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SCRUTINIZING HYPERACTIVITY

Introduction

In past centuries the health of children was mainly threatened by ignorance of basic hygiene, inadequate sanitation, contaminated water, poor nutrition and infectious diseases. Epidemics of cholera and other water borne diseases contributed to the death of thousands of children. Scarlet fever, measles, whooping cough, diphtheria and typhoid did the same. Identification of harmful bacteria and development of methods of immunisation resulted to a large extent in the eradication of infectious diseases. With the advent of modernisation conditions such as hyperactivity, attention deficit disorder and other learning disabilities as well as an increase in chronic illnesses such as asthma, eczema, etc. have been seen. This brochure attempts to summarise observations concerning hyperactivity, and its treatment from a dietetic viewpoint. The information, advice and recommendations are of a general nature and are not specific to the particular circumstances of an individual.

Hyperactivity in history

The hyperactive child and adult have probably been around since the emergence of modern man. Descriptions of clinical patterns as early as 400 BC appear similar to those currently labelled as hyperactive. Heinrich Hoffman, a German physician, first described hyperactivity in 1845. Since then, the hyperkinetic syndrome, commonly labelled as hyperactivity has captured public attention in practically every developed country in the world as increasingly more children have been and are diagnosed as hyperactive. Hyperactive characters abound in literature and cartoons, the main characters in the popular cartoons, Dennis the Menace and Bart Simpson being classic examples.

Hyperactivity defined

Hyperactive children usually have Attention Deficit Disorder (ADD), leading experts to classify the malady together as ADHD (Attention Deficit Hyperactive Disorder). In the USA many children are labelled hyperactive or as suffering with ADD when they attend school. There is some concern about “labelling” children when they do not respond in an acceptable way to the school, perhaps reflecting an inadequacy in the teachers rather than the pupils. Medication to suppress hyperactive children is often prescribed with side-effects such as dizziness, headaches, drowsiness, blurred vision, gastrointestinal problems and depression.

Incidence of hyperactivity

The incidence varies from country to country depending on the criteria used for diagnosis. In the USA the rate ranges from 5 to 22%. In Australia the rate of incidence ranges from 8 to 12%.1 In the United Kingdom a small number of children are diagnosed as hyperactive although referrals to child guidance clinics have increased.2 Hyperactivity is believed to affect 10% of the South African population and is found in every ethnic and socio-economic group.13

Characteristics of hyperactive children

Describing the characteristics of hyperactive children is daunting because many of the symptoms are present in all children to some degree at some time. Hyperactivity has been found to be between four and nine times more common in boys.2,3

The hyperactive baby is restless, has feeding problems and colic (intermittent and unexplained crying) and often has sleeping problems. Some fall asleep late and with difficulty while others wake up frequently or early. The baby often cries incessantly and parents find that no amount of comforting, nursing or cuddling pacifies the child.

The hyperactive toddler lives in a constant state of overstimulation, is constantly moving, unable to sit still, always into everything and touching every object in sight. As the child becomes older the description changes. They are always in motion, constantly fidgeting or shuffling their feet, can not stay at an activity long and can not read without quickly losing interest. A large percentage of hyperactive children have an abnormal thirst with a normal urine output. Other symptoms are lack of concentration, temper tantrums, impatience, quick frustration, clumsiness and sleep disturbances. Hyperactive infants and adolescents usually have a depressed immune system. Asthma, hay fever, otitis, eczema and other atopic conditions are common.

Most authorities agree that the major features of hyperactivity can be categorized as academic difficulties and behavioural abnormalities. Impulsiveness, low frustration tolerance, short attention span, aggressiveness and low self-esteem are some of the symptoms exhibited. Almost all hyperactive children have a high IQ, but poor concentration means they perform less well than they should in school and often complain of headaches, asthma, hayfever and other respiratory disorders.

The characteristics of the hyperactive child tend to intensify from birth to about 3 to 4 years of age, but may have subsided by the time the child reaches 10 to 12 years of age. The child becomes more controlled and the hyperactivity could to some extent be outgrown.4

Hyperactivity and allergies

Allergies to cereals and milk, even mother’s milk is often commonplace. For many years paediatricians and paediatric allergists have reported that a higher percentage of children with allergies have learning disabilities and/or hyperactivity compared with those children who do not have allergies.9 It has been estimated that up to 10% of primary school children suffer from allergic reactions which exhibit in the classroom as behaviour and concentration problems.14

An allergy is an abnormal body reaction resulting from sensitivity to certain substances. The most common types of allergies are asthma, eczema and hay fever. Often symptoms are not recognised as resulting from an allergy and will be treated over and over with medications which may help superficially. As soon as the medication is stopped, the symptoms flare up again.

Causes of hyperactivity

Data pertaining to the cause of hyperactivity is incomplete, but various factors have been linked to hyperactivity. These include among others genetic factors, smoking during pregnancy, artificial additives in food, refined dietary sugar and environmental pollutants. Inborn temperamental variations with chemical differences in the brain are thought by some physicians to be the cause. The reason for these differences is unknown, but may be due to genetic differences or anomalies in the development of the baby before birth.

1. Prenatal influences

Very little is known about prenatal influences but there is a possibility that small birth size may sometimes lead to hyperactivity. Other variations in the mother’s biological processes during pregnancy may contribute to the development of hyperactivity.5 It is well documented that the use of alcohol during pregnancy may result in mental retardation (foetal alcohol syndrome) and hyperactivity. The amount of alcohol, if any, that can be safely taken during pregnancy is unknown.6

2. Inborn temperamental differences

Although uncertain, many child psychiatrists reason that inborn temperamental differences caused by chemical differences in the brain may result in hyperactivity.5

The brain is an extraordinary complex interconnection of nerve cells. It receives information from inside the body via nerve impulses, collates this information and responds by initiating nerve impulses and secreting chemical substances or neurotransmitters (dopamine and noradrenaline). When released, neurotransmitters, transmit signals across synapses to other neurons in the brain. These pass from the brain to other parts of the body to stimulate, regulate and co-ordinate activities in other organs and systems.

