Asset Protection Planning

WATCH OUT FOR THE LATEST IN LIABILITY EXPOSURE

2009-03-03T09:49:00.000-08:00

One of President Obama's first acts after he assumed office was to sign into law the "Lilly Ledbetter" bill. This law will "make it easier for workers to win lawsuits claiming pay discrimination based on sex, race, religion, national origin, age or disability . . .This bill would relax the statute of limitations, making clear that each new paycheck is a violation of the law if it results 'in whole or in part' from a discriminatory pay decision made in the past." Critics claim that employers will now be exposed to "decades-old discrimination claims that they have no ability to defend", and, that the "individual responsible for the alleged discrimination is no longer with the company, or perhaps not even living." (The New York Times, Jan. 28, 2009).
Earlier, Thomas J.. Donohue, president and CEO of the Chamber of Commerce, declared that if such a law was passed it would "lead to a flood of new litigation that will hurt businesses." Donohue "charged that labor unions and trial lawyers are 'expecting quick and frequent payback for their efforts and their investments' in Democratic election campaigns." (LawyersUSA, Nov. 11, 2008)
Subsequently, Lenora Vhu, CNNMoney.com contributing editor, wrote that under this law "small companies may be at a disadvantage - few have access to the attorneys and human-resource professionals that will help larger businesses comply with the newly expanded law." Elizabeth Milito, senior executive counsel of the National Federation of Independent Business stated that: "There's also the potential for one lawsuit that goes south to put a small business out of business." (CNNMoney.com, Feb. 2, 2009)
Coupled with this new law is last year's expansion of the Americans With Diabilities Act whereby the definition of the term "disability" was greatly expanded. In support of this expansion, the 9th U.S. Circuit Court of Appeals just ruled that a "Type-2 diabetes patient was entitled to the protections of the Americans With Diabilities Act." (Los Angles Times, Feb. 13, 2009)

IRS PENALTY FOR LATE FILING OF FORM 5471

2009-01-09T08:42:00.000-08:00

While the penalty for failure to timely file IRS forms has been around for many years, effective 2009 the IRS will asses an automatic penalty on any corporation that does not file a Form 5471 on a timely basis. All U.S. citizens who have equity in, or a controlling interest in a Controlled Foreign Corporation ("CFC") must file a Form 5471, a somewhat common situation for U.S. cleints of certain offshore asset protection promoters. The IRS will now asses an automatic penalty of $10,000 for each missed CFC filing, and, separate penalties will apply to each entity for each year that has not been filed. (See, Offshore Press, Inc., Jan. 5, 2009 www.offshorepress.com)

PITFALLS OF MEDICAID PLANNING

2009-01-09T08:35:00.000-08:00

Elderly individuals, and their children, often seek to protect their assets by transferring such assets to their children in an attempt to subsequently qualify for Medicaid benefits. With rare exception, such transfers do not work and can be very costly for the Medicaid applicant. For example:

A woman who transferred her house to her son before entering a nursing home, thereby incurring a Medicaid penalty period (i.e., disqaulification), violated the state's fraudulent conveyance statute and is financially liable to the nursing home. (ElderLaw Answers, Jan. 5, 2009).

A woman who signed a nursing home admissions agreement as a designated representative (in.e., attorney-in-fact) is not responsible for paying the resident's nursing home bills. However, the personal representative may still become responsible for the payment of the nursing home resident's bills because she used the power of attorney to dispose of the resident's property and failed to pay all of the sales proceeds to the nursing home. (ElderLaw Answers, Jan. 5, 2009).

Estate Planning in Uncertain Times

2008-11-14T08:50:00.000-08:00

For those who believe that the estate tax will be repealed, or the exemptions substantially increased, we are unaware of any pronoucements from the President elect, or the House, that such will be the case in a time of unprecedented federal deficits. Remember, an estate tax was enacted in 1797, repealed in 1802; enacted in 1862, repealed in 1890; enacted in 1898, repealed in 1902; enacted in 1916, then reformed in 1930, 1976-1993, 1997 and 2001.
To circumvent the resulting loss of revenue when the Federal Government increased the personal exemption at least 25 states have already enacted tax laws designed to replace the lost estate tax revenues, with more states likely to follow in the near future.
With the current federal exemptions of $2,000,000 per person ($4,000,000 per couple with proper planning), certain individuals feel that there is no serious need for comprehensive estate planning. However, there are numerous reasons other than taxes for implementing a properly drafted estate plan, such as: (1) avoidance of the time-consuming, privacy-invading and costly probate procedure; (2) providing for family members who now have, or may have in the future, special needs; (3) protection from future creditors of a surviving spouse, children and grandchildren; (4) protecting the estate from challenges launched by greedy and/or power-mad heirs and/or their spouses; (5) providing for an efficient distribution of assets to family members; and (6) provising for succession involving a family business.

