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“Insanity is doing the same thing over and over again and expecting a different result,” spoke Albert Einstein.

After 50 years of observing family business, I have seen dozens of mistakes repeated again and again by inexperienced— and yes, sometimes experienced—business owners that cost tons (often more than $1 million) of tax dollars and wreak economic havoc on the business owners, their businesses and their families.

Following are the four mistakes in typical real-life order that I see the most and that cost the most in dollars (usually down the road), yet are the easiest to correct.

1. Not funding for your kids’ education/ not funding for your kids’ retirement.��
   The insanity. Do nothing, or set aside money in a taxable investment such as bonds, stocks and savings accounts. The solution. Set up a tax-free education/retirement plan for each child. When? It’s best when the baby is born. As little as $10,000 per year for 6 years, a total of $60,000, will fund the baby’s college education (about $70,000) and provide yearly retirement payments of $150,000 starting at age 60 and continuing to age 95. Total benefits should exceed—are you ready?—more than $9 million. Wow! No magic. Just the compounding of money in a tax-free environment.
2. Selling the business to the kids.
   The insanity. You (Joe) are triple taxed. For example, Joe sells his business to his son Sam for $1 million. Tax #1: Sam must earn $1.6 million and pay an income tax of $667,000 to have $1 million left to pay his dad. Tax #2: Joe pays on average $200,000 in capital gains tax, and $800,000 is left. Tax #3: Joe dies. On average there are $416,000 in estate taxes. Only $384,000 is left for the family. The solution. Joe transfers his business to Sam using a grantor retained annuity trust or a defective trust. Joe still gets to have his $1 million flow of income, but Sam pays zero income tax and—best of all—the business is out of Joe’s estate. The tax-savings usually equal about 50 percent of the value of dad’s business.
3. Funding for your retirement.��
   The Insanity. Rich people pour money into qualified plans such as a 401(k) or profit sharing plans or IRAs. You will be taxed 40 percent (ouch!) when you take a dollar out of the plan and 55 percent of the 60 cents balance when you die. Result: Your family gets a mere 27 cents, and the IRS gets 73 cents out of every dollar. Think about it: The IRS gets $730,000 out of $1 million. Insanity, indeed. The Solution. If you are young, about 50 or younger, switch to the strategy in No. 2 above. No matter what your age, use a subtrust to skyrocket the after-tax wealth in your qualified plan. Yes, you can usually multiply your plan dollars 10 times or more. Typically, we turn every $100,000 into $1 million or more—all tax-free.
4. Estate Planning.��
   The Insanity. (a) no plan, (b) a plan that becomes old and no longer fits, or (c) most often, a traditional estate plan (you married people with a two-trust plan) that is well done and sits in the drawer, and when both husband and wife go to the big business in the sky, the IRS is guaranteed a big payday. Over the years, I’ve seen little guys get whacked for $100,000 or more when one slight change would have eliminated the entire tax. The big guys? It’s easy to lose over one-half of your family’s wealth to the IRS; losses of $1 million to $10 million to the tax collector are not uncommon. What kind of insanity robs your family to enrich the IRS?

The solution. Create a wealth transfer plan (a lifetime plan) instead of an estate plan (a death plan) with one clear goal: transfer all of your wealth—every dime of it—to your family.