Recently in Asset Protection Category

August 31, 2013

Florida Asset Protection

One of most common topics we discuss with our business and estate planning clients is asset protection. The best time to do asset protection is when you do not have any known or potential creditors. Unfortunately, this is often the least likely time to consider protecting your assets.

Today we have some innovative trusts that provide asset protection without the risks, expenses, and IRS compliance associated with Foreign ssset protection trusts or Domestic asset protection trusts (DAPT). A domestic asset protection trust is a trust created under state statute (not in Florida) which purports to protect the assets while still giving you access to the assets when there are no creditors. Unfortunately many states will not recognize the protections when there are assets which are located in another state. For example if you have your Florida property or bank account in a Nevada or other state's DAPT, it is likely that a court in Florida may not offer you the protections you have expected.

Unlike a DAPT which relies on another state's laws, our Florida Asset Protection Trust is an IGAP Trust which is based on statutory and common law principles regarding Trusts and Property and can be structured to protect the principal or principle and income of the property being held by the trust. The IGAP trust has no adverse tax consequences like some trusts do because it is taxed just as if you owned the property yourself. In addition some asset protection trusts lose the ability to increase the basis in the assets to the value at your death, but the IGAP Florida asset protection trust does not have this problem and receives the same tax treatment as if you owned the property yourself.

The biggest difference between property in an IGAP Florida asset protection trust and other trusts or property you own individually is that your future creditors cannot reach the principal or principal and income (depending on how the trust is structured). The IGAP trust can also be used to remove assets from the assets which can disqualify you from Nursing home or other forms of government assistance. A DAPT has a 10 year look back period if you became subject to a voluntary or involuntary bankruptcy while assets in the IGAP trust are not subject to the 10 year loop back period.

Often times asset protection trusts work by having you give up control over the assets and appoint someone else to make decisions on your behalf. With the IGAP, you remain in control and make decisions on buying and selling assets as well as if, when, and to whom assets are distributed.

Because there are no annual fees or additional tax returns associated with a IGAP, it is a very cost efficient option for asset protection and estate planning. Many of you may be familiar with a revocable trust as part of an estate plan. If you think of the revocable trust as your savings account, an IGAP Asset Protection Trust would be your savings account.

If you would like talk about how to start protecting your assets along with and estate planning analysis or a complimentary review of your existing estate plan just contact our office and request our estate planning form. Once you complete it, you can schedule a consultation to discuss your circumstances and goals.

May 9, 2013

The Future of Estate Planning: The Multigenerational Life Plan

Over the last year I worked with an intern in our office of a Law Review article for Texas Tech University. This article describes problems with current estate planning and takes the premise that most estate planners have become lazy because of advancements in technology. That is, most only ask their clients about issues that their software is capable of addressing. We identify 6 primary areas that are not addressed in most estate plans:

  1. Firearms;
  2. Digital Assets;
  3. Asset Protection;
  4. Life Planning;
  5. Controlling from the Grave; and
  6. Pets

The citation for the article is
David Goldman & Charles Jamison, The Future of Estate Planning: The Multigenerational Life Plan, 5 Est. Plan. & Community Prop. L. J. 1 (2012).

Continue reading "The Future of Estate Planning: The Multigenerational Life Plan" »

May 4, 2013

Taking Advantage of the Liberal Asset Protection Laws in Florida

asset-protection-cash.jpgEach state has different asset protection laws. Florida's asset protection laws are considered one of the most liberal ones. Therefore, it is a good idea to discuss your case with an estate-planning attorney with expertise in asset protection to take advantage of the liberal asset protection laws of Florida. Florida's asset protection laws apply to permanent residents and people in other states with property in Florida. Florida's asset protection laws are based on several legal sources: the Florida Constitution, Florida Legislature, and common law. Courts also establish asset protection through their interpretation of provisions of the constitution, statutes, and common law.

Florida assets protection laws provide many options to protect your assets from creditors. People anticipating substantial civil judgments often move from other states to Florida to become a resident for asset protection purposes. For example, OJ Simpson took advantage of Florida's asset protection by purchasing a large estate in Florida in part to avoid creditors.