TIME TO PREPARE

2008-10-14T10:52:00.000-07:00

As the economic situation in American becomes more perilous the need for asset protection and estate preservation is even more critical. As more and more families lose jobs, savings and homes the string of lawsuits is likely to rise as they look for any reason to go after someone who seems to have more than they do. Now is the time to prepare and protect yourself and your business. No matter who gets elected this November the economy will still continue on in its downward spiral and Washington spends more and more money they do not have which in turn devalues the American dollar to the point where the dollar becomes worthless. Back in the days of the Great Depression the dollar was still worth a dollar as it was backed by gold. The dollar is not backed by anything but "faith". Both parties have caused this mess and both parties will continue with their "tax and spend" attitude as we the American people budget and struggle. Now is the time to prepare and protect your assets and business from the coming disaster that awaits us. visit www.professionalassetprotectionservices.com for more information or send an e-mail to cpcassetprotection@gmail.com and we will gladly assist you and your family.

Latest in Estate Planning Tips

2008-09-11T11:15:00.000-07:00

According to a recent survey conducted in Michigan, individuals need to "bone up on probate law and appoint someone to take care of their finances if they can't." Over two-thirds of the respondents had not "created a health care power of attorney, which designates someone to make medical decisions on their behalf"; "53 percent of survey respondents said they didn't understand probate law"; and only "2.4 percent of pople had designated a financial power of attorney, which designates someone to handle finances when they are incapacitated." (Lansing State Journal, July 2008).

Extreme care must be taken, however, when it comes to appointing individuals to handle an indivdual's finances and the designated agent must have an impeccable reputation. For example, in New York the "former trustee of an SNT (Special Needs Trust) designed to protect the assets of a woman with developmental disabilities must pay the trust approximately $70,000 after she and her husband used trust funds for their personal needs."

And, in Texas and appeals court affirmed "an attorney's conviction and 45-year sentence for his role in assisting an estate's executor deplete the estate by more than $500,000." The inappropriate depletion of such funds included charging the estate "more than $7,000 to attend the (decedent's) funeral" even though the decedent had specifically directed that a funeral not be held. (The ElderLaw Report, 7-8/2008).

For more information on how to properly protection your estate visit us at www.estateplanningstrategists.com or www.professionalassetprotectionservices.com

Expanded Areas of Litigation

2008-09-11T11:04:00.000-07:00

One: According to an August 2008 article in LawyersUSA, "construction litigation has become a booming area of the law as the economy continues its downward spiral." and, such litigation involves "developers, builders and buyers." The increased litigations includes claims of "construction defects" and "construction delays."

Two: Plantiffs' "attorneys have already begun advertising on the Internet for potential clients" involving allegations that "granite countertops" can decay over time and "emit radon", a radioactive gas that can cause lung cancer." (LawyersUSA, August 2008).

Three: The Massachusetts highest court recently permitted "medical malpractice plantiffs to sue for "loss of chance" of survival alleging a "doctor's negligence in not treating" a patient's stomach cancer "even though the victim had less than a 50-percent chance of survival when he first sought treatment." (LawyersUSA, Agust 2008).

Four: Citing earlier opinions issued in the 1st, 7th, 8th and 11th Circuits, the 6th U.S. Circuit Court of Appeals recently ruled that an "employee who calimed she was retaliated against (fired) for taking leave under the Family Medical Leave Act can sue" her employer. (LawyersUSA, August 2008).

If you are serious about protecting yourself from costly and time-consuming litigation contact us today a www.professionalassetprotectionservices.com

Tort Law

2008-07-22T11:03:00.000-07:00

You should be concerned about lawsuits if your are a professional business person or are someone with significant assets. Look at these recent articles:

"There were about 100,000 attorneys in the United States at the beginning of the 20th century. Now there are 1 million . . .94 percent of all lawsuits across the globe are filed in this country. . . the U.S. tort system costs more than $260 billion peryear, about $880 per person." (Beaufortgazette.com, 4-4-08, "In a land of lawsuits, 10 ways to stay out of court", by Ben Pillow).

