of people in the US are having the uncomfortable realization that tax reform, for high net worth or high income earners, has radically reduced the number of deductions, exemptions and write offs. The net result is more of your income is exposed to the highest rates of taxation. Taking a big hit on the taxes due after the sale of property, then trying to "catch up" with earnings to get back to that net sale figure before you paid taxes, well, it's almost impossible if you do the math. Spreading out your tax due over years or decades, with 100% of your funds invested makes a great deal of sense now and you need to see if this option works in your particular case. 


While everyone likes to talk about their ability to tolerate market risk and volatility, the fact is if you have a big chunk of cash for a property sale, have it in the market and we see a 15% to 20% market decline, you are going to be pretty miserable about that loss. 

As people move to retirement they need GUARANTEED cash flow that shows up every month, on time, in the account and is not subject to market volatility or risk. Remember, you can always reinvest your monthly proceeds into the market if you choose, on a dollar cost average basis, and not expose your entire proceeds to bad luck and bad timing if a market decline occurs. 


We have new major markets coming into play to guarantee payments and simplify the process of a guaranteed installment sale, which coupled with the reality that most people want to avoid higher taxes and lock in guaranteed income, makes this structured sale option more attractive than ever. 

If you are considering this technique, I encourage you to call and speak to us and see if this makes sense for you. It's no pressure, the call and consult is free and it is our firms pleasure to assist you in this important decision. For more assistance and information go to:

Posted on February 8, 2019 .

How to Avoid Misunderstandings When an SNT Is Part of the Personal Injury Settlement

Too often families have unrealistic expectations with regard to personal injury settlements that incorporate a special needs trust (SNT). In such cases, it’s advisable to involve a special needs attorney as early as possible so that all parties understand what is permitted by public benefits regulations.

A special needs trust (SNT) is a legal agreement through which someone places money or property into the hands of a trustee, who will hold and manage those assets for the benefit of a beneficiary with disabilities.  SNTs primarily serve two purposes. If the beneficiary is unable to effectively handle assets on their own, an SNT enables the assets to be managed on their behalf by a trustee. In addition, if the SNT is properly drafted and administered, the assets that it holds will not affect the beneficiary’s eligibility for means-tested programs such as Medicaid and SSI (Supplemental Security Income).

The trustee controls the SNT and is responsible for all investment decisions and distributions, although he/she may seek advice about the beneficiary’s needs from the individual’s family or a professional care manager. The trustee’s role requires a thorough understanding of the rules governing public benefits in order to spend trust money in a manner that protects the beneficiary’s eligibility.  This includes the requirement that funds are to be used for the sole benefit of the beneficiary, not other family members.

Since most SNTs must provide accountings to the state Medicaid agency or the court to ensure that distributions are in order, the trustee must maintain good records of all receipts and payments. Sometimes the trustee must get approval from the court or a review committee for disbursements above a certain dollar limit.  

Trustees do not give funds directly to the beneficiary, since that would be considered income by Medicaid and SSI and could affect eligibility for those programs.  And rather than making distributions to other family members, the trustee usually pays vendors directly on behalf of the beneficiary.

When families understand how an SNT must be administered in order to protect the beneficiary’s eligibility for important government benefits it can avoid both disappointment and conflict.

Posted on February 8, 2019 .