4 Key Asset Protection Exemptions for Florida Residents

1. Homestead exemption: Article 10, section 4 of Florida's Constitution provides that the homestead is exempt from forced sale under process of any court. In a nutshell, it is nearly impossible for creditors to force the sale of a homestead. Florida's homestead exemption also protects spouses and children of decedents: a spouse cannot transfer the property by Will if survived by a spouse or minor child.

2. Life insurance and annuities: Florida statutes section 222.14 provides that the cash surrender values of life insurance policies issued upon the lives of citizens or residents of the state and the proceeds of annuity contracts issued to citizens or residents of the state are not subject to attachment, garnishment or legal process in favor of any creditor of the person whose life is so insured or of any creditor of the person who is the beneficiary of such annuity contract (unless the insurance policy or annuity contract was effected for the benefit of such creditor).

3. Qualified plans, IRAs and pension: These are fully exempt if the federal requirements are met. Florida statutes section 222.21 provides that any money or other assets payable to an owner, a participant, or a beneficiary from, or any interest of any owner, participant, or beneficiary in, a fund or account is exempt from all claims of creditors of the owner, beneficiary, or participant if the fund or account is:

  • a. Maintained in accordance with a master plan, volume submitter plan, prototype plan, or any other plan or governing instrument that has been preapproved by the Internal Revenue Service as exempt from taxation.
  • b. Maintained in accordance with a plan or governing instrument that has been determined by the Internal Revenue Service to be exempt from taxation .
  • c. Not maintained in accordance with a plan or governing instrument described in point a or b, if the person claiming exemption under this paragraph proves by a preponderance of the evidence that the fund or account is maintained in accordance with a plan or governing instrument that is in substantial compliance with the applicable requirements for tax exemption or would have been in substantial compliance with the applicable requirements for tax exemption but for the negligent or wrongful conduct of a person or persons other than the person who is claiming the exemption under this section
4. Prepaid tuition and medical savings accounts: Florida's asset protection laws protect assets in qualified tuition programs, medical savings account, Coverdell education saving account, and hurricane savings account (Fla. stat. § 222.22).

For a Florida estate planning attorney with experience in asset protection law, call the Apple Law Firm at (904) 685 - 1200 or click the "Contact Us" tab at the top of this page.

September 7, 2012

Last Will and Embezzlement

New movie about financial exploitation of the elderly.

September 5, 2012

Life Estate Deeds May Put Child's Interest In Home At Risk to Creditors

asset-protection-cash.jpgIn Florida many parents create Life Estate Deeds with their children in an attempt to avoid Probate on their homes. A Florida Life Estate Deed is a document which changes the ownership of a home or other piece of real estate. Essentially it creates a present interest and a future interest. A traditional life estate would say something like this, " I give my self and my spouse the right to live in the home as long as either of us shall live and the remainder to my child or children."

This example would create a future interest that vests now in the child or children and a present interest or right to use the home for the parents or grantor. While there are many potential problems like loss of tax basis, penalties and interest for failure to do gift tax returns, loss of eligibility for nursing home coverage because of the gift, the issue we are concerned about here is the risk that the home could be lost to the creditor of the child or one of the children.

Here is how it works. If the child or children do no live in the parents home, it is not their homestead, even if they do live in the home, it cannot be their homestead because they do not have a present interest in the home. Remember the child or children only have a future interest in the home. A creditor can levy against that asset just like any other. There are tables that determine the value of a future interest based on the age of the parents, their life expectancy, and the current interest rates.

So besides all the other risks associated with transferring a portion of your home to a child, you may in fact transfer nothing to your child if they end up having a creditor take the child's portion of the home.

There are ways of avoiding probate, reducing risks of loss to creditors, and receiving favorable tax status that may work in your situation but you should discuss these with a Florida Estate Planning Lawyer to see which options offer the best combination of benefits for your situation.

