You've worked your entire life to build a successful practice and put your kids through college, and now you're set for retirement. But if you ask your attorney, he'll likely explain that most of your estate -- your individual retirement accounts (IRAs) and qualified retirement plans -- may be wiped out by taxes -- up to 75% -- at your death.

In this month's article, we'll discuss how a wealth replacement trust (WRT), funded by a "survivorship" or "second-to-die" life insurance policy, can help you achieve your financial goals and avoid sharing such a large portion of your assets with Uncle Sam.

While a WRT isn't for everyone, an estate planning professional may be able to help you use this tool to effectuate the transfer of wealth to your beneficiaries, free of income and estate taxes, in a way your current assets cannot.

Despite much discussion about the elimination of estate taxes, don't count on that anytime soon. If you want your children to inherit as much as possible, estate planning is essential.

If you have a large estate ($3 million or more), a major portion probably is in IRAs or qualified retirement plans. Because these assets have never borne income tax, they are especially challenging assets to weave into your estate plan.

Not only will your estate bear tax on the assets passing to your heirs, but your heirs will pay income taxes on amounts in these plans. Once your heirs pay income and estate taxes on the $1 million IRA account you leave them, they'll probably net only 25 cents on the dollar.

How does this happen? First, the $1 million can be taxed at a marginal estate tax rate as high as 55% ($550,000).

Then, the $1 million is taxed again on the income tax level, with estate deductions figured into the equation.

Your heirs are allowed a deduction for estate taxes paid. However high-income taxpayers are subject to a phase-out of itemized deductions, which adds another 3%, or $30,000, worth of teeth to the tax bite.

So, you take this $30,000 and subtract it from the estate deduction of $550,000. That figure, $520,000, is subtracted from the $1,000,000 and multiplied by the 39.6% marginal income tax rate (assuming your heirs are in the highest tax bracket).

Therefore, once your beneficiaries pay estate taxes of $550,000 and income taxes of $190,080 ($1,000,000 minus [$550,000 minus $30,000] x 39.6%), they're left with $259,920, or about 25 cents on the dollar.

As discussed in previous articles, with a WRT funded by a survivorship life insurance policy, Dr. Goodvision can fund the trust with estate tax-free annual exclusion gifts. Dr. Goodvision can use some of his required minimum distribution payments from his IRAs and qualified plans to fund these annual gifts. The annual gifts cover the annual life insurance premiums.

Because the WRT invests in a life insurance policy, the entire policy grows income tax-free. And when Dr. Good-vision passes on, the WRT collects the life insurance proceeds free of income and estate tax -- and distributes the assets free of the 75% tax "taint."

Almost anyone with a sizable estate that includes large IRAs or large qualified retirement plans can use this strategy to leverage the estate and minimize tax obligations. Surely, it's something worth looking into.