When there is a deficiency of a particular neurotransmitter, the nerve cells can not function effectively and the portion of the brain that it “operates” will not function correctly. Successful functioning of the nervous system depends on the release of sufficient quantities of neurotransmitters. Hyperactive children are probably deficient in some neurotransmitters.5 In many hyperactive children the quantity of these transmitters probably increases with age, explaining why hyperactive children improve as they grow older.

3. Heavy metal poisoning

Heavy metals such as lead, copper, cadmium and aluminium are thought to be a cause for hyperactivity, especially where children live in industrialised areas. These metals all affect the nervous system. The lead content of environmental air has risen due to the higher lead content of petrol and increased car ownership. Cadmium from parental cigarette smoke and aluminium from food cooked in aluminium foil containers also affect the nervous system.4,6

4. Food preservatives, additives, flavorants and colorants

An allergist, Dr Benjamin Feingold,7 has proposed that hyperactivity is caused by artificial food preservatives, flavors, colorants and natural salicylates. He reported that 30 to 50% of hyperactive children could improve if these were omitted from the diet. His hypothesis stemmed from his observations that in some people salicylates cause allergic reactions such as asthma and eczema. When treating the asthma by removing salicylates from the diet, he noted a behaviour change as well as the disappearance of the asthma symptoms.

Since many patients who are allergic to salicylates also react to artificial colors and flavors, Dr Feingold further postulated that food colors and flavors may also have a behavioural effect similar to that of salicylates in those people who are sensitive to them.

The food colorant tartrazine increases the urinary excretion of zinc. Food colors and flavors are found in foods such as luncheon meats, sausages, hot dogs, jams, sweets, cake mixes and flavored cold drinks. Dietary sources of salicylates are found in apples, peaches, oranges, tea and worcester sauce.

Most dietary-crossover studies eliminating foods containing salicylates, food colors and flavors by a number of researchers have not been able to substantiate Dr Feingold’s theories. Some studies, on the other hand, have provided data in support of the Feingold diet. The final answers are not yet in as there is insufficient evidence on whether the Feingold diet genuinely works.

5. Deficiency of nutrients

5.1. Essential fatty acids

Research4,8 concludes that hyperactive children have a deficiency of essential fatty acids (EFAs) either due to an inability to absorb EFAs adequately from the gastrointestinal tract or because their EFA requirements are higher. A deficiency of EFA in animals causes a constant thirst which is one of the symptoms of numerous hyperactive children.

EFAs are needed to form Prostaglandins (PGE) which are vital regulators in the body. They participate in the regulation of blood pressure, heart rate, blood clotting and the central nervous system. They are essential because the body cannot manufacture them and has to obtain them from dietary sources. There are two EFAs essential to man – linoleic acid and cis alpha linolenic acid.

EFAs are converted by the enzyme delta-6-desaturase to gammalinoleic acid (GLA) which is then converted to another substance called dihomo-gamma-linolenic acid. This in turn is converted to hormone-like substances called eicosanoids of which there are two groups – prostaglandins and leukotrienes. Cis alpha linolenic acid is converted to a substance termed eicosapentaenoic acid (EPA) which is in turn also converted to prostaglandin.

The source of the problem is that the enzyme necessary for the conversion process does not seem to work efficiently in the hyperactive child and adult, with a resultant deficiency of PGE and leukotrienes. The enzyme deficiency or inhibition could be attributed to among others elevated blood glucose levels, a diet consisting of too much saturated fat, refined sugar, the intake of alcohol and deficiencies of zinc, magnesium and vitamin B6.4

Preliminary studies on the effects of supplementation with essential fatty acids in Canada, USA, United Kingdom and South Africa have reported some degree of improvement.2,4

5.2 Other Nutrients

Two-thirds of hyperactive children studied were deficient in zinc.2 A deficiency of zinc, magnesium and vitamin B6 blocks the formation of GLA.

A number of nutrients are essential to the proper functioning of the nervous system and these are discussed under the heading – treatment of hyperactivity.

6. Sugar

Clinical observations and parent reports suggest that refined sugars especially cane sugar triggers hyperactive behaviour. Two theories have been proposed for this reaction. One is that a diet consisting of refined carbohydrates influences the level of EFA. Another possibility is that certain sugars (glucose) influence brain neurotransmitter levels and therefore the activity levels in hyperactive children.

Researchers designed a study where children were given one of three different breakfasts; one high in carbohydrates, especially refined sugar; the second high in protein and the third high in fat. After each meal children were challenged with fructose, glucose and placebos. Children reported by their parents as hyperactive after eating sugar did indeed show an increase in activity level when challenged with glucose after eating a high carbohydrate meal.9

Normal children challenged with sucrose had more problems with attention after a high carbohydrate breakfast than after a high protein breakfast. The reverse was true for children with hyperactivity.12

Another study showed that of 261 hyperactive children who had five hour glucose tolerance tests performed on them, 74% had abnormal glucose tolerance curves. The predominant abnormality accounting for 50% of these results was a low, flat curve similar to that seen in hypoglycaemia. Hypoglycaemia is a potent stimulus for the production of epinephrine which could affect behaviour.10

Sugar may on occasion aggravate existing behaviour disorders. Reducing the intake of sugar should be encouraged. Rigid sugar free diets can be burdensome and socially inhibiting for the hyperactive child. The area of sugar intake and behaviour requires much more research before any recommendations can be made.

A study on the use of artificial sweeteners suggests that some hyperactive children become non-compliant and more aggressive when given large doses of aspartame.9

Treatment of hyperactivity

It is important to rectify the essential fatty acid deficiency. The enzyme necessary for the conversion process of essential fatty acids does not seem to work efficiently in the hyperactive child and adult. Essential fatty acids need to be provided in a form which can be readily utilized. Human breast milk contains relatively large amounts of GLA. Another important source of GLA is the oil of the evening primrose flower which contains 9% gammalinoleic acid (GLA) while fish oil contains 20% eicosapentaenoic acid (EPA). These oils which are commercially available should be provided in a ratio of 2 GLA to 1 EPA (e.g. 500 mg Evening Primrose Oil to 250 mg Fish Oil).4

Zinc, vitamins B6, C and E are catalysts necessary to metabolize the essential fatty acids.6 Since most hyperactive children appear to be deficient in these nutrients supplementation with them makes good sense.