September 4, 2012

Who Ownes your Itunes Account? and Bruce Willis

digital_assets.jpgLast week there were several articles which brought light to many that our online identities are just licenses which will expire upon out death. While this concept is new to some, most lawyers understand this. Unfortunately there appear to be some who do not understand that we are dealing with licenses which expire upon death, because they are recommending that their clients deal with these assets using a traditional will. While they understand that a will only deals with assets that exist after death, they probably do not understand that your iTunes , Amazon , Gmail, Facebook, and Twitter accounts are licenses, which if owned individually, will not survive the death of the creator.

A Trust or Business entity can survive death! They are fictitious entities which are created by state statutes which do not have to dissolve upon death. A trust generally has provisions for beneficiaries unlike a business entity.

Last weekend the Wall Street Journal and several other publications ran articles on Who inherits your iTunes account?
Over the weekend there were several stories in the UK and Australia about Bruce Willis and his massive iTunes account with 80,000 or so songs. Today it is being reported that Bruce has no plans on suing Apple Computer over his iTunes account.

While your Amazon and iTunes accounts may be the most popular and have the most perceived value to people, it is often their other accounts that make more sense to try to protect in a DAPTrust.

If your mortgage goes to your email account and you die or become incapacitated, who will know who or how much to pay? Will they know soon enough to save your home from foreclosure, or will you incur thousands of dollars in legal fees because you signed up for electronic billing?

Will your family have the right to access your digital photos? Can you family realize value in your Facebook, or Twitter accounts to contact your "Friends" on your behalf to let them know of your illness, condition, or passing? Could your family benefit financially by allowing others to contact your "Friends" who may be aligned similarly in business?

While the iTunes angle is appealing, the other reasons are the real reasons one should plan to deal with his or her Digital Assets. Ensuring that you children can listen to your older outdated music is a nice thought, but can you remember the last time you pulled out one of your parents records or tapes to listen to it.

If you are interested in planning for your Digital Assets you might consider talking with an estate planning professional about a Digital Asset Trust - DAPTrust.com

August 10, 2012

FACEBOOK FOUNDERS USE GRATS TO AVOID EXCESSIVE TAXATION; YOU CAN TOO

News sources recently revealed that Facebook founder Mark Zuckerberg -- as well as other Facebook top brass--use Grantor Retained Annuity Trusts ( GRAT or GRATS) to protect their assets and investments from excessive taxation. A Grantor Retained Annuity Trusts (more commonly called GRATs) is a perfectly legal--and very efficient--way to protect and pass significant assets from one person to another without incurring an exorbitantly high tax bill.

GRATs differ from certain other asset protection trusts in that they offer a good vehicle for wealthy investors who put money in start-ups, while other trusts may not. But it's not only wealthy startup investors who may find GRATs useful. GRATs are an excellent way to shift wealth to others at little or no tax cost and with minimal legal and economic risk. As such, they can be the perfect tool for business owners, professional investors, and many others. Setting up a GRAT allows the investor/grantor to give assets over to the trust for a pre-determined number of years. During this time the assets appreciate and the grantor receives annual payments adding up to the asset's original value plus a return based on a fixed interest rate determined by the Internal Revenue Service. At the end of the trust term the assets (at their new value) are transferred to the beneficiary named in the trust with none of the usual gift or estate tax on the appreciation.

This makes GRATs sound like the perfect (and perfectly simple) tool, but nothing is perfectly simple. The pre-determined lifetime of your GRAT will depend on your individual circumstances, as well as the tax laws at the time, so you'll want to make sure you have the help of an experienced and knowledgeable attorney helping you design your trust. Contact our office for more information.

We also have other types of irrevocable trusts that can be used to create similar benefits with or without inclusion in your estate. Today with the estate tax exemption at 5 million not everyone will benefit from a GRAT but for those with less than 5 million, some of our other trusts can offer the same benefits as GRATs offer the wealthy.

July 26, 2012

Can Life Insurance be subject to Creditors in Florida?

While traditionally in Florida the proceeds from a life insurance police are exempt from the claims of a creditor, what happens if the beneficiary designations fail or the proceeds are directed back to an individuals probate estate or revocable trust?

In a recent Florida case, life insurance benefits were directed to the descendants revocable trust upon his death. This could have only happened intentionally unless a revocable trust was the owner and the beneficiary designation failed because it was improper or the beneficiary died before the grantor of the trust.

