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This is an exciting tax story. If you have $250,000 or more in a qualified plan (IRA, 401(k), profit sharing or other plan), read every word of this article. You’ll save a ton of taxes, while your family will inherit a small fortune ... tax-free!

Typically, the story would be about a reader of this column but in this case the reader showed the column to two of his friends (let’s call them Joe and Sam) who are brothers. Joe and Sam each own 50 percent of a successful business.

Except for a two-year age difference (Joe at age 58, Sam 56) they are like identical twins. Both are married, each has two children and each has one child in the business. Both have massive estate tax problems. Each is worth about $9 million, but neither has any significant cash or liquid-type investments. Both have a similar medical problem and although Joe is insurable, his high rating makes insurance on his life too expensive. Sam is not insurable.

Many visits to many professional advisors still left each of them with about a $3.5 million potential estate tax liability. Part of the problem was the amount of money — $1.8 million — each had in a profit-sharing plan.

Big dollar numbers in the plan sure sound good, but let’s do the math for just $1. Take out one dollar and the IRS gets 35 cents in income tax. So, $.65 are left. At death, the IRS gets 55 percent (using 2011 rates) or $.35 for estate taxes. Only $.30 out of every dollar will go to the family.

Now, let’s do the math on the $1.8 million. Would you believe $1,273,500 for the IRS and only $526,500 for the family? Truly a tax tragedy!

Two more points: (1) If you die with money in a qualified plan (IRA, 401(k), profit-sharing plan or similar plans), the IRS nails your estate for the same double tax (do the math for the amount in your plans). This double tax at death is called income in respect of a decedent (IRD).

(2) Your home state may get into the act and take some more dollars, (typically in the four percent to eight percent range) off the top. Fortunately, for you lucky people who are residents of Florida, there is no State income tax.

Is there a way to legally sidestep this tax tragedy? Fortunately, yes. It’s called a “Retirement Plan Rescue” (RPR).

The core concept behind an RPR is to shift from a highly taxed environment (a qualified plan) into a tax-free environment (life insurance). Sorry, but if you are uninsurable or highly rated (have serious health issues), an RPR won’t work for you. Have a healthy spouse? She/he will probably save the day and put an RPR in your planning picture.

For example, an RPR saved the day for Joe and Sam. Here’s how. Using an RPR, we bought $4 million in life insurance for each of their wives, both age 54 and healthy. When each $4 million in proceeds will be paid down the road to Joe’s and Sam’s families (that’s $8 million total), the entire amount will be received tax-free — no income tax, no estate tax — by the beneficiaries.

Remember, Joe’s family only would have received $526,500. The RPR turned the tax tragedy (a $1,273,500 tax) into a $4 million tax-free victory. It’s not only legal, but easy to do.

Now an example for you married folks. Jack (61 years old) and Jill (60 years old) had $532,000 in a 401(k). They used an RPR to create $3.7 million (tax-free) to their family by buying a second to-die life insurance policy.

And finally, an example of Henry, a healthy 74 year old single man with $1.25 million in a Rollover IRA. Henry lives in a state with a 5 percent income tax, so the $1.25 million is only worth $337,500 to his family. He used a RPR to acquire $1.9 million in insurance on his life, which will go to his heirs tax-free.

The benefits of RPR are easy to summarize: save a large amount of taxes and multiply the before-tax value of your qualified retirement plan (tax-free). However, the implementation of an RPR requires a great deal of expertise. In additional, each RPR (because of the many variables) is different and must be created on a case by case basis.

Here are the big questions readers always ask: How will an RPR work for me and my family? What will my tax-savings be? How much tax-free wealth can be created?

I have arranged for readers of this column to get the answers to these questions. Just send me the information necessary to create an RPR, with (a) your name, address, phone numbers (business/home/cell); (b) total amount in all qualified plans combined (if married, same for your spouse) and (c) your birthday (also your spouse). Please put “RPR” at the top of your fax and send it to 847-674-5299.