Category Archives: Asset Protection Law

Pros And Cons Of Asset Protection

Pros And Cons Of Asset Protection

Asset protection is the concept of and strategies for guarding one’s wealth. Asset protection is a component of financial planning intended to protect one’s assets from creditor claims. Individuals and business entities use asset protection techniques to limit creditors’ access to certain valuable assets while operating within the bounds of debtor-creditor law. Asset protection helps insulate assets in a legal manner without engaging in the illegal practices of concealment (hiding of the assets), contempt, fraudulent transfer, tax evasion, or bankruptcy fraud. Experts advise that effective asset protection begins before a claim or liability occurs, since it is usually too late to initiate any worthwhile protection after the fact.

Some common methods for asset protection include asset protection trusts; accounts-receivable financing and family limited partnerships (FLP). If a debtor has few assets, bankruptcy may be considered the more favorable route compared to establishing a plan for asset protection. If significant assets are involved, however, proactive asset protection is typically advised. Certain assets, such as retirement plans, are exempt from creditors under United States federal bankruptcy and ERISA (Employee Retirement Income Security Act of 1974) laws. In addition, many states allow exemptions for a specified amount a home equity in a primary residence (homestead) and other personal property such as clothing. Each state in the United States has laws to protect owners of corporations, limited partnerships (LPs), and limited liability corporations (LLCs) from the entity’s liabilities.

Asset Protection and Real Estate

Jointly-held property under the coverage of tenants by entirety can work as a form of asset protection. Married couples who hold mutual interest in property under tenants by entirety share a claim to a whole piece of property and not subdivisions of it. The combined ownership of the property means that creditors who have liens and other claims against one spouse cannot attach the property for their debt reclamation efforts. If a creditor has claims against both spouses, the tenants by entirety stipulations would not protect the asset from being pursued by that creditor. Some attempts at asset protection include putting the property or financial resource in the name of a familiar member or other trusted associate. For example, an heir might be gifted ownership of real estate or other property while the actual owner continues to reside on the property or make use of it. This could complicate efforts to seize property as actual ownership must be determined. Financial accounts may also be domiciled in offshore banks in order to legally avoid paying taxes against those funds.

Here’s a list of pros and cons to assist in that effort:

Advantages

• Bankruptcy protection
• Divorce protection
• Protects inheritance from lawsuit
• Keeps assets in the family (for grandchildren or other children) upon the death of a child
• Provides for management of assets for children who may need assistance
• Permits child or child’s spouse to qualify for public benefits without spending down inheritance
• Avoids taxation of inherited assets upon child’s death

Disadvantages

• Cost of creating trust
• More complicated to have separate trust account
• Need to file annual tax return for trust
• Works only if child follows trust rules
• Stronger protection if trust uses independent trustee, which may entail loss of control and ongoing trustee fees

• Little benefit if child will quickly spend the inherited funds
Estate planning is a stressful thing. Nobody likes to consider their own mortality, and making end-of-life plans puts it in square focus. However, it’s important for everyone to arrange these plans so that your descendants and assets are cared for, even ensuring that your affairs are kept in order should you become unable to make certain decisions for yourself. One of the more popular ways to protect your assets, medical decisions and finances is by using a trust. A trust enables you to maintain a level of control over how your money is spent. There are, however, certain benefits and risks associated with this approach. Explore the various pros and cons of using trusts when it comes to estate planning, and how an estate planning attorney can help you make the right choice.

A trust is an asset pool held for the benefit of and use by a third party, or beneficiary. This beneficiary is doled out assets as controlled by a trustee. There are two basic kinds of trusts: those established in a will, or living trusts determined while you’re still alive. Trusts last until a certain set of predefined conditions are met. For example, you could design a trust for a young heir to become accessible when they reach 18 years old, at which point the trust ends and the inheritance transfers completely to them. As the creator of the trust, you are the settler. In the case of a living trust, you can also be the trustee.

Benefits of a Trust

There are several benefits to using a trust. The most important is that it tends to be more efficient than simply doling out assets in a will. It allows you specific means of allocating assets through using specific, controlled manners. It also helps to avoid estate taxes, and gives you control over how your beneficiary will receive your assets. In brief, a trust ensures a beneficiary won’t squander their inheritance. A trust can also be used in case you become incapable of making decisions for yourself. It can guarantee your medical care is covered, and your daily expenses and bills are paid. If needed, it can provide for someone to take over as caregiver. The drawback of a trust is that it can be more complex to set up than a will. Arranging a trust takes effort, funding and time. More notably, you can’t simply take a trust back after you establish it. You have to take particular steps to revoke a trust, and then you’ll have to redefine how the assets are distributed. A revocable trust can circumvent some of these problems, but this adds an additional layer of complication.

Working With a Trusts Attorney

If you’re considering creating a trust for your property, you’ll want the best possible advice. A qualified attorney can make sure you take the right steps and avoid critical mistakes, ensuring your assets are well protected and your heirs are well cared for.

Asset Protection in a Revocable Living Trust

Generally speaking, if asset protection is your goal, a revocable living trust is not the proper vehicle for your purposes. The settler, or person who creates the trust, essentially retains control and ownership of the trust’s assets, meaning they can remove assets from the trust or change the trust terms at any time, while the trust itself simply holds title to the assets. In the event a creditor wins a lawsuit against the settler, the court can order the payout of trust assets in settlement of the creditor’s claim. Although revocable trusts do not offer asset protection, they have other benefits when it comes to estate planning. For example, such trusts can be helpful in avoiding probate fees when the settler passes.

Asset Protection in an Irrevocable Trust

In order to properly protect your assets, you need an irrevocable trust. As its name suggests, once such a trust is created, you cannot revoke it yourself by changing its terms, nor do you have control over the trust’s assets. Instead, the trust’s assets are in the control of the trustee, or person assigned to manage the trust, and any changes or distributions are at the trustee’s discretion. If a creditor files a lawsuit against you, the assets in the trust will likely not be considered yours, so even if the creditor wins judgment against you, the chances are much better that the assets residing in the irrevocable trust will be protected.

Domestic Asset Protection Trust

There are two kinds of irrevocable trusts that work as asset protection vehicles: domestic asset protection trusts and foreign asset protection trusts. A domestic asset protection trust can be established within the U.S. in any of the states that provide legislation permitting the creation of such trusts. Not all states provide for asset protection trusts, so it’s important that you consult with an estate planning adviser or online service provider to determine which state, if any, is best to set up such a trust. However, as these trusts have become more common, more and more states have come to recognize the legal status of such trusts. Note that it is less costly to set up an asset protection trust in the U.S. than it is to create a foreign asset protection trust. Because these trusts are fairly new, the case law concerning their treatment is constantly evolving, which adds a level of uncertainty to their ability to properly protect assets. Most states have a limitation period during which assets transferred into such a trust remain vulnerable to creditors.

Foreign Asset Protection Trust

The foreign asset protection trust, also known as an offshore trust, provides more effective protection for your assets. Such trusts are established in jurisdictions outside of the U.S. which provide more stringent protection for trusts and their assets. Because your trust is in a foreign jurisdiction, it’s governed by the laws of that jurisdiction rather than by U.S. laws. Although they are usually more costly than their domestic counterparts, foreign asset protection trusts generally have more stringent privacy measures, making it harder for others to learn the trust terms and assets. Another benefit is that jurisdictions that promote themselves as offshore trust havens usually do not enforce U.S. judgments against assets of trusts formed in their jurisdiction.