The B-group vitamins are particularly vital to the hyperactive child as one of their main functions is to regulate the central nervous system. Vitamin B1, thiamin, is involved in the maintenance of the central nervous system. A deficiency of Vitamin B2, riboflavin, may lead to central nervous system symptoms such as headache, irritability and fatigue. Vitamins B6 and C are involved in neurotransmitter synthesis.

Calcium acts as a co-factor in biochemical reactions in the body and takes part in the generation of nerve impulses throughout the nervous system. Magnesium which is necessary for the growth and repair of body cells also assists the transmission of nerve impulses to the muscles and acts together with calcium. Vitamin D aids the absorption and utilization of calcium and magnesium.

Zinc and chromium play a role in sugar balance by enhancing the action of insulin in promoting uptake of glucose. A glucose tolerance factor has been identified as a natural form of chromium which seems to potentiate the action of insulin. Supplementation with chromium has been shown to reduce glucose levels and to improve glucose tolerance.11 Since abnormal glucose tolerance levels have been seen in some hyperactive children supplementing with chromium and zinc may help.

Although all the amino acids have certain unique functions in the body a few are worth singling out. Four primary amines, serotonin, dopamine, norepinephrine and acetylcholine are synthesised from amino acid precursors and appear to be under dietary control. Dopamine and norepinephrine are synthesised from tyrosine and phenylalanine (phenylalanine is metabolized to tyrosine), serotonin is synthesised from tryptophan and acetylcholine is synthesised from choline. Deficiencies of L-Taurine and glycine which both aid the regulation of the nervous system are possibly liked to hyperactivity, epilepsy and anxiety.

The beneficial effects of large doses of vitamin C to alleviate common symptoms of allergy have been described, but not substantiated in controlled studies. Anecdotal reports suggesting that lysine tablets relieve the symptoms of food allergy in some individuals are also undocumented.11 Methyl Sulphine Methane and calcium assist in allergic sensitivities.

Although Feingold’s hypothesis has not been experimentally confirmed, elimination of food additives, colors, flavors and salicylates may be of benefit and is worth a try. Exclusion of sugar and refined carbohydrates is also recommended. If such a diet is to be followed, attention should be paid to its possible nutritional inadequacies and there should be some nutritional counselling and vitamin supplementation. Small, frequent meals consisting of protein and unrefined carbohydrates should be emphasized.

In Conclusion

There appears to be a relationship between brain function and nutrition. Studies on the effect of evening primrose oil and fish oil on hyperactivity have shown improvement in behaviour patterns and learning ability. The diet of the hyperactive child should be supplemented with these oils as well as magnesium, zinc, calcium, vitamin C and the B-complex vitamins.

The keys to managing the hyperactive child are dietary control, discipline and lots of tender loving care. All children have strengths and weaknesses. By recognising and accepting the diversity of human personalities and abilities a foundation will be laid for all hyperactive children to achieve their scholastic and developmental potential.

Research activity has increased and it is hoped that future research and clinical findings will lead to better treatment and understanding of hyperactivity.

For access to correct combinations of specialised nutrients, see “ADHD / Hyperactivity” under “Children’s Needs” on http://wellness.oppiweb.com

REFERENCES

1. Serfontein G. Add in adults – help for adults who suffer from attention deficit disorder. Simon and Schuster, Australia. 1994: 9

2. Matthews P. Fast Food. Nursing Times. March 1986.

3. Colten H.R; Food Hypersensitivity, food allergies and hyperkinesis. Suskind R.M; Textbook of Pediatric Nutrition. Raven Press, New York, 1981: 553-562.

4. Van der Merwe C.F. Hyperactivity, Medunsa. August 1992.

5. Wender P.H; Wender E. The Hyperactive Child and the Learning Disabled Child – a Handbook for Parents. Crown Publishers, 1978: 22.

6. Barnes B; Colquhoun I. The Hyperactive Child – what the family can do. Thorsons Publishers, Northamptonshire. 1984: 19, 77.

7. Feingold B. Why your child is hyperactive. New York: Random House, 1985.

8. The Hyperactive Children’s Support Group. Information sheet – Health Visitor, 1980, 57;1: 87-93

9. Silver L.B. Attention-Deficit Hyperactivity disorder. Clinical guide to diagnosis and treatment. Washington: American Psychiatric Press Inc, 1992: 129-134.

10. Langseth L; Dowd J. Glucose tolerance and hyperkinesis. Food Cosmet. Toxicol. 16:129. 1978.

11. Krause M.V; Mahan L.K. Food Nutrition and Diet Therapy. A textbook of nutritional care. Philadelphia: W.B. Saunders Company, 1984: 633-668.

12. Kinsbourne M. Sugar and the hyperactive child. New England Journal of Medicine. Feb 3, 1994: 355-356.

13. Edmonds T.L. Hyperactivity, following a special diet could help. Longevity. July 1995: 88-89.

14. Ryan B.J. Cerebral Hazards in relation to food and environmental chemicals. The Hyperactive Children’s Support Group of Southern Africa. Newsletter 25, Fourth quarter 1995.

Glossary

ADD – Attention Deficit Disorder. Developmental dysfunction of the central nervous system.

Allergy – Unusual sensitiveness to the action of particular foods, pollens, dust, etc.

Amino acid – Organic acid containing the group nitrogen, especially as a constituent of protein.

Asthma – Disease especially allergic of respiration.

Diphtheria – Acute infectious bacterial disease with inflammation of mucous membranes, especially throat.

Eczema – Inflammation of skin.

Enzyme – Any of a unique class of proteins which accelerate a broad spectrum of biochemical reactions.

Food Additives – Added to food to color, preserve or flavor.

Hay Fever Summer disorder caused by allergy to pollen or dust often with asthmatic symptoms.

Neurotransmitter – Chemical substances when released, transmit signals across synapses to other neurons in the brain to stimulate, regulate and co-ordinate activities in other organs and systems of the body.

Otitis – Inflammation of the ear.

Salicylate – Salt of salicylic acid. Found in almonds, apples, apple cider, apricots, blackberries, cherries, cloves, cucumbers, currants, gooseberries, grapes, nectarines, oil of wintergreen, oranges, peaches, pickles, plums, prunes, raisins, raspberries, strawberries and tomatoes. Food with added salicylates for flavoring may be ice-cream, bakery goods (except bread), candy, chewing gum, soft drinks, jam, cake mixes.