"Finding victims is no longer difficult and the practice of proactive marketing has become a livelihood for many lawyers . . . The combination of agressive trial lawyers and activist judges in many cases, have made the practice costly and abusive. In fact, some areas of the country have become known as judicial hellholes." (Producersweb.com, 5-13-08 "How to protect your wealth from lawsuits", by James A. Lavorgna).

In a report released by the Pacific Reasearch Institute, only five states "have effective tort laws on the books, reasonably low costs and few litigation risks." Thirty-one other states either have "weak tort laws on the books, high tort costs and high litigation risks", "have weak tort rules" and are open "to vulnerabilities and a need for reform", or have "strong tort rules, but moderate to high tort costs and litigation risks." (Lawyers USA ("LUSA") 3-24-08, page 2).

If you are worried about protecting what you have worked so hard to achieve, check us out at www.professionalassetprotectionservices.com to see if we can be of help in today's lawsuit happy society.

Evidences of a Well-Drafted Trust Agreement

2008-07-15T15:51:00.000-07:00

22 EVIDENCES OF A WELL-DRAFTED TRUST AGREEMENT

1. The Trust Agreement is at least 50 pages (single-spaced type) in length.
2. An extensive "Definitions" section (4 pages) that is designed to either eliminate or minimize questions and conflicts involving interpretations of Trust terms.
3. A "Situs" section which provides that the Grantor or subsequent Trustees may relocate the Trust administration to a different jurisdiction if beneficial to do so.
4. A "Trustees" section which provides how Trustees will be selected, and removed, under certain conditions. A designated Co-Trustee, although inactive, to insure that he/she can instantly function on behalf of the Trust in the event the Grantor is unexpectedly incapacitated.
5. A comprehensive Trustees "Powers" section (11 pages) which grants broad administrative powers to the Trustees, including: (a) broad investment (both domestic and overseas) powers; (b) right to borrow monies and pledge Trust assets as collateral; (c) right to loan Trust funds; (d) indemnification provisions for the Grantor and the Trustees should they incur personal expenses involving Trust activities; (e) environmental provisions in the event the Trust is found to hold contaminated real estate; and (f) Trustees right to make gifts on behalf of the Grantor.
6. A "Successor Trustee" section setting forth the names and order of Successor Trustees.
7. An "Irrevocability" section which provides that the Trust is revocable, but that it becomes irrevocable when the Grantor dies or becomes legally incompetent.
8. If married, then a comprehensive "Marital" Trust section (10 pages) which is designed to maximize the available exemptions from federal death taxes.
9. A comprehensive "Disclaimer" section which provides that any beneficiary may disclaim his/her right to an inheritance should it be deemed advantageous to do so.
10. A "Long-term", or "multi-generation", Trust section which provides that upon the Grantor's death the Trust will provide maximum asset protection for the heirs (i.e., children and grandchildren). In a long-term, rather than a typical short-term, Trust arrangement the Grantor's children would receive all of the Trust's annual income, with a limited right to access principal in an emergency, and upon the deaths of the children the grandchildren would then commence to receive distributions of Trust principal (usually at ages 35, 45 and 55).
11. A comprehensive "Right to Withhold or Terminate" benefits section which provides that, in their sole and absolute discretion the Trustees have the right to withhold and/or terminate a beneficiaries income and principal distributions in order to prevent a loss of funds to third parties should that particular beneficiary be determined to have: (a) a severe physical, mental or emotional impairment; (b) a serious substance abuse problem; (c) been convicted of a felony involving drugs or narcotics; (d) or is involved in pending litigation or insolvency proceedings; (e) a large unpaid judgment; (e) taken a vow of poverty; or (f) the tax advantages to the beneficiary would be disadvantageous.
12. A "Sub-chapter S" corporation section designed to prevent termination of the corporation's favorable "S" tax status after the death of the Grantor should the Trust be the owner of sub-chapter "S" corporation stock.
13. An Optional "QDOT" section which provides for the retention of the maximum marital deduction (otherwise unavailable under current law) from federal death taxes in the event the spouse has been determined to not be a legal U.S. citizen.
14. A comprehensive "No Contest" (in terrorem) section (5 pages) which provides extensive protection in the event a designated beneficiary elects to challenge the distribution provisions of the Trust agreement or to harass the designated Trustees. If such a challenge is filed in court, then the challenging beneficiary (except in Florida) is automatically disinherited and the legal costs allocated to the challenging beneficiary.
15. A comprehensive "Disabled Beneficiary" section which constitutes a "special needs trust" arrangement whereby funds would be withheld from any beneficiary who becomes disabled and who is otherwise qualified for local, state or federal financial assistance.
16. An "Incapacitation" section (2 pages) which defines who, when and in what manner a Grantor may be determined to be legally incapacitated and his/her services terminated as a Trustee. This section should contain HIPAA ("Health Insurance Portability and Accountability Act") language providing that a Trustee may obtain copies of medical records to determine if a licensed physician has concluded that a Grantor or a beneficiary is legally incompetent.
17. A "Limited Amendment" section which provides that after the death or legal incapacitation of the Grantor, if there is a change in the State or Federal tax laws that would be detrimental, then the Trustees have a limited power to amend the Trust to insure compliance with the new law and without resorting to costly court proceedings.
18. An "Arbitration" section providing for mandatory arbitration, rather than costly public litigation, in the event of an unresolved disagreement between Trustees and/or beneficiaries.
19. A comprehensive "Generation Skipping Tax" section (4 pages) that is designed to minimize or eliminate the otherwise costly imposition of the generation skipping tax (55%) for larger estates which are distributed to multiple generations.
20. A limitation on a "Grantor's Gifts or Right to Revoke section which is designed to prevent an incompetent or elderly Grantor from being taken advantage of by unscrupulous individuals (e.g., family members, church members, neighbors, new spouse, etc.) whose primary goal is to obtain access to the Trust funds.
21. A "Notice to Creditors" section concerning a public notice which must be published in a local paper at the Grantor's death to insure that creditors have been properly notified of such death and given time to file any claim against the Trust estate.
22. A privacy "Disclosure" section noting that the Trust's provisions and affairs are private and that no one has permission to publicize such without the permission of the Trustees.
Call Us Today for a free consultation regarding you current estate plan and how we may be able to improve it.