When the grantor of the trust died, the trusts instructions told the successor trustee to pay the settlor's death obligations. Even if such language was not in the decedent's revocable trust, they are presumed under Florida Law.

Normally under Florida Statute 222.13(1) Whenever any person residing in the state shall die leaving insurance on his or her life, the said insurance shall inure exclusively to the benefit of the person for whose use and benefit such insurance is designated in the policy, and the proceeds thereof shall be exempt from the claims of creditors of the insured unless the insurance policy or a valid assignment thereof provides otherwise.

While the mere fact that life insurance proceeds are payable to a trust, rather than directly to a natural person, does not deprive them of their exempt status,4 section 733.808(1), Florida Statutes (2008), makes it clear that life insurance proceeds payable to a trust "shall be held and disposed of by the trustee in accordance with the terms of the trust as they appear in writing on the date of the death of the insured."

The court stated that
In other words, the exemption rendering life insurance policy proceeds unavailable to satisfy estate obligations can be waived. The very statute that creates the exemption makes this clear:

Notwithstanding the foregoing, whenever the insurance, by designation or otherwise, is payable to the insured or to the insured's estate or to his or her executors, administrators, or assigns, the insurance proceeds shall become a part of the insured's estate for all purposes and shall be administered by the personal representative of the estate of the insured in accordance with the probate laws of the state in like manner as other assets of the insured's estate.
§ 222.13(1), Fla. Stat. (2008). Section 222.13(1) does not prohibit life insurance proceeds' paying the insured's estate's debts and other "death obligations," nor does it prohibit directing payment of policy benefits to a trust for that purpose.

An insurance policy is a contract. The right to select the beneficiary of a life insurance policy is an aspect of the freedom to contract. The statutory exemption does not purport to restrict that freedom. The owner of an insurance policy may waive the section 222.13 exemption merely by designating the insured or one or more of the insured's creditors as a beneficiary or beneficiaries, by naming the insured's estate as a beneficiary of the policy or, as here, by naming as beneficiary a trust whose terms direct distribution of the trust assets to the personal representative, if requested.

In this case, there was an attempt to reform the trust under FL statute 736 but his requires clear and convincing evidence that both the accomplishment of the settlor's intent and the terms of the trust were affected by a mistake of far or law.

In this case they were unable to prove the intent necessary to reform the trust.

If you have a life insurance policy or a revocable trust in Florida you may want to review the terms of the beneficiary designations as well as what the policy directs the successor trustee to pay. It was unfortunate that the life insurance policy became subject to claims of the creditors because of the poor choice of wording.

July 11, 2012

Elder Law Update: States That Could Make Children Pay for Dad's Care

Unpdaid long-term care bills are increasing and becoming more of a problem in many states. All 50 States have statutes that obligate adults to care for children or other family members; if your parent lives in one of 29 states, you could be held responsible for your parents unpaid long-term care bills. What? How could this be? are the typical reactions to many living in these unfortunate states.

Katherine Pearson at Penn State Law School has written a paper on Fillal Support Laws and the enforcement Practices for laws requiring adult children to pay for indigent parents.

Her abstract states:

Family responsibility and support laws have a long but mixed history. When first enacted, policy makers used such laws to declare an official policy that family members should support each other, rather than draw upon public resources. This article tracks modern developments with filial support laws that purport to obligate adult children to financially assist their parents, if indigent or needy. The author diagrams filial support laws that have survived in the 21st Century and compares core components in the United States (including Puerto Rico) and post-Soviet Union Ukraine. While the laws are often similar in wording and declared intent, this article demonstrates that enforcement practices are quite different among the two countries, even as both countries struggle with aging populations and recession. In addition, the author analyzes a potentially disturbing trend emerging in at least two U.S. states, most significantly Pennsylvania, where filial support laws are now a primary collection tool for nursing homes, with decisions against adult children running to thousands of dollars in retroactive "support." The article closes with concerns for policy makers in any state or country considering filial support as an alternative or supplement to public funding for long-term care or health care for the elderly.

What is interesting is that some states like NY have cases where they were able to go after children in other states to collect the funds. I can see how a state can enforce laws against its residents or those domiciled in that state but the concept of creating a law in one state that creates an obligation on adult children living in another state is beyond logical.