Typhoid – Infectious bacterial fever with eruption of red spots on chest and abdomen with severe intestinal irritation.

Worcester – Pungent sauce first made in Worcester (United Kingdom).

Author: Jan Greeff

This article will compare three popular wealth transfer techniques that all produce potential estate tax savings by removing future appreciation from the transferor’s estate, but without generating significant taxable gifts. Because these techniques produce little, if any, taxable gifts, even those clients who anticipate estate tax repeal (or reform) should not be reluctant to use them. All three techniques also provide the transferor with an income stream for a fixed period. Finally, all three techniques take advantage of the actual rate of return on the transferred assets as compared to the assumed rate of return utilized by the IRS to value the transferred asset. Yet each technique has its advantages and disadvantages when compared to the others.

Grantor Retained Annuity Trust (GRAT).

In the typical GRAT, the grantor contributes income-producing assets (i.e., Subchapter S stock or an interest in an FLP or FLLC) to a trust and receives a fixed payment (the annuity) from the trust each year. Whatever remains in the trust when the GRAT term ends passes to the remainder beneficiaries tax free. For the year the GRAT is created, the grantor has made a taxable gift equal to the difference between the amount contributed (after considering valuation discounts) and the present value of the annuity payments that the grantor will receive. This present value calculation is computed using the IRC Section 7520 rate for the month the GRAT is established. The Section 7520 rate is 120 percent of the annual mid-term applicable federal rate (AFR). Savvy planners will select the combination of annuity payment and trust term that will result in the present value of all future annuity payments equaling the amount initially contributed to the trust. Thus, no (or little) gift taxwill be levied. If the GRAT’s actual rate of return exceeds the Section 7520 rate, the excess appreciation will pass to the GRAT remaindermen free of transfer taxes. Additional transfer tax savings occur because the grantor is not separately taxed on the annuity payments, but instead is responsible for paying all of the GRAT’s income taxes. This is because the GRAT will be a “grantor” trust. Rev. Rul. 2004-64. This tax payment is effectively a tax-free gift to the GRAT’s remainder beneficiaries to the extent the GRAT’s income exceeds the annuity payments.

If the grantor dies during the GRAT term, a portion of the GRAT’s assets are included in the grantor’s estate. The portion so included in the amount necessary to produce the retained interest in perpetuity (as if the annuity amount were the annual income of the GRAT’s assets) using the IRC Section 7520 rate in effect on the date of death (or the alternate valuation date). Generally, if a GRAT’s assets have substantially appreciated, there will be a significant tax-free transfer of wealth even if the grantor dies during the term.

Intentionally Defective Irrevocable Trust (IDIT).

An intentionally defective irrevocable trust is an irrevocable trust that the grantor purposely creates to be “defective” for income tax purposes, but “effective” for transfer tax purposes. If properly designed, the IRS treats the grantor as the owner of the trust’s assets only for income tax purposes (a so-called “grantor” trust). After the IDIT is established and a small gift (i.e., seed money) is made to the trust, the grantor sells income-producing assets (i.e., Subchapter S stock or interests in a family LLC) to the trust in exchange for the trust’s installment note. The sales price will consider valuation discounts.

In the typical sale to an IDIT no down payment is made, the IDIT pays the grantor annually interest only at the AFR for the month of the sale, and there is a balloon payment at the end of nine or more years. Because the sale is between the grantor and his/her grantor trust, the IRS does not recognize any gain or loss on the sale. Under Rev. Rul. 85-13, transactions between a grantor and his/her grantor trust are disregarded for income tax purposes. If the assets in the IDIT appreciate greater than the AFR, such excess value is removed from the grantor’s estate. Additional transfer tax savings occur because the grantor is not separately taxed on the interest payments, but instead is responsible for paying all of the IDIT’s income taxes. This tax payment is effectively a tax-free gift to the beneficiaries of the IDIT to the extent the IDIT’s income exceeds the interest payments. Rev. Rul. 2004-64.

Private Annuity.

A private annuity is a contractual arrangement that is very much like an installment sale, except that the payments must continue until the seller’s death. In the typical private annuity, a parent (seller) sells income producing assets (i.e., Subchapter S stock or interests in a family LLC) to a child (buyer). The sales price will consider valuation discounts. The buyer takes legal title to the property and promises to make payments (the annuity) to the seller for the rest of the seller’s lifetime. The amount of the annuity is determined by IRS actuarial tables established under IRC Section 7520. Until April 18, 2007, the annuitant (seller) was able to report the built-in gain on the property sold piecemeal as part of each annuity payment. Under current law, the entire amount of the seller’s gain or loss (if any) must be recognized at the time of sale. Thus, part of each payment will now be a tax-free return of basis and part will be interest income. Each payment made by thepurchaser is added to his/her basis in the property and no portion of the payment is deductible to the seller. If the value of the private annuity received by the seller equals the transferred property’s fair market value, then no gift tax will be incurred.

How They Stack Up

Mortality Risk. In a GRAT, if the grantor does not survive the fixed term, a portion of the assets in the GRAT are included in the grantor’s estate. In contrast, there is no such mortality risk with an IDIT. However, with an IDIT there is a risk that if the grantor dies before the note is paid off, any gain on the outstanding note must be recognized. With a private annuity, a short life span simply enhances the efficacy of the transaction. It must be noted, however, that the actuarial tables cannot be used to determine the amount of the private annuity where the seller is “terminally ill” (i.e., has at least a 50 percent probability of dying within one year of the sale).

Disadvantage: GRAT.

Taxable Gift. As a result of the Tax Court’s holding in Walton, 115 T.C. 589, it is now possible to “zero-out” a GRAT so that no taxable gift occurs. For sales to an IDIT, most planners believe that the IDIT should have some equity (seed money) to avoid potential transfer tax issues. Therefore, it is advisable for the grantor to make a gift to the IDIT in the range of 10 percent of the value of the property to be sold to the trust. Private annuities can be easily structured without incurring a taxable gift.

Disadvantage: IDIT.

Hard To Value Assets. Where hard to value assets are involved, or where valuation discounts are being taken, the GRAT offers a significant advantage over an IDIT or a private annuity. The reason is that the GRAT regulations allow the annuity to be set forth as a percentage of the initial value of the assets transferred to the GRAT. Therefore, if the GRAT’s assets are revalued as a result of a gift tax audit, the amount of the annuity automatically adjusts thereby minimizing any unexpected gift tax.