In many cases, assets of a foreign asset protection trust are held in an offshore account. While this provides more protection from a U.S. court-ordered seizure of assets, it does expose the assets to potential economic and political risks associated with the jurisdiction in which the offshore account is held. Today many estate planning firms tout the benefits of Offshore Asset Protection Trusts as instant asset protection solution for every individual looking for the end-all, be-all. It feels to them like finding the last raft on a ship that has a pin-sized hole in it. Their first instinct is to throw out the raft and jump off the boat immediately. Unfortunately, things since 9/11 and the global financial crisis of 2008 have changed in this country. Prior to 9/11 we recommended offshore trusts for a much larger percentage of clients, but that is no longer the case.
Why an Offshore Asset Protection Trust is a Bad Idea for Most People
Because of the new regulations from the Patriot Act and subsequent banking acts, offshore asset protection trusts are very expensive to maintain. Going offshore to establish asset protection trusts means going out-of-pocket for between $5,000 to $10,000 per year in maintenance fees. Because of these expenses, many of these offshore trusts will only last about three to four years for the average individual, particularly if they were created in a rush to thwart a perceived upcoming risk; for this reason, grantors often question whether their hasty decision was indeed the right one at the time. There are quite a few mandatory and compliance forms to file when going offshore.

At a minimum, there’s Treasury Department form 90-22.1, Report of Foreign Bank and Financial Accounts to consider. There may also be a requirement to file a Foreign Bank Account Report (FBAR), which falls under the authority of the Financial Crimes Enforcement Network (FinCEN) form 114. Aside from filing TD and FinCEN forms, offshore trust grantors may also have to respond to the Internal Revenue Service (IRS) by filing forms 3250 and 3250A. These forms, which require disclosure of trust assets, are handled by a foreign trustee and a CPA based in the United States. As of December 31st, 2012, the U.S. Foreign Account Tax Compliance Act (FATCA) is creating an additional burden on offshore trust grantors and trustees by requiring financial institutions abroad to report on the financial holdings and income of their clients. With the new filing and compliance requirements also comes uncertainty as to how offshore trusts are managed. It calls for retaining the services of an attorney to work in conjunction with the foreign trustee. If you take into consideration all of the aforementioned factors, it is easy to see the $10,000 annual maintenance cost of an offshore trust.

Medicaid Asset Protection Trust

While one of the primary purposes of an asset protection trust is to protect the settlers’ assets from creditors’ claims, such a trust can also be used to help make you eligible for Medicaid by reducing the assets in your name. If you are planning to set up a trust for this purpose, it’s important to consult with an adviser with experience in this area, as not every trust can help you comply with Medicaid’s eligibility requirements. An asset protection trust can be a vital estate planning tool. Because it’s crucial for such a trust to be set up properly, consult with an adviser with expertise in asset protection matters.
Here are some of the ways the assets can be siphoned off:
• Failure to pay child support or alimony. The courts could order those payments withdrawn from the assets. Retroactive and future payments could “wipe out” the assets.
• Debts due to state and federal governments. That could take the form of taxes not paid or a fine that is imposed as part of a sentence in a civil legal action.
• Payment due those who have provided services to the beneficiary associated with the trust.
Factors to Consider When Opting For Asset Protection Trusts
Securing your assets through foreign asset protection trusts are a lot more useful and inexpensive than you possibly could imagine. However, potential settlers must cautiously assess different offshore trust jurisdictions and make sure that their interests will be given high priority. It is also important that they seek professional advice to ensure optimum benefits. Here are some of the things that one should bear in mind in choosing the right jurisdiction for an offshore trust.
• Make sure that a prospective jurisdiction does not give foreign judgments against the assets that are transferred to a valid or legal trust within its jurisdiction. However, the assets that come from criminal activities such as fraud should be duly exempted. It should also have foreign trust laws that are favorable to your specific needs.
• Political and economic stability is crucial in choosing the right jurisdiction. A country that is politically and economically unstable or underdeveloped can only provide weak asset security. Furthermore, it is often characterized by ineffective financial infrastructures that give you fewer credible banks, lawyers and trustees to choose from.
• It should allow the formation of irrevocable trusts which could give the settler the ability to keep the powers related to the ownership of the asset protection trusts and all of the properties involved therein.
• It is not advisable to invest your assets in non-sovereign nations. This is because they may be under another country’s jurisdiction that may not be beneficial to your interests.

Asset Protection Lawyer Free Consultation

When you need legal help with asset protection, trusts, wills, probate or other estate planning and administration issues, please call Ascent Law LLC for your free consultation (801) 676-5506. We want to help you.

Michael R. Anderson, JD

Ascent Law LLC
8833 S. Redwood Road, Suite C
West Jordan, Utah
84088 United States

Telephone: (801) 676-5506

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4.9 stars – based on 67 reviews


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Good Resources On Estate Planning Trusts

Good Resources On Estate Planning Trusts

Trusts can be effective tools for assisting and making life easier for a surviving spouse. They can also be used as part of a strategy to reduce estate settlement costs. People might do an excellent job of managing their assets when they are active and alert, but when their health fails, they might wish to assign the management of their assets to a trustee through a trust instrument. If the estate of the first to die is large and will flow directly to the surviving spouse, especially if the surviving spouse is elderly and inexperienced in investing and managing assets, a trust might be the most desirable method of meeting the surviving spouse’s and children’s present and future interests. A trust is a legal relationship. Unlike a corporation, a trust is not considered to exist as an entity separate from the people that own it and control it. A trust is created when it is signed, or it can be created orally. It can be funded anytime. In a trust, assets are entrusted to a trustee who holds legal title and manages the assets until they are distributed to the eventual beneficiary. The terms of the trust describe how income from the assets and principal are to be distributed and managed. The trustee can be a bank, a trust company, another professional, or one or more family members (spouse, son, daughter, or self).

Usually the trustee is someone trusted by the trust creator (the settler or grantor). The trustee should be capable of managing the assets entrusted to him or her by the creator, until the assets are distributed to the benefactors. Beneficiaries can receive income from a trust during the trust’s existence, and/or receive assets when the trust is dissolved. When a trust is set up by spouses, the surviving spouse usually receives the income from the assets that are in the trust; assets then go to the children when the trust is dissolved. When a trust is created, the creator determines the conditions under which the trust will be dissolved. In the case of creating a trust with a child as the beneficiary, some creators wish the trust to be dissolved when the child is capable of wisely spending or investing his or her inheritance. A trust can also be dissolved when the surviving spouse dies. In both instances, the benefactors can receive income from the assets in the trust, and have limited access to the principal, if needed, before the trust is dissolved.

If assets are to be transferred to a trustee, titled assets (cars, trucks, stocks, bonds, real estate, savings/checking accounts, certificates of deposit, insurance policies, retirement accounts, etc.) should be retitled, as titles need to be changed with each respective titling agency. Some banks will institute an early withdrawal penalty if the title of a certificate of deposit is changed before the certificate matures. Assets without titles need to be signed over to the trust. Then, at the termination of the trust, assets need to be retitled and transferred back to beneficiaries. In regards to transferring assets, the same processes that happen through probate occur with a trust. Transferring property through a trust rather than through probate is not necessarily simpler and might or might not allow the heirs to receive a larger portion of the inheritance, but the trust process is usually quicker. However, transfer of property through a trust is more private, as there is no listing of assets and value of assets in the probate court or newspaper. Because the trust is a legal relationship not separate from the people that own and control it, assets transferred to a trust need to be put into the name of the trustee, not into the name of the trust. Transfers of title into the name of the trust might be a void transfer.

