Articles Posted in Asset Protection

I just finished my new book Protect your IRA : Avoid the 5 Common Mistakes!

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Here is the Table of Contents

The 3 Reasons Most People Experience Confusion with Their IRAs
Don’t Just Focus on the Taxes
Avoid the 5 Common Mistakes

Common Mistake #1: Trying to Avoid Income Taxes Now
Common Mistake #2: Incurring Unexpected Excise Taxes
Common Mistake #3: Losing your IRA to Long-Term Care Costs
Common Mistake #4: Paying Income and Estate Tax
Common Mistake #5: Naming Your Beneficiaries as Beneficiary

Putting It All Together
Creating Your Protection Plan

If you would like a copy, please visit our main Florida Estate Planning and Asset Protection website and request a copy using the contact form.

Florida Asset Protection Trusts: Can they be changed?

In Florida, both revocable and irrevocable trusts are valuable estate planning tools that permit individuals to organize and protect their assets from creditors.  The Florida Asset Protection trust is not used by many estate planning lawyers.  Asset Protection is an important part of estate planning in Florida. While the name irrevocable would seem to indicate that the trust cannot be revoked, there are many ways of accomplishing the same effect as revoking a trust.

Generally when one discusses revoking a trust, they are referring to doing one of the following:

  1. Changing a term in the trust
  2. Changing the plan of distribution or the beneficiaries named in the trust.
  3. Changing the managers in the trust- the trustee
  4. Changing the co-trustee in the trust
  5. Changing the assets in the trust

Of course there is also rate case when the need for a trust no longer exists. The creator of the trust may simply want to discontinue the existence of the trust and retain individual ownership of the assets.  We find that most people who want to revoke a trust are mistaken in their reasoning. Some people would like to revoke an irrevocable trust for a legitimate reason.  One example is a life insurance trust where the beneficiary no longer needs the insurance.

Florida law permits judicial modification and non-judicial modification of irrevocable trusts which may solve many problems that may arise in the future.  An even better solution is to permit changes in the trust, when estate tax is not a consideration, and permit the original creator of the trust to make the changes directly.  Many of the irrevocable trusts we create permit the settor ( the creator) to make changes to the beneficiaries, trustees, successor trustees, and assets in the trust.

In some cases the beneficiary can be a spouse so the entire trust can be undone without any consequences if necessary.  You should speak with an estate planning and asset protection lawyer about the new breed of irrevocable trusts that offer far greater flexibility than traditional Irrevocable trusts.    An irrevocable trust  or more specifically a Florida Asset protection trust can be designed to offer  asset and medicaid protection while a revocable trust offers neither.

 

Most financial planners are unfamiliar with some of the modern twists available with irrevocable trusts.  They tend to be familiar with the older style of irrevocable trust that can pose several problems for those who use them. These problems include:

  1. Loss of control over the management of the assets;
  2. A separate EIN number for tax reporting purposes;
  3. A larger tax bills because of the way traditional irrevocable trusts are taxed;
  4. A loss of the step up in basis available to assets owned by an individual upon the death of the settlor; and
  5. The inability to change provisions or beneficiaries in the future.

The irrevocable trust, you have chosen does not suffer from any of the traditional problems discussed above.  It is an Irrevocable Pure Grantor trust  (IPUG™). With the iPug™ many of the advantages that are traditionally only found with a revocable trust can be provided in an irrevocable trust.  Some may ask, why should we use an irrevocable trust instead of a revocable trust.  Here is a summary of the reasons that the iPug™ trust is superior to the revocable trust and does not pose the problems that a traditional irrevocable trust presents:

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At the Law Office of David M. Goldman, one of our biggest goals is to protect our client’s assets from creditors.  One of the most important assets a person can have is a retirement account.  These accounts are often targeted by creditors, but the good news is many retirement accounts are protected from creditors through federal and state laws.