Advantage: GRAT.

Generation Skipping Tax Exemption. Because of the estate tax inclusion period (ETIP) rules, the grantor’s generation skipping tax (GST) exemption cannot be allocated to the initial contribution to the GRAT. Instead, the grantor must wait until the end of the GRAT term to allocate his/her GST exemption. With an IDIT, the grantor can allocate his/her GST exemption, but only has to do so to the extent of any seed money gifted to the IDIT. Since a private annuity does not usually generate a taxable gift, there are no GST implications to that technique.

Grantor Trust Status. As mentioned above, the grantor’s payment of income taxes on behalf of a “grantor trust” is effectively a tax-free gift to the trust’s beneficiaries. Since GRATs and IDITs are both grantor trusts, to the extent that their income exceeds the annuity payment (for GRATs) or the interest payment (for IDITs), such excess is transferred to the trust’s beneficiaries tax-free. No such opportunity is available with a standard private annuity transaction, unless the sale is made to a private annuity trust designed as an IDIT.

Disadvantage: Private Annuity.

Interest Rates. The lower the assumed interest rate the more leverage possible. For GRATs and private annuities the assumed interest rate is the IRC Section 7520 rate which is 120 percent of the mid-term AFR. In comparison, the installment note used in a sale to an IDIT need bear interest at only the AFR.

Advantage: IDIT.

Backloading. With a GRAT, the annuity payment can increase annually, but not more than 20% over the previous year. A private annuity requires equal periodic payments. In contrast, most installment sales to IDITs are structured as interest-only with a balloon payment. Therefore, the less paid out annually to the grantor, the more appreciation passing to the grantor’s heirs.

Security. A private annuity cannot be secured. Thus, the seller must rely on the buyer’s ability to pay. In comparison, with GRATs and IDITs, the grantor is protected because the transferred assets are held in trust until the end of the term (with GRATs) or until the note is fully paid (with IDITs).

Overpayment. The total amount to be paid to the grantor with either a GRAT or IDIT is fixed. However, with a private annuity, if the seller lives past his/her life expectancy, it is possible that all of the assets sold (plus the appreciation thereon) will be returned to the seller, and possibly some of the purchaser’s assets as well. ôEUREUR¹ Disadvantage: Private Annuity. Gain Recognition. GRATs and IDITs (where the installment note is paid prior to the grantor’s death) involve no gain recognition to the grantor. In contrast, private annuities cause the transferor to recognize gain at the time of the sale.

Certainty. A GRAT is a statutory technique governed by IRC Section 2702. Private annuities are generally governed by the regulations under IRC Section 7520. In comparison, installment sales to IDITs are based upon an amalgamation of public and private revenue rulings and case law.

Life Insurance Applications. Life insurance can add value to all three wealth transfer techniques. In the context of a GRAT, a policy on the grantor’s life owned by an irrevocable trust can be used as a “hedge” to provide the liquidity – both income and estate tax free – to pay the estate taxes due if the grantor does not survive the GRAT term. With the typical IDIT, the income earned by the trust (in excess of the interest payments due the grantor) can be used to purchase life insurance thereby “leveraging” the grantor’s GST exemption. Finally, with a private annuity, a policy on the buyer’s life can provide a source of funds to “assure” the annuity payments continue in the event the buyer predeceases the seller.

Advantage: Life Insurance.

Conclusion. Whether a GRAT, IDIT or private annuity should be used in a particular situation is fact specific. Each technique, while similar in many ways, has advantages and disadvantages when compared to the other two strategies. Thus, a careful analysis of each strategy must be made (preferably with the client’s involvement) before implementing a particular course of action.

THIS ARTICLE MAY NOT BE USED FOR PENALTY PROTECTION. THE MATERIAL IS BASED UPON GENERAL TAX RULES AND FOR INFORMATION PURPOSES ONLY. IT IS NOT INTENDED AS LEGAL OR TAX ADVICE AND TAXPAYERS SHOULD CONSULT THEIR OWN LEGAL AND TAX ADVISORS AS TO THEIR SPECIFIC SITUATION.

Author: Julius Giarmarco, Esq.

One of the chief concerns facing family business owners is how to effect an orderly and affordable transfer of the business to the next generation and/or key employees. Failure to properly plan for a smooth transition can result in monetary losses and even loss of the business itself. This article will explain how to keep the family business in the family.

There are essentially three levels to a business succession plan. The first level of a business succession plan is management. It is important to recognize that management and ownership are not the same. The day-to-day management of the business may be left to one child, while ownership of the business is left to all of the children (whether or not they are active in the business). It is also possible that management may be left in the hands of key employees rather than family members.

The second level of a business succession plan is ownership. Most business owners would prefer to leave their businesses to those children that are active in the business, but would still like to treat all of their children fairly (if not equally). Yet, many business owners lack sufficient non-business assets to allow them to leave their inactive children an equal share of their estate. Thus, a business succession plan must provide a means of transferring wealth to the children who are not interested in, or not qualified for, continuing the business. Business owners must also assess the most effective means of transferring ownership and the most appropriate time for the transfer to occur.

The third level of a business succession plan is transfer taxes. Estate taxes alone can claim up to 45% of the value of the business, frequently resulting in a business having to liquidate or take on debt to keep the business afloat. To avoid a forced liquidation or the need to incur debt to pay estate taxes, there are a number of lifetime gifting strategies that can be implemented by the business owner to minimize (or possibly eliminate) estate taxes.

LEVEL ONE – MANAGEMENT

Whether management of the business will rest in the hands of the next generation, in the hands of key employees, or a combination of both, the business owner must learn to delegate and work on the business. It can take many years to train the successor management team so that the business owner can walk away from day-to-day operations. For many business owners, giving up such control can be difficult.

All too often, business owners focus more on the ownership and transfer tax issues involved in a business succession plan and ignore the people issues. In the typical family business, the future leader is likely to be one of the business owner’s children. If so, steps must be taken to assure that the future leader has the support of the key employees and other family member owners. Generally, a gradual transfer of roles and responsibilities gives the successor time to grow into his/her new position and allows the business owner some time to get use to his/her diminishing role. Thus, lead-time is important for a smooth transition.