Types of Trusts

Assets can be transferred into a trust directly while one is living (these trusts are known as “inter-vivo” or “living trusts”), or assets can be directed into a trust by one’s will (these are called “testamentary trusts”). Living trusts that can be changed or revoked by the settler are called “revocable,” while those that cannot be changed or revoked are called “irrevocable.”

Revocable Living Trusts

Property placed in a revocable living trust can be returned to the creator by revoking the trust. Since the creator has the power to pull the assets back, when the creator’s estate is settled, assets in a revocable living trust are inventoried, appraised, and included in and federal estate tax calculations.

Irrevocable Living Trusts

When an irrevocable living trust is created, the creator has given the assets to the trustee. The creator no longer has control over the assets, or the legal right to control them in the future, unless the creator is the trustee. Assets in an irrevocable living trust are not subject to estate taxes unless the creator is also the trustee or has retained other rights.

Totten Trust (Payable-on-Death Accounts)

This is even easier than setting up a revocable living trust. If you have a bank account, you can simply turn it into a Totten trust by signing a form that your bank provides that designates the beneficiaries that you wish to receive the contents of the account. Totten trusts avoid probate and are very efficient at transferring property to your beneficiaries. In addition, Totten trusts can often be set up to pass securities (stocks and bonds) as well as bank accounts.

Trusts have been used to minimize federal estate taxes while providing security to a surviving spouse. One strategy to do this is to create a trust and write the wills of both spouses so that their assets pour over into the trust when the first spouse dies. In other words, the assets are willed to the trust rather than to the surviving spouse. The surviving spouse then gets the income from the trust and has limited rights to the principal, but the property in the trust is not in the surviving spouse’s estate. This is one way to have the first to die spouse’s assets pass through estate settlement and be charged estate settlement costs only once instead of twice if passed from the first to die to the survivor. This strategy no longer reduces federal estate taxes due to the portability of the federal estate tax exclusion, but it still reduces other estate settlement costs. A new provision in the federal estate tax law might reduce the use of trusts in estate planning.

Another very effective use of trusts is to make the trust the owner and beneficiary of life insurance. This might reduce estate settlement costs since the proceeds are not subject to federal estate taxes (in certain cases), appraisal, probate costs, or attorney fees (in certain cases). To minimize estate taxes yet provide for a surviving spouse, a trust might be utilized. However, if a trust is used to avoid probate, it should be done in the appropriate situations and for the correct reasons. One appropriate reason for living trusts is privacy. When an estate is settled, property being transferred, along with its appraised value, is often listed in the newspaper and at the county courthouse. However, if the property has already been transferred to a trust, it is not owned by the deceased at the time of death; therefore, it is not listed in the newspaper or at the courthouse. Living trusts are only one of several ways to avoid probate. Other methods include joint ownership of real property with rights of survivorship (JTRS), owning property such as retirement accounts with named beneficiaries, having payable on death (POD) accounts, giving before death, and owning life insurance policies with a named beneficiary. Probate might also be avoided by using a transfer on death (TOD) designation for stocks, bonds, other securities, real estate, and automobiles. Unfortunately, the laws of Ohio are not uniform as to each of these asset categories. For example, with any security, you can specify that if the intended beneficiary predeceases you, the predeceased beneficiary’s share will pass to the beneficiary’s lineal descendants, per stripes. However, with real estate, you have to specifically name the contingent beneficiaries. Accordingly, if one of your children has another child after you set up the deed, you will need to prepare a new deed to reflect a new contingent beneficiary. If these limitations are not of concern, you should be able to avoid probate for all titled assets without going to the expense of a trust.

Typical probate fees are estimated to be between $150 and $400. Probate fees are negligible, so avoiding probate to avoid probate fees might not be appropriate. Executor fees are another settlement cost. An executor in the probate process performs functions similar to those of a trustee for a trust. In general, the more time spent and the more management required of a trustee, the higher the fees (assuming the fees are accepted). Assuming that a family member is the executor or trustee, the fees are not a concern. However, trustee fees might be higher if a bank or trust company performs the function. Avoiding probate to avoid executor fees is not advantageous since trustee fees might be as much as or higher than executor fees. An appraisal is needed if tax forms have to be filed. An appraisal might be necessary when assets are placed into a living irrevocable trust, as gift tax forms might need to be filed. So the appraisal fee is often incurred even if probate is avoided with a trust instrument. Attorney fees are often a large portion of estate settlement costs. However, attorney fees will be charged when property is passed on to others through the probate process or through a trust. Also, to settle an estate, some attorneys charge by the hour. Others base their fees on a percentage of probate property only, and some base their fees on both probate and non-probate property. Although the percentage charged for non-probate property is generally lower than the percentage charged for probate property, one cannot automatically assume that non-probate property will not be included in the attorney fee calculation. Attorneys also charge to create and dissolve trusts. Property must be retitled into the trust when it is put in, and it must be retitled out of the trust when the trust is dissolved. Retitling might or might not be included in the fee charged by the attorney who created the trust. Therefore, attorney fees might not be reduced when avoiding probate by the use of a living trust. If you are considering a living trust to save attorney fees, consider the total cost of creating and dissolving the trust. In general, with a living trust, you pay attorney fees up front, but you also pay after death to dissolve the trust. If assets are handled by probate, the court oversees their retitling and transferring. If assets are put into a trust, an attorney has to do their retitling and transferring when the trust is dissolved.

Steps to an Estate Plan

A checklist to help you take care of your family by making a will, power of attorney, living will, funeral arrangements, and more. Here is a simple list of the most important estate planning issues to consider.
• Make a will: In a will, you state who you want to inherit your property and name a guardian to care for your young children should something happen to you and the other parent.
• Consider a trust: If you hold your property in a living trust, your survivors won’t have to go through probate court, a time-consuming and expensive process.

• Make health care directives: Writing out your wishes for health care can protect you if you become unable to make medical decisions for yourself. Health care directives include a health care declaration (“living will”) and a power of attorney for health care, which gives someone you choose the power to make decisions if you can’t. (In some states, these documents are combined into one, called an advance health care directive.)
• Make a financial power of attorney: With a durable power of attorney for finances, you can give a trusted person authority to handle your finances and property if you become incapacitated and unable to handle your own affairs. The person you name to handle your finances is called your agent or attorney-in-fact (but doesn’t have to be an attorney).
• Protect your children’s property: You should name an adult to manage any money and property your minor children may inherit from you. This can be the same person as the personal guardian you name in your will.
• File beneficiary forms: Naming a beneficiary for bank accounts and retirement plans makes the account automatically “payable on death” to your beneficiary and allows the funds to skip the probate process. Likewise, in almost all states, you can register your stocks, bonds, or brokerage accounts to transfer to your beneficiary upon your death.
• Consider life insurance: If you have young children or own a house, or you may owe significant debts or estate tax when you die, life insurance may be a good idea.
• Understand estate taxes: Most estates more than 99.7% won’t owe federal estate taxes. For deaths in 2017, the federal government will impose estate tax at your death only if your taxable estate is worth more than $5.49 million. (This exemption amount rises each year to adjust for inflation.) Also, married couples can transfer up to twice the exempt amount tax-free, and all assets left to a spouse (as long as the spouse is a U.S. citizen) or tax-exempt charity is exempt from the tax.
• Cover funeral expenses: Rather than a funeral prepayment plan, which may be unreliable, you can set up a payable-on-death account at your bank and deposit funds into it to pay for your funeral and related expenses.
• Make final arrangements: Make your end-of-life wishes known regarding organ and body donation and disposition of your body burial or cremation.
• Protect your business: If you’re the sole owner of a business, you should have a succession plan. If you own a business with others, you should have a buyout agreement.
• Store your documents: Your attorney-in-fact and/or your executor (the person you choose in your will to administer your property after you die) may need access to the following documents:
 Will
 Trusts
 insurance policies
 real estate deeds
 certificates for stocks, bonds, annuities
 information on bank accounts, mutual funds, and safe deposit boxes
 information on retirement plans, 401(k) accounts, or IRAs
 information on debts: credit cards, mortgages and loans, utilities, and unpaid taxes
 Information on funeral prepayment plans, and any final arrangements instructions you have made.