If your parent's are alive and going to receive care from a nursing home in one of the following 29 states, you should talk with an estate planning professional to determine what your risk of liability is.

Alaska, Arkansas, California, Connecticut, Delaware, Georgia, Indiana, Iowa, Kentucky, Louisiana, Maryland, Massachusetts, Mississippi, Montana, Nevada, New Hampshire , New Jersey, North Carolina, Ohio, Pennsylvania, Rhode Island, South Dakota, Tennessee, Utah, Vermont, Virginia, West Virginia .

NOTE: There are no laws in Florida that would require such support but we often see individuals who check their parents into nursing homes or hospitals who sign admission papers who unnecessarily obligate themselves financially. You may want to discuss how to limit such financial obligations by use of a power of attorney.

April 19, 2012

Law Review Article on Digital Assets & Estate Planning

John B. Conner has written a Law Review article in the Estate Planning and Community Property Law Journal titled "DIGITAL LIFE AFTER DEATH: THE ISSUE OF PLANNING FOR A PERSON'S DIGITAL ASSETS AFTER DEATH"

The article starts off discussing issues of digital assets and estate planning by defining digital assets and then discussing issues in estate planning created by digital assets.

It goes on to talk about how websites are dealing with digital assets and privacy acts as the relate to deceased users with social networking, web-based email, blogs and other online content.

Mr. Conner then give some suggestions for dealing with digital assets properly through planning, and some of the problems with using standard wills or other documents.

He then discusses post mortem identity theft and content theft from the deceased blogs and concludes that as the Internet continues to grow the need for estate planners who are able to deal with digital assets will continue to expand. Some state are attempting to implement legislation to help deal with these issues but those may only help if you die in one of those states.

I have recognized the need for planning for your digital death for several years and have been dealing with clients to design systems that will help provide for their digital death. If your current estate plan has not contemplated your digital death, perhaps you should talk with someone who understands how to deal with this unique class of assets.

While we have been saying this for years and it is the reason we created the original Gun Trust it is nice to see others in the legal community begin to recognize the difference and purpose in firearms trusts. Our trust are now designed for all firearms and not just NFA firearms.

April 11, 2012

Slayer Statute and Asset Protection in Probate

The Florida Slayer Statute bars a murderer from profiting off the victim's assets. The victim's assets which are subject to a Florida Probate pass as if the murderer had predeceased the victim and other jointly held assets are severed so that the victim and murder each owned 50%.

One problem with the slayer statute is that the effect of the statute does not take place until there is either a criminal or civil conviction. It is possible to make changes to the ownership of the assets prior to a court determination that the slayer statute applies. While there are some safeguards in place to prevent those with knowledge from profiting from these types of transfers, there appears to be certain situations where one could protect the assets prior to such a determination. I have not seen any case-law where this has been challenged and do not know what the outcome would be but like with many asset protection techniques, it can put someone in a better position to negotiate if there are any funds or asset left.

One recent case in South Florida involved a beneficiary of a trust. This individual adopted his girlfriend so that she would be a legal beneficiary of the trust. While it does not appear that these asset would have been subject to a slayer statute claim, it is the type of planning that we are referring to and can create the desired results through creative planning.

If you are involved with a potential probate in which a relative was believed to be responsible for the murder of the decedent, contact a Jacksonville Probate Lawyer to discuss how to structure the assets or what steps can be taken to protect your rights.

April 5, 2012

Florida Asset Protection Update

asset-protection-cash.jpgA Florida Asset Protection Lawyer is of most use when you do not have any potential liabilities. When you have a known creditor, you have to be concerned with fraudulent conveyances and fraudulent transfers. Generally if you participate in a fraudulent conveyance or transfer the court can undo a transaction within 4 years of its occurrence.

A Fraudulent Transfer occurs when you transfer an asset to put it outside the reach of a creditor.

A Fraudulent Conveyance occurs when you transfer an asset for less than full value and this causes harm to a potential creditor.