Many family businesses are dependent on one or two key employees who are critical to the success of the business. These key employees are often needed to manage the business (or assist in the management of the business) during the transition period. Therefore, the succession plan must address methods to guarantee that key employees remain with the business upon the death, disability or retirement of the business owner. Among the commonly used techniques used to assure that key employees remain with the business during the transition period are employment agreements, nonqualified deferred compensation agreements, stock option plans and change of control agreements.

LEVEL TWO – OWNERSHIP

Often, a major concern for family business owners with children who are active in the business is how to treat all of the children equally in the business succession process. Other concerns for the business owner include when to give up control of the business and how to guarantee sufficient retirement income. For example, selling (as opposed to gifting) the business to the active children results in all children being treated equally and provides the business owner with retirement income. For those business owners that are not reliant on the business for their retirement, they can gift the business to the active children, and leave the inactive children non-business assets. If, as a result, the inactive children will not receive an equal (or fair) portion of the business owner’s estate, make up the difference by establishing an irrevocable life insurance trust for their benefit.

Simultaneous with the gifting and/or selling of business interests, the new owners should enter into a buy-sell agreement. A buy-sell agreement is a legal arrangement providing for the redistribution of shares of the business following the death, disability, retirement or termination of employment (triggering events) of one of the owners. The buy-sell agreement would also set forth the purchase price formula and payment terms upon the happening of a triggering event. If properly designed and drafted, a buy-sell agreement will create for the departing owner a market for what otherwise would be a non-marketable interest in a closely held business; will allow the original owners to maintain control over the business by preventing shares from passing to the departing owner’s heirs; and will fix the value of a deceased owner’s shares for estate-tax purposes.

LEVEL THREE – TRANSFER TAXES

The transfer tax component of business succession planning involves strategies to transfer ownership of the business while minimizing gift and estate taxes. The gift and estate-tax consequences deserve special attention. Unanticipated federal estate taxes can be so severe that the business may need to be liquidated to pay the tax.

While there is currently a lapse in the estate and generation-skipping transfer taxes, it’s likely that Congress will reinstate both taxes (perhaps even retroactively) some time this year. If not, on January 1, 2011, the estate tax exemption (which was $3.5 million in 2009) becomes $1 million, and the top estate tax rate (which was 45% in 2009) becomes 55%.

For business owners with taxable estates, a gifting program can be used to reduce estate taxes. For lifetime gifts or sales of the business, nonvoting shares are usually used for two reasons. The first is to accomplish the business owner’s desire to retain control of the business until a later date (i.e., the owner’s death, disability or retirement). The second reason is to reduce the gift-tax value of the shares because of valuation discounts for lack of control and marketability.

Gifts of business interests up to $13,000 ($26,000 for married couples) can be made annually to as many donees as the business owner desires. This amount is adjusted for inflation in increments of $1,000. Such gifts not only remove the value of the gifts from the business owner’s estate but also the income and future appreciation on the gifted property.

Beyond the $13,000 annual gift tax exclusion, the business owner can gift $1 million ($2 million for a married couple) during his/her lifetime. While the use of the gift tax exemption reduces (dollar for dollar) the estate tax exemption at death, such gifts remove the income and future appreciation on the gifted property from the business owner’s estate. Unlike the estate tax exemption, the gift tax exemption remains fixed at the $1 million level.

While a business owner can gift shares in the business outright, consideration should be given to making the gifts in trust. One advantage of making gifts in trust for the benefit of the active children is to protect them from their inability, disability, creditors and predators, including divorced spouses. Another advantage to making gifts in trust is that the assets in the trust at the children’s deaths can (within limits) pass estate-tax free to the business owner’s grandchildren (and perhaps more remote descendants depending on state law). These are sometimes known as generation-skipping or dynasty trusts.

For business owners with very large estates, there are sophisticated gifting strategies that can be used with little or no gift tax, such as installment sales to a grantor trust, private annuities, grantor retained annuity trusts, and self-cancelling installment notes. There is also statutory relief, including Internal Revenue Code Section 303, which permit the tax-free use of a closely held corporation’s cash to pay a deceased shareholder’s estate tax; and IRC Section 6166, which allows the business owner to pay estate taxes on installments.

Life insurance often plays an important role in a business succession plan. For example, some business owners will wait until death to transfer all or most of their business interests to one or more of their children. If the business owner has a taxable estate, life insurance can provide the children receiving the business the cash necessary for them to pay estate taxes. As mentioned above, business owner can use life insurance to provide those children who are not involved in the business with equitable treatment. Finally, life insurance is a popular way to provide the cash necessary for the business or the surviving owners to purchase a deceased owner’s interest pursuant to the terms of a buy-sell agreement. In many instances, the cash surrender value in a life insurance policy can also be used tax free (by surrendering to basis and borrowing the excess) to help pay for a lifetime purchase of a business owner’s interest.

SUMMARY

Succession planning is critical to ensuring the continuation of any family-owned business. An effectively developed succession plan provides for a smooth transition in management and ownership with a minimum of transfer taxes. Given the number and complexity of succession options available, effective succession planning requires time, the assistance of outside advisors, the input of family members, and the willingness to address interpersonal conflicts that can arise during the planning process. Once completed, the succession plan will provide peace of mind for the business owner and key employees, personal satisfaction for family members, and new opportunities for the business itself.

THIS ARTICLE MAY NOT BE USED FOR PENALTY PROTECTION. THE MATERIAL IS BASED UPON GENERAL TAX RULES AND FOR INFORMATION PURPOSES ONLY. IT IS NOT INTENDED AS LEGAL OR TAX ADVICE AND TAXPAYERS SHOULD CONSULT THEIR OWN LEGAL AND TAX ADVISORS AS TO THEIR SPECIFIC SITUATION.

Author: Julius Giarmarco, Esq.

Internet marketing strategies should showcase the business or products that they are promoting in such a manner that business increases exponentially. The goal of any marketing strategy should be to increase visibility in the public eye. Internet marketing is no different, it is just approached differently.

The number one mistake made in Internet marketing is attempting to jump in to it without any advice, instruction or know how. Somehow people have decided that by purchasing a domain name and building a website that they will automatically generate traffic. Nothing could be further from the truth.