The Importance of Estate Planning

Many people believe that having an estate plan simply means drafting a will or a trust. However, there is much more to include in your estate planning to make certain all of your assets are transferred seamlessly to your heirs upon your death. A successful estate plan also includes provisions allowing your family members to access or control your assets should you become unable to do so yourself.

Here is a list of items every estate plan should include:
 Will/trust
 Durable power of attorney
 Beneficiary designations
 Letter of intent
 Healthcare power of attorney
 Guardianship designations
In addition to these six documents and designations, a well-laid estate plan also should consider the purchase of insurance products such as long-term care insurance to cover old age, a lifetime annuity to generate some level of income until death, and life insurance to pass money to beneficiaries without the need for probate.

Get Legal Help Finding the Right Estate Plan for You

Probate laws are some of the oldest on the books. While the terminology and concepts may seem archaic, the good news is that you don’t have to figure this all out on your own. There are estates planning attorneys who can help you map out your estate plan and draft important documents. Get started on planning your estate by contacting an experienced estate planning lawyer.

Free Consultation with a Utah Estate Lawyer

If you are here, you probably have an estate issue you need help with, call Ascent Law for your free estate law consultation (801) 676-5506. We want to help you.

Michael R. Anderson, JD

Ascent Law LLC
8833 S. Redwood Road, Suite C
West Jordan, Utah
84088 United States

Telephone: (801) 676-5506

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4.9 stars – based on 67 reviews


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FLP for Asset Protection in Utah

We’ve previously talked about family savings trusts and compared an FLP and LLC here and here.

If you’re wondering whether an FLP (Family Limited Partnership) will really work for asset protection, then you really must first first understand what Asset Protection is. In the most basic sense, Asset Protection is any action that dissuades or disallows any unwanted and unauthorized person or entity from reaching your assets. That’s really it.

FLP for Asset Protection in Utah

In that sense, Asset Protection could include:

  • Giving your assets away to a charity or person.
  • Losing your assets in Utah.
  • Investing your assets in a copper mine in South America, which turns out to have no value.
  • Placing your assets in an unreachable location, like a treasure chest dropped to the bottom of the sea, or
  • Piling all your assets up and making s’mores over a roaring bon fire.

In each of the above cases, the assets would be difficult, if not impossible, to reach for anyone! The problem, of course, is that anyone includes you. In practical terms, what Asset Protection has come to be known as is slightly different than these methods mentioned above.

Legal Asset Protection is the use of legal entities and tools that place a legal barrier between an unauthorized creditor and your assets, while leaving you in the position of being able to control, use and enjoy those assets.

From this perspective all of the above options are out. What’s in is the Family Limited Partnership and its cousins like the far more powerful Asset Protection Trust. So how does the FLP really work to protect your assets?

The properly utilized FLP is a legal entity drafted under the laws of a state that statutorily does not allow a creditor to reach the underlying assets of one of the FLP members. It does this with one very special feature – The Charging Order.

A Charging Order Against an FLP

The Charging Order is a legal concept and in the words of the Statute itself:

“A charging order constitutes a lien on the judgment debtor’s transferable interest in the partnership.”

The key concept here is lien. If all things go well, a creditor would not be able to force a distribution of the partnership assets and would be left sitting there with just a lien. This has the effect of placing the barrier we want between the assets and a creditor who is after them.

What the charging order, and the FLP in general, does NOT do is completely remove the creditor; rather it just makes them wait. The net effect is that a creditor holding a charging order is likely to come back to the negotiating table and accept an offer of settlement that is far more favorable to you than it would have been had the creditor been able to directly reach your assets.

Is this Asset Protection? Yes, it does accomplish the goal of placing a barrier, while still allowing you to control, use and enjoy those assets, at least to a point. However, it is not an ultimate barrier. If the creditor is not motivated to settle, and is willing to wait it out, they are in line to receive any eventual distributions from the partnership. In the meantime, you are deprived of your use and enjoyment of those assets. It basically creates a face-off.

So when is an FLP enough? Basically that depends on the level of protection you desire and the level of assets you are trying to protect. Our experience has shown that if your asset level is below $250,000 the FLP alone is a good strategy. When your assets begin to climb higher than that, and definitely when the reach the $500,000 mark, we have found that the deterrent effect of the FLP alone is just not enough.

The reason is obvious, the more the money, the more incentive a plaintiffs’ attorney has to either wait it out, or worse yet, attempt to break open the FLP. The later can and does happen and anyone familiar with a courtroom will tell you that judges are highly adept at finding ways around the very rules and statutes they are meant to uphold. Why? Because there are always 2 sides to every story and more than one way to read the statutory intent of a law.

For these reasons 90% of the time I do not rely solely on the FLP for real Asset Protection. While it remains a valuable entity, particularly for the consolidation and management of all the assets, when it comes to real deterrence and protection I rely on the far more powerful 
Asset Protection Trust, which is the key to a great estate and asset protection plan.

Free Initial Consultation with Lawyer

It’s not a matter of if, it’s a matter of when. Legal problems come to everyone. Whether it’s your son who gets in a car wreck, your uncle who loses his job and needs to file for bankruptcy, your sister’s brother who’s getting divorced, or a grandparent that passes away without a will -all of us have legal issues and questions that arise. So when you have a law question, call Ascent Law for your free consultation (801) 676-5506. We want to help you!

Michael R. Anderson, JD

Ascent Law LLC
8833 S. Redwood Road, Suite C
West Jordan, Utah
84088 United States

Telephone: (801) 676-5506

Ascent Law LLC

4.9 stars – based on 67 reviews


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Domestic Asset Protection Trusts

Domestic Asset Protection Trusts

Whether you have a higher net worth or are in a high-liability profession, a domestic asset protection trust can help protect you and your family from lawsuits. If you wish to stop the claims of future creditors and litigators, we can help you. There are several ways to protect your assets, from gifting to family members and charities to paying for certain Medicare costs up front. Setting up a trust, however, is one of the most effective strategies.

Asset Protection Trusts and Other Trusts

Types of trusts include:

  • Revocable Trusts: These do not provide protection from creditors. Since the person who created the trust can amend it, that person’s creditors can also reach the trust’s assets.
  • Irrevocable Trusts: When a trust is created by someone other than the trust beneficiary, assets can be shielded from creditors. There are certain exceptions to this, however, such as government entities and individuals to whom are owed child support payments. Unless a trust is a self-settled irrevocable trust, it will only provide minimal protection.

We’ve talked about asset protection and asset protection trusts here, here, here, and here.

UTAH PASSES NEW DOMESTIC ASSET PROTECTION TRUST LAW

In May 2013, Utah established a new self-settled domestic asset protection trust statute. This law provides a great degree of protection: as long as a person creates and funds an irrevocable trust with his/her assets and meets the requirements of the statute. When these are met:

  • The person’s future creditors will not be able to attach the trust property
  • They will not be able to force distributions from the trust to the trust’s creator
  • They will not be able to require the trustees to pay directly to the creditor distributions that would otherwise be made to the trust’s creator

ALTERNATIVE ASSET PROTECTION OPTIONS FOR SALT LAKE CITY FAMILIES

Whether one of these new trusts is right for you depends on the size of your estate and your personal wishes. We listen to each client and create custom plans for asset protection. For example, your life insurance and retirement plans might already have sufficient asset protection in place, but other assets may be at risk. We can help set up special trusts, corporations and limited liability companies to protect you.

