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Many wealthy individuals are being told to prepare for more income tax audits by the Internal Revenue Service. Recent statistics seem to support that view. The IRS recently released its annual Data Book, which summarizes audit and collection activities for fiscal year 2010. Not surprisingly, the IRS is focusing its audits on returns that will likely produce the most revenue for the U.S. Treasury.

Given the evolution and complexity of the insurance industry, due diligence on carriers, products and advisors is more important than ever, especially for families of significant wealth. Examination of carriers must go beyond rating services; analysis of products must go beyond illustrations, and selection of an advisor must go beyond initial numbers, friendship or branding.

While the tax advantages of life insurance are important, pricing is also critical. Access to policies priced specifically for ultra-wealthy individuals can enhance planning effectiveness and deliver significant value over time.

Researchers tested the effectiveness of life insurance's investment characteristics in three estate scenarios under a Monte Carlo analysis involving three different investment portfolios. Their results show life insurance creates more wealth regardless of when death occurs for even the most liquid, well planned estate.

Policy owners must avoid projecting today's economic environment forward for an extended period, causing them to choose products that lock in long-term mortality and interest rates. Such a move not only virtually ensures long-term underperformance but also sacrifices the flexibility necessary to take advantage of conditions as they change.

In light of the current environment, it is easy to lose sight of the proven policyholder protections that the life insurance industry continues to provide, including regulatory and third-party oversight, as well as mechanisms to support policyholders of troubled companies.

Difficult financial times are likely to continue, affecting all aspects of the economy and the markets, but the high-quality subsector of the municipal market is not at risk for significant defaults or losses. Debt burdens are relatively light, and annual required payments are often senior to most other budget items.

Master limited partnerships represent a niche asset class that is gaining attention for its attractive yield potential, historically low correlation to other asset classes, and potential tax benefits. Strong industry fundamentals, attractive valuations, and above-average dividend yields provide a compelling entry point for investors looking at MLPs.

Power failures, IT system crashes, supply chain problems or a flu epidemic can cripple a family office as completely as a natural disaster or terrorist attack. Developing and implementing a business continuity plan can help bolster a family business's defenses against such risks and serve as a first line of defense against losses.

Increased tax exemptions, continued availability of valuation discounts, historically low interest rates and depressed asset values have created a perfect storm for families interested in preserving their wealth. However, current opportunities may begin being eliminated as early as January 2012.