In order to successfully market any business or product the marketer should have a firm idea of what they are doing and why they are doing it in order to gauge the response received and make adjustments as necessary.

Email marketing can be an effective tool when used correctly. The opt-in list should be built with appropriate and engaging responses to keep them opted in and part of the program. Spamming people should be avoided to keep from having your name and brand targeted as bad. Remember that more people remember the bad comments about a product than remember the good comments.

Use social networking as an Internet marketing tool. If reaching the masses is the goal, and it should be, then social networking is the place to be. The social networking phenomena has reached more people than any one marketing strategy could dream of doing. Join a social network, set up pages that correspond to the business and include links to the target website.

Finally, no Internet marketing campaign would be complete without an offer. Make visitors an offer they can’t refuse. Whether it’s a contest, future newsletter or other promotional item, the key is getting them to the website.

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Article Source: http://EzineArticles.com/?expert=Mark_A._Abrahams

An Internet marketing campaign may be no big thing for established companies but it’s quite a serious move for small to medium-sized fledgling businesses. If you wish to launch an Internet marketing campaign for your company without stretching your finances too much, here are a few things you should consider.

Learn about search engine optimization.

No Internet marketing campaign will ever get off the ground without at least a basic understanding of search engine optimization. If you want your Internet marketing campaign to be successful, you need to know how to optimize all parts of your campaign for positive search engine results. The search engine is your best bet to getting recognized and it’s important that you understand that early.

Create your own blog.

Having your own website is extremely important but it’s not something you should ever take lightly. If you have no patience to learn website building and designing nor do you have any means of hiring a professional one to make your own website then it’s better to postpone your plans and create your own blog instead.

A blog is virtually just like any website. You can post different kinds of content on it. It may not offer you the same extent of freedom and versatility that websites can give you, but for businesses that are just getting started, blogs are perfectly satisfactory already.

A blog is a great way to have your presence felt online. It is also easier to interact with your clients frequently with a blog. For every post you upload, you can invite your readers to share their thoughts by posting their comments.

Buy your own domain name.

Blogs and websites are free to build. There are lots of web hosting sites that provide you with adequate web space without cost. They may ask you to post ads in your website, but if you have an account with Google Adsense or something similar then that might turn out to be a good thing anyway since it can serve as another secondary source of income.

So yes, you can skimp on web space but what you must definitely pay for is your own domain name. Having your own domain name www.yourcompanyname.com immediately gives your business a professional image in the Internet. More people will sit up and take notice if they see that you’ve got your own domain name. For many, having your own domain name means you’re taking your business seriously.

Determine your target market.

Your Internet marketing campaign will have greater chance of succeeding if you already know who you’re after. People in the Internet are different from the customers you meet daily in the real world. People from the same demographics may act differently online when compared with how they are offline. That’s why you need to research about your market first, learn who your customers are, get to know them and find out what they’re looking for before you start your Internet marketing campaign.

Stay in touch.

Updating your blog or website weekly isn’t enough nowadays. People stay online longer and longer and they won’t visit a website that’s simply unable to keep up with their schedule. Your Internet marketing campaign must be designed to provide your customers what they want in daily doses. If not that then at least make sure you update blog a few times each week. Do that and you’ve got yourself a cost-efficient Internet marketing campaign for your company!

*********For more information about Internet Marketing be sure to follow the link in the resource box below to receive your free home business C

All rights reserved. Article may be reprinted as long as the content remains intact and unchanged and links remain active.

Author: Anthony Harris

In Internet marketing article, we are going to talk about the advantage that you can derive from testing things quickly and determining their viability in the shortest amount of time possible. The reason why this is so important is because you do not want to spend an excessive amount of time trying to figure out whether or not a particular strategy will work.

Far too many aspiring Internet marketers get stuck repeatedly trying something over and over again despite the fact that there has been no evidence to suggest that whatever they are trying will be successful. You want to try to figure out whether or not something is viable. To the extent it is not viable, you obviously want to try some other things then. Don’t fall into the trap of feeling as if though you need to keep beating a dead horse.

You will soon discover that a lot of things that you try is an Internet marketer do not work the first time. We need to do is take the results that you have derived from whatever experiments you have conducted and make modifications to the approach you are using. You can then try the technique again to see what happens. More often than not, you will be stunned by the results that you get. Why? Because I testing quickly in determining the viability of a particular technique, we will be setting yourself up for success that happens a lot faster.

In the final analysis, you really over to yourself to do things as quickly as possible to determine whether or not you’re on the right track or not.

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Article Source: http://EzineArticles.com/?expert=Stephen_Brite

According to The World’s Glossary of Internet Terms, Affiliate Marketer is defined as: “A business relationship with a merchant or other service provider who allows you to link to that business. When a visitor clicks on the link at your site and subsequently makes a purchase from the merchant, you receive a commission based on the amount of the sale, a referral fee or a pay-for-click fee.”

This is a simple, straight-forward agreement between a merchant and an affiliate which allows you to make money online. Budding affiliate marketers run into a problem when they try to reverse the success process. Instead of starting at the beginning, they try to start at the end.

Making money is the end of the process. The beginning of the process is education and there are several steps in between. Too many people, who are just getting started in affiliate marketing, fail to take the steps necessary to get to the end of the process and actually make money.

Step #1: Educate yourself. This is the key, opening the door of opportunity. It’s also the common thread connecting successful affiliate marketers. Education lays the foundation – the building blocks to success. Start by gathering the best information you can find about affiliate marketing and absorbing it.

Step #2: Turn that information into usable knowledge. Even the best information remains kind of worthless, however, until after you discover how to use it – how to make it serve your purpose.

Step #3: Start applying the knowledge … take action …start building your affiliate business. Will you make mistakes, even though you’ve invested all that time educating yourself? Yes, you most likely will make mistakes. However, in the long run you learn from your mistake, which is essential for anybody trying to make money online.

Step #4: Test and tweak, test and tweak. This one never ends. And it’s often the dividing line between succeeding and failing. Attention to small details often returns big rewards.

Following these steps will define you as a successful affiliate marketer.

Why not take a look at how you can start today in affiliate marketing and start making your fortune. Click the link below to see what else you can do.