Salt Lake City Pet Trust Lawyer

Your pets have their own favorite foods, toys, playtime activities, medicines, and other specific health care needs. A pet trust allows you to specify with exactness how your pets will be cared for in your absence. They can get the veterinary care they need, at the veterinarian they are accustomed to, through directives you make in your pet trust. They can be ensured of daily exercise, proper boarding, as well as any other needs they have come to appreciate as being part of your loving family. Sure, you could informally ask your friends or heirs to take care of your pets after your death or if you become disabled. Sadly, the pounds receive many such animals, as those agreements are not enforceable and leave far too much to chance. Your pets mean too much to leave their futures so uncertain. Call us about a pet trust and make sure all of your family is cared for.

What is a pet trust?

A pet trust is a legally-enforceable document that ensures your pets are properly cared for in the event of your death or disability. Under Utah law, a trust can be created that provides for all of your pets and other domestic animals, such as horses, dogs, cats, and birds. When a trust is created, funds are set aside to provide for your animals’ on-going maintenance and care in the event of your incapacity or death. A trustee that you appoint is charged with managing those funds and may legally use them solely for the proper care of your animals, and no other purpose. A pet trust is the only sure way of providing for the continued care of your animals after your death or even if you simply become incapable of taking care of them.

Benefits of Having a Pet Trust

Many people think a will is sufficient. But it is not. Money left for animal care might be contested by heirs. A trust avoids this possibility entirely, by giving you complete control over the designated assets both during incapacity and after death. Wills are subject to court processes and may result in undesired consequences, but a trust is not: it puts you in control by doing what you want, when you want, and keeps you out of court entirely.

Through a pet trust, you can designate not only how the funds are used, but how the funds can be invested and grown over time, to continue providing care and then, following the passing of your pets, to provide for a charitable gift to a charity of your choosing (perhaps animal related, if you like). The amount you set aside can be determined according to your own animals’ needs, such as what kind of animals they are and how many, the type of boarding they need, and medical care they might require as they age.

How Seniors Can Protect Their Pets

Studies have shown that seniors live longer, healthier, more content lives when they have a companion animal. But often seniors are worried about what will happen to their animals when they pass on. Pet trusts make it possible to continue to let your pets know how much they are loved and how much happiness they have brought into your life. With a pet trust, you can rest assured knowing that your companion animals will not be left to fate after your death or incapacity.

Free Initial Consultation with an Asset Protection Lawyer

When it’s time to protect your assets, call Ascent Law for your free consultation (801) 676-5506. We want to help you.

Michael R. Anderson, JD

Ascent Law LLC
8833 S. Redwood Road, Suite C
West Jordan, Utah
84088 United States

Telephone: (801) 676-5506

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4.9 stars – based on 67 reviews


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Lottery Trust

If you’re one of the lucky few to strike it rich in the state lottery, congratulations! But before you jet off to the tropics, break ground on that new four-story mansion, or start giving out a bunch of cash to your friends and relatives, you’ll most likely need some help managing all of that newfound wealth. Establishing a “lottery trust” in the form of a blind trust, revocable trust, or some other legal entity can help alleviate potential problems. For instance, a blind trust allows lottery winners to maintain their privacy in states that prohibit winners from remaining anonymous.

Lottery Trust

This article provides the basics of establishing a lottery trust, but there is no one-size-fits-all approach as the needs of each lottery winner will vary. Generally, those who choose to form a trust for their lottery winnings will need to do so before claiming their prize.

When You Might Need a Lottery Trust

Not everyone will need or want a new trust through which to manage their lottery winnings, but it’s very important to work with a reputable financial planner. If you’re married and already have a trust set up in you and your spouse’s name, you can simply deposit the winnings into that account. But you may also want to include additional bells and whistles often used by wealthy couples, such as a bypass trust that automatically names the surviving spouse as the beneficiary upon your death and helps reduce your family’s tax obligations.

Factors to consider before deciding on whether to establish a lottery trust include (but are not limited to) the following:

  • Anonymity – Just a handful of states protect the anonymity of lottery winners; by putting your winnings into a trust, only the name of the trust becomes public.
  • Multiple Winners – It’s very common for coworkers or family members to pool their resources and enter the lottery using the same number; but since only one entity may claim a lottery prize, the establishment of an irrevocable trust in the name of the winners will ensure fair distribution.
  • Payments or Lump Sum? – The way in which you receive your lottery winnings will have an impact on your tax obligation; if the winner dies before all payments are made, for example, a trust can help manage those annual tax bills.
  • Married? – You’ll want to look into the marital property implications of your lottery winnings; consider getting a prenuptial agreement if you get married after winning the lottery.

Set Up a Lottery Trust

If you’ve just won the lottery, you’re probably excited to cash it in as soon as possible and pay off debts, go on a spending spree, and send checks to your relatives. But time is on your side, and it’s important to take a deep breath and consider your options first. A financial planner can help you manage your wealth, while an estate lawyer will be able to draft a lottery trust for you and your family.

As with any other trust, a lottery trust — whether it’s a blind, revocable, or irrevocable trust — is managed by an appointed trustee. The winner may appoint him or herself as the trustee, but appointing another individual will help protect your privacy. You will then name beneficiaries to the trust, which may be your family members or just yourself. Lottery winners often set up individual trusts for each family member, as well as charitable or other types of trusts.

Blind Trusts

When you create a blind trust — in which you (and other named beneficiaries) are not involved in the day-to-day management of the funds — you essentially donate your winning ticket to the trust before claiming the prize. The trust, then, claims the ticket in its name and invests the funds (without your input) as it sees fit. Since the lottery winner isn’t involved in the investment or management decisions, it’s best to appoint someone with expertise in such matters.

Irrevocable Trusts

An irrevocable trust, meanwhile, is considered the best legal entity to use when multiple individuals are claiming a single prize, such as workplace lottery pools. Irrevocable trusts allow the funds to be dispersed to each of the winners in the pool without having to simply rely on a single winner’s honesty (while avoiding the tax consequences of transferring the winnings to multiple parties). And since it may not be revoked or altered, it helps prevent future disputes among the parties.

Other types of trusts or legal structures may be suggested by a trusts attorney, who can help determine the best route by assessing your needs and goals.

Free Initial Consultation with a Lottery Trust Lawyer

If you’ve won the Lottery – protect your assets and call Ascent Law for your free Lottery Trust consultation (801) 676-5506. We want to help you.

Michael R. Anderson, JD

Ascent Law LLC
8833 S. Redwood Road, Suite C
West Jordan, Utah
84088 United States

Telephone: (801) 676-5506
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Fraudulent Conveyance Explained

We spend a lot of time thinking about and writing about fraudulent conveyances here.  That’s because a fraudulent conveyance can totally defeat an asset protection plan, no matter how good your asset protection attorney may be.  Laws regarding fraudulent conveyances make certain types of transfers wrongful.  One type of transfer that is prohibited is a transfer made within a certain period of time before a claim is made or while a claim is pending.  What is a claim?  Claims take many forms.  Claims can be lawsuits, demand letters, or even accidents where an injured person has yet to contact the person at fault.