CONTROLLING, OR NOT, FROM THE GRAVE

2008-07-14T08:35:00.000-07:00

As revealed by a recent by a recent decision rendered by an Illinois Court of Appeals, aggressive "strings" to control one's estate from the grave can turn into a "rope" which destroys the estate plan as being against "public policy."

In his estate plan, decedent Max Feinberg attempted to, in essence, control his grandchildren from the grave through a provision which would prohibit them from marrying "outside the Jewish faith, unless the spouse has converted or converts within one year of the marriage to the Jewsish faith." If such conditions were not met, then the grandchild would be "deemed to be deceased, along with all of his or her descendants."

Citing such authorities as In re Estate of Gerbing, 337 N.E.2d 29, 32-33 (1975); In re Keffalas' Estate, 233 A.2d 248, 250 (1967); and the Restatement (Third) of Trusts, § 29, Comment;, Illustration 3, at 64 (2003), the Court negated this restrictive provision, ruling that such a restriction "violated public policy."

While many properly drafted restrictive protective provisions (i.e., "strings") may be included in Wills and Trusts, if the individual elects to attach too many restrictions (i.e., "ropes") to his or her estate plan it may cause costly, time-consuming and privacy-invading litigation resulting in the provision being declared void and against public policy. (In re Estate of Max Feinberg, Court of Appeals, Third Division, June 30, 2008).

How does your estate plan stack up against others? Do you feel confident that you have included all of the desired protective features allowable under current law? Our firm has reviewed over 1000 such estate/asset protection plans and 99% of them fail to meet the desired protection? Visit us at www.professionalassetprotectionservices.com for more information and a Free 20 minute phone consultation concerning your estate/asset protection plan.

Asset Protection - Words of Warning!

2008-07-11T08:38:00.000-07:00

ASSET PROTECTION PLANNING GUIDELINES AND WORDS OF WARNING!