CLICK HERE to see more easy steps on how you can start today using social networking sites to build your wealth.

Terry Shadwell

Author: Terry Shadwell

At first glance all teddies and bodysuits might look alike, but there are some differences between the two pieces of lingerie. A teddy usually a one-piece garment that resembles the combination of a camisole and panties. While teddies are now considered sexy lingerie, like all lingerie they started out with a specific function. Teddies were used for full coverage underneath clothing. A fit that was once loose, became more form fitting over time, eventually evolving into the skin tight lingerie we have today.

A bodysuit is also a single piece made of a stretchy material and designed to cling to the body. Bodysuits have short sleeves, long sleeves, no sleeves, and leggings. Teddies are primarily thought of as sexy lingerie and are never worn as an outer garment. Sexy bodysuits, on the other hand, are often worn for fun in the bedroom or for making a splash out in public. Bodysuits gained popularity in the 1980s, frequently worn as outerwear. A sexy bodysuit was and still is a perfect match for everything from skirts to jeans. On a more functional level, bodysuits are a favorite choice for athletes like gymnasts, runners, cyclists and have been a standard garment for dancers for years.

Bodysuits are enjoying a comeback from the days when big hair and leg warmers ruled the world. As the saying goes, if you hang on to something long enough, it eventually comes back into style. Bodysuits come in a wide variety of colors, textures, and styles to match anyone’s tastes

What most women like about the bodysuits is the appearance of having a tucked in shirt or blouse without all the excess fabric around the waist. Bodysuits also work well underneath a jacket for smooth lines without the added bulk.

Bodysuits and teddies are made from sheer or semi-sheer stretch fabrics such as Lycra or Spandex. Both cling tightly to the curves of the body, but unlike a corset or girdle, a sexy bodysuit won’t be tight enough to change your shape. Bodysuits and teddies lack boning for any kind of support, although there are a few on the market with control panels or built in bras.

To keep it real, wear a teddy or bodysuit under your clothes during the day. Whether grocery shopping or sitting in on a boring board meeting, you can keep it sexy and cool by wearing relaxing lingerie under your clothes. Nobody will have to know and you’ll be able to remain comfortable and collected in the most chaotic of circumstances.

Whether you choose a teddy or sexy bodysuit for fun or practical reasons, this sexy lingerie is an indispensable addition to any wardrobe. Both go from public to private in the blink of an eye. Have a hot date right after work? No problem. Your sexy bodysuit will transition nicely from the boardroom to the club. Be as revealing or as secretive as you like with your sexy lingerie, no one will ever know – that is, of course unless you want them to.

Dorothy Mae Hills rose on November 25th 1932 to the Union of Ira and Bunnie Barnes in Dothan Alabama. She was called home to glory on August 27th 2010 at Memorial Hospital in Colorado Springs, Colorado at 1:30p.m. with several family and friends by her side. She graduated from Carver Senior High School in Dothan Alabama on May 28th 1951.

She obtained an Associates Degree from Cameron State Agricultural College in Lawton, Oklahoma on May 26th 1961. She found her home in Colorado Springs, in 1969 with her husband of 50 years, Johnnie Mac Hills. She worked for the Ampex Corporation in Colorado Springs for 22 years and retired in 1990. She was a homemaker for 8 years until she became co-owner of T-N-D’S Lingerie and More from July 1, 1998 to August 2004. Dorothy married Johnnie Mac Hills on April 2nd 1951, Johnnie soon retired from Fort Carson and they decided to make a home in Colorado Springs, Colorado. Dorothy Hills was a member of Fresh Start Baptist Church where she was Vice- President of the Deaconess board. She was also the musician for the children’s choir at the church. Dorothy always went out of her way to help others, and brightened the room with her presence, outgoing personality and smile. Dorothy enjoyed music, being a member of the Red Hat Society in Colorado Springs, reading and studying her Bible, shopping, gardening, decorating and spending time with her family, grandchildren and her dog Shamu. Both Parents Preceded her in death as well as her husband, and two brothers Isaac Barnes and Bobby Earl Barnes. She leaves to cherish her memory her Son, Anthony Jerome (Dionne) Hills, grandchildren, Ariayanna Wilson, Ke’ Anthony Hills, Five Sisters: Catherine Whitted, Betty Jean (Clyde) Shipman, Minnie (Joe Lee) Johnson, Geraldine Muse, Annie (James) Mosley and one Brother Billy Joe (Beatrice) Barnes and a host of relatives and friends. Visitation will be Friday September 3, 2010 from 12:00pm to 8:00pm at Swan Law Funeral Directors, 501 N. Cascade Avenue, Colorado Springs, CO. Services will be at Fresh Start Baptist Church Saturday September 4, 2010 at 11:00a.m. 3231 Chelton Circle, Colorado Springs, CO. Graveside services will follow at Memorial Gardens Cemetery, Colorado Springs, CO, a reception will follow at the church. Flowers can be sent for Dorothy Hills to Swan Law Funeral Directors, 501 N. Cascade Avenue, Colorado Springs, CO 80903.

One of the easiest ways to make money as an Internet marketer is to get your customers excited about whatever products and services you might happen to be offering. The reason why this is so important is because people who are excited about a particular product or service are far more likely to actually purchase the product or service in question. If you remember that, you will be dramatically boosting your chances of making money online.

How often have you seen people who are not really excited or enthusiastic about something willingly pay money? Well it happened, it certainly does not happen as often as you might assume. Many experts have concluded that the more excited and happy a potential customer is, the better the likelihood that they will actually buy something from you. Once you understand this principle, you can focus a lot of your marketing efforts towards reaching people who are more closely suited to your ideal customer. While this may seem like common sense, far too many aspiring Internet marketers neglect this simple principle and they later regret it.

In the final analysis, really need to take steps to ensure that your prospective customers are excited about doing business with you. Not only will this help generate more sales for you, but it will also improve the overall shopping experience. You ultimately do with yourself to give yourself the best chance possible to make as much money as you can as an Internet marketer. Therefore, you really need to be open-minded about following the advice in this article.

Did you know? There are hidden dangers that can KILL your chances of ever being a successful Internet marketer. Get the facts before it’s too late… Click Here!

Article Source: http://EzineArticles.com/?expert=Stephen_Brite