Fraudulent Conveyance Explained

Let’s look at an example.  Consider an oral surgeon or dentist (“doctor”) who is not properly insured and accidentally causes injury to a patient during a surgical procedure.  If the patient sues the doctor, then the doctor’s personal assets are at risk.  The doctor’s personal assets include cash, stocks, bonds, investment properties, and in some cases even items like cars, boats and airplanes.

What we’ve established so far is that a doctor with assets has caused an injury.  Assume that no lawsuit has been filed.  Even though there is not a lawsuit pending, there is a “claim” against the doctor.  The doctor knows that she or he could end up owing money to the patient, and that is enough.  What can the doctor do to protected assets?

The answer is complex.  While the doctor can continue to move money and assets around, if the doctor moves assets to a place where they cannot be reached by the injured patient, then a court can “set aside” those transfers of assets.  The bottom line is that a court can require transferred assets to be given to the injured patient, even if the doctor is no longer legally and technically the owner of the assets.

In other words, once a claim exists, it is too late to protect most assets.  While one can continue moving assets while a claim is pending, it is almost impossible for an asset protection attorney to develop a plan that would make assets immune, at that point.  The moral of the story is that people with assets who are engaged in professional practices (e.g. doctors, dentists, lawyers, real estate developers, etc.) need to engage an asset protection attorney before claims arise.  That is the only way that a plan providing true asset protection can be developed and tailored to meet the needs of specific individuals.

It is true that some assets, in some states, are exempt assets and automatically protected.  But if you are a person with assets that go beyond exempt assets, then you should consider proactively pursuing an asset protection strategy.

What is Funding?

  • Primary and Second Homes (non-rentals)

The first asset you need to consider is your primary residence.  If you live in a state with fantastic homestead protection like Utah, then you don’t need to do anything.  Your home is protected.  Otherwise, you need to provide some protection for your home.  The typical way to do that is to transfer or “deed” your primary residence into your asset protection trust.  The same is true of any second homes that you own but don’t use to generate rental income.

  • Rental Properties

Rental properties are slightly riskier than non-rental properties.  As a result, there needs to be some additional insulation around them in order to protect your other assets.  That additional insulation comes in the form of a limited liability company (a “LLC”).  The funding works as follows:

  1. The LLC is created, and it is owned in the exact same proportions as the rental property to be transferred.
  2. The rental property is deeded into the LLC.
  3. The LLC is transferred into your asset protection limited partnership.

It’s very important that you follow the exact sequence described above, because in some instances it can save you money by avoiding transfer taxes and/or a reassessment for tax purposes (check with your local taxing authority and clerk of court to make sure).

  • Safe Assets

Cash, stocks, bonds, precious metals, and jewelry are all considered “safe assets.”  That’s because they can’t generate liabilities for you.  Think about it like this: Someone can get injured on your rental property.  That’s just not true of your safe assets.  Because of this unique feature, your safe assets can be owned directly by your limited partnership, without the need to insulate those assets with an LLC.

  • Vehicles

Vehicles are very risky assets.  As a result, they should be left outside your plan completely.  Own vehicles in your personal name, and trust that your other assets are safely protected.

Free Consultation with a Lawyer in Utah

If you have a bankruptcy question, or need help with Asset Protection, call Ascent Law now at (801) 676-5506. Attorneys in our office have filed thousands of cases. We can help you now. Come in or call in for your free initial consultation.

Michael R. Anderson, JD

Ascent Law LLC
8833 S. Redwood Road, Suite C
West Jordan, Utah
84088 United States

Telephone: (801) 676-5506

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Asset Protection or Bankruptcy

Asset protection planning is closely related to financial planning.  Both asset protection and wealth preservation strategies are about managing risk, which requires careful planning and appropriate asset allocations.

Asset Protection or Bankruptcy

Asset Protection Works like Premium Insurance

In the insurance industry, underwriters charge fees (“premiums”) to undertake risks.  Individuals and businesses pay those premiums in order to limit their exposure to financial losses.  In other words, premiums represent known, fixed costs that are paid in exchange for a release from future liabilities, the extent of which are unknown.  Traditionally, asset protection has worked in a similar way.  The transaction fees required to set up wealth preservation strategies and asset protection plans are fixed, up-front costs similar to insurance premiums.

In the aggregate, people are more likely to lose money due to poor financial planning–a lack of proper asset allocation, biased advisors, and a bad economy or poor investment choices–than they are to lose money in a lawsuit.  But each individual situation is unique, and some people are in riskier, more lawsuit prone businesses than others.  In the case of high net worth individuals with significant exposure to risk (e.g. physicians like OBGYNs), certain wealth preservation strategies (in addition to insurance) absolutely must be pursued.

Wealth Preservation Through Asset Management

The least expensive form of wealth preservation comes from shifting at-risk assets to exempt assets.  The only cost from such a reallocation of assets (other than transaction fees) is a possible reduction in liquidity.  As an example, one could sell a certain portion of their stock or bond portfolio and purchase a cash-value life insurance policy.  While stocks and bonds are highly vulnerable in a lawsuit by creditors, the cash value of life insurance is protected from the claims of creditors in many states.  The practice of economics is the shifting of assets from areas of low yield to areas of high yield.  Thus, if one can achieve her or his required rate of return via one of two investment vehicles, it makes economic sense to choose the less risky vehicle–the vehicle with less exposure to a suit by creditors.

Preservation of Assets

Where the goal is preservation of assets, timing is another consideration.  The structure of any asset protection plan should match the investments made within the plan.  It would make little sense to implement a wealth preservation strategy intended to last 30 years only to lose the principal in risky, short-term investments.  In the very near future, however, it may be possible to earn growth portfolio type gains while only taking wealth preservation risks.

Why Bankruptcy Doesn’t Always Work

If I lose my case, I’ll just file for bankruptcy.” We hear that statement often from scared doctors, dentists, orthodontists and other professionals, trying to fool themselves out of needing asset protection. Most of these doctors, unfortunately, don’t understand U.S. and state bankruptcy laws. Most believe that if a huge lawsuit comes their way, they can simply declare bankruptcy, have the judgment forgotten and continue their normal life.

Besides the damage to one’s credit and the rebuilding process that would ensue over the next seven years, there are many consequences originating from federal and state bankruptcy rules that govern a person’s lifestyle. For example, federal bankruptcy rules state that a married couple can have $34,850 in home equity after bankruptcy. Chances are, as a successful medical professional, you have more equity in your home than that. Be prepared to sell the house, give the profits to your debtors and move into an apartment. It may be easy to declare bankruptcy and avoid paying off a lawsuit debt, but we guarantee that it will be difficult having to change the lifestyle your family has become accustomed to.

The bankruptcy exemption rules are very specific about business “tools of the trade”. A successful doctor may have a thriving practice with a state-of-the-art office. But if that doctor declares bankruptcy, all the “tools of the trade” will be sold off to debtors except for $1,750 according to Federal laws. What type of doctor’s office can be run with just $1,750 in equipment?

Each state has their own bankruptcy exemptions and these take the place of federal exemptions where applicable. Lucky doctors in Utah get to keep their home after declaring bankruptcy no matter what the value.

Utah Bankruptcy exemptions and generally, Utah is very lenient compared to most states. For most successful professionals, declaring bankruptcy will drastically alter their lives.

After learning of these rules, most of our clients come to the understanding that it will be better for the happiness of their family to utilize asset protection to protect wealth instead of giving it up through bankruptcy. Before considering bankruptcy as an option, please consult with an attorney specialist in your state.

Free Consultation with a Lawyer in Utah

If you have a bankruptcy question, or need help with asset protection in Utah, call Ascent Law now at (801) 676-5506. Attorneys in our office have worked on thousands of cases. We can help you now. Come in or call in for your free initial consultation.