Many individuals mistakenly believe, in our "enlightened" technological society, that they are perfectly capable of developing their own asset protection plan through materials purchased off of the internet or the services of their local general practioner. Unfortunately, nothing could be further from the truth. Individuals, internet document services and general practioners are totally unaware of the myriad of issues and problems that must be resolved prior to the implementation of any asset protection structure. Problems and issues include:

The desire to protect ALL asset and the unwillingness to accept competent experienced advice that not all assets may be protected, and, that any attempt to do so could result in a very costly judicial determination that doing so constituted a "fraudulent conveyance".
Does a potential liability already exist (e.g., you just rear-ended a car in front of you at a stop sign) even though no lawsuit has yet been filed nor any judgement been issued?
Lack of attorney-client privacy privilege when materials are purchased off of the internet.
"Cookie-cutter" do-it-yourself ducuments that may not provide the desired protection.
Inability to consult with a licensed practitioner, experienced in tax and asset protection planning, on issues before, during and after the asset protection structure is implemented.
What assets may already be protected under state law, but could lose such protection if an improper transfer or structure is utilized?
What assets should be transferred to an asset protection structure?
What assets should not be transferred to an asset protection structure?
What could be the adverse consequences (e.g., alter ego judicial determination) if the wrong assets are transfered to an asset protection structure?
What is the best structure to utilize under the client's circumstances?
What is the best jurisdiction (i.e., state or country) in which to establish an asset protection structure?
What are the disadvantages of Family Limited Partnerships ("FLP's") when it comes to asset protection?
What are the disadvantages of Limited Liability Companies ("LLC's") when it comes to asset protection?
Contrary to the claimsof the uninformed and/or the dishonest, in only 9 states for FLP's (and 15 states for LLC's) do the statues specifically provide that a charging order is a creditor's sole remedy? As a result, in most of the remaining states a judgment creditor can subsequently petition the court and obtain the foreclosure and sale of the debtor's charged interest.
Should all of the applicable assets be transferred into one FLP, or LLC?Can all assets (i.e., real estate and personal) obtain equal protection?
When an FLP and/or LLC is utilized, is a charging order the only remedy available to a judgment creditor? NO! A judgment creditor may also petition the court arguing such issues as: (a) fraudulent conveyance; (b) alter ego; (c) reverse veil piercing; (d) resulting trust; (e) constructive trust; and (f) creditor's bill.
Out of the 9 FLP states and the 15 LLC states, only 7 of these states' statutes actually contain additional protective language.
When is it appropriate to implement a Domestic Asset Protection Trust ("DAPT")? Are they actually viable? And, if so, which are the best states, out of the 9 states which have enacted some form of asset protection statute, in which to establish a DAPT?
When is it appropriate to implement an Offshore Asset Protection Trust ("OAPT")? Are they actually viable? And, if so, which are the best countries in which to establish an OAPT?
How does a client protect his asset from loss due to the mismanagement or dishonesty of a foreign (domestic or offshore) Trustee?
On a scale of 1 to 10, with 10 being the best, what is the worse asset protection structure? The worst structures would include: (a) transfers of all assets solely into the name of a spouse, child or friend; (b) the use of false liens; (c) use of a corporation primarily for asset protection; and, (d) use of an FLP and/orLLC without other protective structures.
On a scale of 1 to 10, what is the best asset protection structure? The use of a properly drafted LLC or FLP achieves about a 4 on this scale. An LLC or FLP coupled with a DAPT increases to about a 7, and, and LLC or FLP coupled with an OAPT achieves about a 9.
Properly drafted comprehensive asset protection OAPT or DAPT Trust agreements chould consist of not less than 90 pages of single-spaced text.
Properly drafted comprehensive LLC Operating agreements should consist of at least 50 pages of single-spacedtext. The failure to implement such an Operating agreement could result in extremely adverse results in the event of a creditor attack.
What is the best, most cost effective asset protection structure for that particular client? Only the client, after and in-depth consultation with an experienced asset protection law firm can make that dtermination. NOTE: Research indicates that there are really only about 14 law firms who are experienced and highly qualified in this field of law.

We have been associated with one of the above 14 top qualified asset protection law firms for many years and have protected numerous individulas and their families from the rising costs of litigation.

If you are really concered about Asset Protection for yourself and your business then why leave it up to chance? Visit us on the web at www.professionalassetprotectionservices.com or contact us today for a Free 20 minute phone consultation to determine if our sevices can be of benefit to you and your family. Call Us Today! (989) 539-3996