There are many ways of protecting assets as part of an overall Florida Estate Plan but careful consideration must be taken of your present situation and circumstances. Some of the tools used by Florida Asset Protection Lawyers include creating Florida Asset Protection Trusts, Domestic asset protection trusts, limited liability companies, limited partnerships, Florida LLLPs, and different forms of ownership.

In addition to how the assets are structured there can be different ways in which you spend "at risk" money and save money that is not at risk. If you would like to learn more about Florida Asset Protection, contact us to discuss your circumstances and objectives with a Florida Asset Protection Lawyer.

Note: Asset Protection is a complex practice area and as such we do not offer free consultations in this area. A typical consultation takes 2 or more hours.

March 28, 2012

Effects of Splitting Anniuty can be Harsh!

Sometimes clients who are in a divorce are ordered to split up assets. Some of these assets can have large penalties when surrendered. Once such example is an annuity. Often annuities have surrender charges and can also have tax penalties when they are held within an IRA. You might have a high yielding annuity that has a 10% surrender charge as well as a 10% additional tax penalty for removing funds early.

If your incremental income is taxed at 35% and you had to pay a 10 % penalty and 10% surrender charge, you could lose over 50% of the assets value to taxes and penalties. In addition, it may be hard to achieve the returns that many older higher yielding annuities are earning.

If you find yourself in such a situation, you may want to see if you can swap assets so that you can keep the annuity but pay the other party their share of its value without the penalty and tax consequences.

March 5, 2012

Attempt to Avoid Probate Earns Medicaid Applicant Penalty Period

Often in an attempt to avoid a relatively small probate fee, individuals can create huge penalty periods and taxable issues for themselves. Take for instance, a woman in New York who, two years before applying for Medicaid, transferred money from her account to an account with a co-owner. Transferring individually owned funds to an account with joint tenants is a common way to avoid a Florida Probate.

While her estate planning attorney seems to have given the advice, he was not aware of the problems that estate planning techniques to avoid probate can have on Medicaid eligibility.

Not only can transfers like this have problems for the individual making the transfer, but they can also create problems for the beneficiary or the new co-owner who will now have additional assets in their name, that may disqualify them from government benefits like Medicaid.

Before you try to save a few dollars and do what worked for your parents or friends, you may want to discuss your circumstances with a Jacksonville Estate Planning Lawyer who is familiar with Medicaid and Elder law issues.

November 30, 2011

2012 Florida Mediaid Eligibility Requirements

The eligibility requirements for Medicaid have changed for Florida as of 1/1/2012. There were changed in the income criteria, maximum amount of assets, and maximum equity in your homestead property.

Florida Medicaid Income Limits as of 1/1/2012.

The Applicant's income limits have increased from $2022/ month to $2094/month. If the applicant for Medicaid has income in excess of $2094, they may use a Qualified Income Trust or Miller Trust to help the applicant qualify for Florida Medicaid Benefits under the Medicaid Asset Test.

Florida Medicaid Asset Limits as of 1/1/2012.

For an individual who is not married, the Applicant can only have $2000 in countable assets. This number is unchanged from 2011.

For an Applicant who is married, their Spouse's Asset limits have increased from $109,560 in 2011 to $113,640 as of 1/1/2012.

If you have more than the maximum assets, we can talk about how to convert countable assets to exempt assets, spend the money appropriately or plan for gifting, loans, or Medicaid compliant annuities to allow you to qualify even if you have significantly more assets than the maximum.

Florida Medicaid Homestead Equity Limits as of 1/1/2012.

An Applicant for Florida Medicaid can have $525K in homestead equity. This value has increased from the $506K which was allowable in 2011. If your home has more than the maximum value of equity, there are ways to reduce the amount of equity to allow you to qualify for Florida Medicaid.

if you or a family member will be looking for Florida Medicaid Benefits, you should consult with a Florida Medicaid Lawyer before you apply for coverage to protect excess income or assets and allow you to qualify properly. Many of these techniques can still be used even if the family member is already in a nursing home.

As you or your family members age, it is important to review your Florida Estate Planning Documents with someone who is familiar with Elder law and estate planning because many of the techniques used for estate planning can cause problems when applying for Florida Medicaid Benefits