Michael R. Anderson, JD

Ascent Law LLC
8833 S. Redwood Road, Suite C
West Jordan, Utah
84088 United States

Telephone: (801) 676-5506

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Asset Protection for Real Estate

There have always been detractors to Asset Protection Trusts for real estate.  Most have been less than fully informed or have had an alternate agenda or product to promote. However, there is thoughtful analysis out there and one of my esteemed colleagues, whom I highly respect, comments regularly on why he believes the Foreign Asset Protection Trust doesn’t work.

Asset Protection for Real Estate

In a recent installment, he cites the Arline Grant Case, which he points out has been touted by asset protection attorneys as a success story.  The facts are that Mr. Grant established 2 separate trusts, one for himself and another for his wife Arline, in 2 separate offshore asset protection jurisdictions. He then proceeded to do 2 things.

  1. Stiff the IRS for $36 Million bucks,
  2. And then Die.

Firstly, stiffing the IRS for $36 Million should already tell you that this is not the kind of case either side should be citing as precedent.  The IRS is no usual creditor and $36 Million is no usual amount.  (And I was not one of the people who trumpeted it as a ‘success’).   Much like the Anderson case, having the U.S federal government as the Plaintiff and having amounts in the tens of millions of dollars are simply bad facts that make bad law.

Nevertheless these are the facts and through the U.S. Court’s the IRS has aggressively pursued Arline to the point where Arline will be held in contempt if the Trustee does transfer any assets into the United States to anyone.  Score one for the IRS.

But this post is not really about the Arline Grant case.  While it is interesting, it is hardly a representative model for how I see real people with similar plans use them.  I have been creating asset protection plans since 1997 and therefore have thousands of reference points from my own clients to comment on how these plans are really used. There are 3 primary ways my clients use their planning:

Reduce Fear of Lawsuits: Way #1

The first, and by far most important, use of the planning has little to do with academic arguments of technical correctness or backward looking judgments.  It is more simple and more important. My clients use their planning to reduce stress caused by fear of the legal system.

While this may sound intangible, the benefits are very real.  Our clients consistently report to me that they feel more free to engage in their work, and their life because they do not feel like they are risking everything they have worked a lifetime for over a mistake or a bad outcome.  They have a lower level of overall stress, are happier to go to work, and produce more as a direct result.

It is a very similar feeling to the difference between driving your car without insurance, and knowing that you have insurance.  This simple knowledge directly affects how enjoyable that experience really is.

Deter Frivolous Lawsuits: Way #2

While analyzing a case like Arline Grant is interesting, the planning is far more likely to be “used” in a much different way.  I have had hundreds of calls from clients saying “Doug I need to use my plan”.  What this means most often is that the existence of the plan itself is used to:

  • Discourage or deter the attacker from further action, and/or
  • Remove the Assets from the reach of the attacker, and/or
  • Dramatically strengthen the negotiating position of my client, and/or
  • Reducing the massive stress which the uncertainty of a lawsuit brings, allowing my clients to function during the 2-5 years an average case goes on.

Notice I did not say: Thwart a court from pursing the assets, such as Mrs. Grant has attempted to do.  Why?  Because in my experience with many cases over the years, I have had a total of 0.0% (Zero) that have made it through our protection to force an extraction of assets from a client.

We’re not saying it is not possible and won’t happen, it happened to Arline (albeit in very extreme circumstances). What I am saying is that arguing over issues that have a less than 0.01% chance of occurring is missing the forest for the trees.  These cases that get all the press are the most extreme exceptions and typically represent people that are guilty of bad behavior.  Concluding that Asset Protection Planning “doesn’t work” is not just throwing the “baby” but the whole family out with the bath water!  Unfortunately all the successful cases don’t get all the press because the result is a lawsuit that is not filed or is settled quietly under favorable terms.

Get Your Financial Planning in Order: Way #3

The third way in which my clients use their planning may be the most important of all.  They use it as a catalyst to get their financial and legal house in order.  Most people DO NOT want to address their estate or death planning.  It makes us all face our mortality and this is easy to push away. We just don’t want to think about it.

However, with Asset Protection there is a more pressing motivation.  They DO want to keep what they have and continue to enjoy it.  I know this is true, because 80% of the clients who come to me have not yet done even a simple estate plan.  And yet they are calling me about Asset Protection.

Asset Protection Planning allows them to address the estate planning issues.  I often work with local estate planning counsel of my clients who are very thankful that their clients are finally “getting this done.”  And it doesn’t end there, the process has them looking at their insurance, investments, business structures, real estate.  Basically, everything they have gets reviewed.  All because the client is motivated to protect their assets!

Grow Your Personal Wealth: One More Way!

And if that is not enough there is a final way in which my clients tell me they have paid for their planning over and over again.  THEY SAVE MORE.  Because they feel protected, AND they have a dedicated place in which to save, they tend to focus more clearly, and put away more money.  It’s like putting a Piggy Bank in your kids room instead of a “change drawer” The Piggy Bank will always end up with more money in it.  And over 20 or 30 years of working life that is a lot of change!

These are the real world ways in which my clients use their asset protection every day of the week, every week of the year, and every year they have.

So what about Mrs. Arline Grant?  Has her offshore planning failed?  Ask yourself.  The IRS still doesn’t have their money.  The U.S. Courts haven’t been able to compel Arline to bring anything back, and Arline is still alive and free.

My prediction is that, just like in the Anderson case, somewhere down the line a “settlement” will be reached, both giving the IRS some money and leaving some for the family. I seriously doubt this would be the case if the planning had not been offshore.

Free Consultation with a Utah Asset Protection Lawyer

If you are here, you probably have a legal matter you need help with, call Ascent Law for your free estate law consultation (801) 676-5506. We want to help you.

Michael R. Anderson, JD

Ascent Law LLC
8833 S. Redwood Road, Suite C
West Jordan, Utah
84088 United States

Telephone: (801) 676-5506

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Asset Protection for Landlords

Asset Protection applies to anyone who has assets they really want to keep.  However, for some professions the attorneys consider it a bit more important than others.  Of course we would include the usual suspects like doctors and medical professionals, as well as builders and absolutely anyone with employees.  But there is another area in which it is becoming more and more important – Landlords.

Asset Protection for Landlords

Landlords Need Asset Protection

20 or 30 years ago, landlords weren’t particularly worried about lawsuits.  Sure they happened, but insurance was easy to get and was likely to cover almost anything that could happen.  Today the world is just a bit more complicated.  Here’s why:

  1. Claims availableto tenants have increased from just a few simple, obvious and insurable actions like breach of contract or a failure to follow State law in enclosing a pool, etc, to dozens of claims that would have been unimaginable to your parents.  These include harassment, slander, negligence, MOLD, emotional distress, discrimination, neglect and pain and suffering to name just a few.    Many of these are excluded from your insurance policy or simply uninsurable. (Try for yourself to search “Can I Sue my Landord” and see how many pages you get with “ideas”).
  2. Awards and judgmentsagainst landlords have gone from limited and predictable to unclear and wildly erratic.  I was able to find dozens of pages doing a quick net search dedicated to horror stories from landlords for claims usually stemming from tenants who were behind on their rent or conducting illegal activity.  Imagine an uninsured award for $490,000 to a handicapped tenant for emotional distress.  Of course the tenant was not paying the rent, and its hard for me to imagine any scenario where a $550/mo apartment would reasonably result in a half a million dollar award no matter how rude or insensitive a landlord may be.
  3. In a world with few claims and reasonable judgments insurance companies stood behind their insureds and paid claims regularly and in good faith.  In a world ofout of control juries and unpredictable awards, insurance companies regularly look first to how to avoid being responsible for the claim and only after being held to the fire accept responsibility for the action.  Often this occurs only after the insured spends considerable time and money of her own to fight the insurance company.
  4. Plaintiff’s attorneys have found a solid and reliable referral source in the tenant pool.  If you haven’t noticed, plaintiffs attorneys now dominate most of the outdoor billboard and afternoon television advertising in most major U.S. cities.  There is a reason for this and it doesn’t take a rocket s scientist to determine what it is.  Advertising for questionable claims within the afternoon television watching demographic has proven very profitable!  This includes quite a few tenants who are like couch potatoes it in the afternoon wondering how to pay the rent.  Lawyers are only too happy accept their calls and counsel them on the possible claims they may have against a variety of potential defendants.  At the top of that list are their current or former employers and their current landlord.  Welcome to America!
  5. Finally, landlords have at least one asset worth pursuing, and often more than one.  If you have real estate or investments of any kind, then you are a target today like no other time in the history of the world (except perhaps in the French revolution where being rich alone could ensure a date with the guillotine).  We are living in the American version of a redistribution of the wealth mentality which pervades our legal system.  It has now become culturally acceptable to gain money or wealth by being a successful plaintiff.

How to make a Asset Protection Plan

So what does this all mean if you are a landlord?  It’s simple.

  1. Figure out where your exposure is on all sides.That means making sure you have the right amount and types of insurance with companies which are least likely to play the “It’s not my responsibility” game with you.
  2. Get a clear and accurate analysis of your current asset picture and what you can do to protect it.There is nothing which reduces the chances of having an aggressive plaintiff’s attorney on your tail like moving his cheese.  No assets, no reason to sue.  It really has become that simple.

If you are reading this then you are likely doing research on the Internet.  This is a great thing, but be aware, it has its limits.  Asset protection is an area where a little knowledge can definitely be dangerous.  Once you have done the basic research I recommend that you pick up the phone and speak with some of our experienced attorneys.

Asset protection has become a very popular field, which means there are a lot of people now counseling in the area.  Make sure you find someone with experience who can provide both the legal tools you need as well as the ongoing counsel required to make those tools really work.

In the end, asset protection has become an essential part of any wealth planning strategy and taking it seriously can make all the difference when it comes to keeping what you have worked to create.

Free Initial Consultation with an Asset Protection Lawyer

It’s not a matter of if, it’s a matter of when. Legal problems come to everyone. Whether it’s your son who gets in a car wreck, your uncle who loses his job and needs to file for bankruptcy, your sister’s brother who’s getting divorced, or a grandparent that passes away without a will -all of us have legal issues and questions that arise. So when you have a law question, call Ascent Law for your free consultation (801) 676-5506. We want to help you.

Michael R. Anderson, JD

Ascent Law LLC
8833 S. Redwood Road, Suite C
West Jordan, Utah
84088 United States

Telephone: (801) 676-5506

Ascent Law LLC

4.9 stars – based on 67 reviews


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The Cook Islands Trust

In the past several years, many estate planners have entered the field of Asset Protection.  The challenge as a consumer of this service is that it is getting more and more difficult to understand your options.

The Cook Islands Trust

Do You Need a Fully Triggered Offshore Trust RIGHT NOW?

One such option being offered aggressively is a “Fully Triggered” Cook Islands Offshore Trust.  And for many people who call me, this seems like a dream come true.  It feels to them like finding a parachute in the back of a plane which just developed severe engine troubles. Their first instinct is to put on the parachute and jump as soon as possible.

The problem is that 99% of the time, jumping out of the plane is NOT the best solution.  What they actually need is for the pilot to talk with them and help them analyze all of their options, the safest of which is to simply land the plane.  Of course if someone is selling parachutes, then it’s even more difficult to recommend a thoughtful and unbiased decision.

And this is the real challenge for you if you are considering a Cook Islands Trust.  I am a big fan of the Cook Islands Asset Protection Trust (just like I am a fan of parachutes) – but in both cases only when it is necessary, and when it is the right time to use one.

Why a FULLY Offshore Asset Protection Trust is (sometimes) a Bad Idea

Here is what you need to know (and may not be being told) when you are considering a fully Offshore Asset Protection Trust, in any jurisdiction:

  1. A foreign APT is expensive to maintain.The costs can range for maintaining a foreign trust, but it is safe to say that, especially considering the IRS compliance requirements, it will come it more than a non-foreign trust.
  2. Can I cancel my Cook Islands Trust?This is a question I get a lot from callers about 4 years after they have done a fully foreign Trust.    The top reason cited was excessive maintenance fees and reporting requirements.  Many times these trusts were done when the client felt like there was a pending issue, and then once that issue was resolved, they started to feel uncertain about the ongoing reporting and costs.
  3. Foreign asset protection trusts are required to file multiple forms with the IRS.You are required to file a Form 3520 with the IRS, and a Form 3520A every year.  This is a full balance sheet disclosure and extensive return detailing all assets held by the trust. You can check with your own CPA on the cost, but it is not free for either the CPA time, or the trustees time to facilitate and execute.
  4. If you transfer assets offshore, or open an offshore bank account, then you must file at a minimum an additional IRS formTD F 90-22.1.  Failure to file this timely has significant penalties.  Additional reporting may be required and the IRS is adding new requirements all the time including the new FinCEN 114a.  If your Trust is a foreign Trust, then you also have FATCA reporting.
  5. Dealing with and working with any offshore trustee or Trust Company requires experience and ongoing support by your attorney.Budget this into the ongoing costs and make sure that you both have an attorney (and not a document preparation firm) and that he or she is very experienced in this complicated field of law.

Are You Getting a Sustainable Asset Protection Plan for $10K?

In addition to understanding the real costs of an Offshore APT, it is equally important to evaluate the support of the firm establishing your plan.

  1. Is the asset protection company you are working with a law firm?If not then you can have NO EXPECTATION of ATTORNEY CLIENT CONFIDENTIALITY or PRIVILEGE.  This is a huge issue and simply cannot be ignored as many of the low cost asset protection providers are not law firms and do not offer ongoing professional counsel and support, or an attorney client privilege.
  2. How long do you plan on keeping your Trust?If you are simply reacting to an emergency, then creating the Trust at the lowest possible cost should be your last priority, while getting the most experienced advice should be your first.  If you plan on keeping your plan for many years to protect you and your family, then be aware of what the total maintenance cost of your plan will be over the life of the plan.

In many cases clients determine that it’s too expensive to keep a plan that is not actively being used for many years.  The exception would be a “Nest-Egg” trust in which you will fund with $5,000,000 or $10,000,000 and forget about.  In this case a fully triggered plan makes a lot of sense.  The second exception is when you are actually going to USE the plan to actively defend against an attack.  In that case you are getting the protection you are paying for.

Free Initial Consultation with Lawyer

It’s not a matter of if, it’s a matter of when. Legal problems come to everyone. Whether it’s your son who gets in a car wreck, your uncle who loses his job and needs to file for bankruptcy, your sister’s brother who’s getting divorced, or a grandparent that passes away without a will -all of us have legal issues and questions that arise. So when you have a law question, call Ascent Law for your free consultation (801) 676-5506. We want to help you!

Michael R. Anderson, JD

Ascent Law LLC
8833 S. Redwood Road, Suite C
West Jordan, Utah
84088 United States

Telephone: (801) 676-5506

Ascent Law LLC

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