So what type of retirement accounts are protected from creditors?  The most common form of protected retirement accounts are known as “qualified retirement plans,” and are protected under Federal ERISA law.   ERISA protected accounts include traditional pension plans such as 401(k) and 403(b) plans, and these plans are usually exempt from civil court judgments and from bankruptcy.  Other protected accounts include Rollover IRA accounts, which are assets, formally in a 401(k) account, from a previous employer that are “rolled over” into an IRA.  This means that these retirement accounts are usually protected no matter what state they were established in.

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One issue that occurs in estate planning is whether or not a charitable pledge can be enforced on a person’s estate after death.  Wealthy individuals often make pledges to their favorite charitable organizations during their lifetime, only to die before fulfilling the pledge.  Executors are then placed in the difficult situation of balancing its duty to ensure the estates assets for the decedents heirs and to pay the money owed by the estate to the charitable organization.   If a court rules the pledge is enforceable, the pledge must be paid out of the estate before the rest of the estate’s assets are distributed to the beneficiaries.

Courts will often find a charitable pledge enforceable when these situations occur:

The pledge is an offer to contract that becomes binding when work obligated by the pledge has begun, or the charity relying on the pledge has otherwise incurred liability.

Donor’s pledge has induced other pledges

The charity’s acceptance of the pledge imparts a promise to apply the funds according to the donor’s wishes, and his pledge is supported by that promise.
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Limiting the ability for creditors to charging lien to the owner of a Florida LLC is a big concern for many residents. At least two members are required to limit a creditor’s ability to charge a lien, and adding another member to an LLC can be a tricky process.

In Olmstead vs. Federal Trade Commission, the Supreme Court decided the issue of whether a court could order a judgment-debtor to surrender all “right, title, and interest in the debtor’s single-member limited liability company to satisfy a judgment. The Court ruled courts were allowed to do this and reasoned, “that there is no reasonable basis for inferring that the provision authorizing the use of charging orders under section 608.433(4) establishes the sole remedy for a judgment creditor against a judgment debtor’s interest in single member LLC. This case, and other recent bankruptcy cases, have made it clear that a single member LLC is not as safe from creditors as once believed. The best solution to this issue of potential liability is to form a multiple member LLC.

Generally, there are two ways to add another member to an LLC. The LLC owner can allow a third party to invest money in the LLC in exchange for a minority interest. There is no limitation regarding who can serve as the third party, which means a family member or even a spouse can be a third party. What is important is that the share of the LLC given in consideration for the investment reflects a fair value for what is given.

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If a tenant does not pay rent in Florida, a landlord can evict the tenant if he or she follows the correct procedures as defined in the Florida statutes.

Florida law no longer allows “self-help” evictions, which few states continue to recognize, such as changing the locks or shutting off the utilities. A self-help eviction occurs when a landlord retakes possession of a property without using the eviction process. Courts no longer favor this approach as it can lead to dangerous confrontations, assault, or even harassment. Landlords must now follow the eviction legal process.

The key to the eviction process is the proper preparation and delivery of a three-day eviction notice. This notice must be delivered, and cannot be waived by either the landlord or the tenant. Termination for nonpayment of rent is exclusively accomplished under the act of serving the three-day notice to all tenants. Without the termination for nonpayment, a lawsuit to remove a tenant who refuses to leave cannot be heard in court. If the landlord purchased the property through a foreclosure, there may be an additional 90-day notice required.

The Florida statute provides the three-day notice must “substantially comply” with the form provided in the statue. This form states to the tenant the “what, when, and to whom, and where” regarding the tenant’s requirements to avoid an eviction. Many Florida courts have held that a three day notice that fails to substantially comply with the notice is defective, and a court will be unable to evict a tenant if the notice is not proper. Continue reading

Estate planning often focuses on married couples, but estate planning for a single person is equally as important. A single person often owns assets in their name individually, which means these assets must go through the probate process when the person dies. The big question then becomes whom do these assets pass to?   In addition, asset protection and Medicaid issues become more important to address with a single person than a married couple.

A single person like any other person can own many assets and have a desire to see those assets distributed to certain people. Some assets, such as life insurance and retirement plans, are distrusted at death according to the beneficiary designations. If a person dies without a will, his or her possessions are passed intestate according to the intestate laws of the state. For a single person, the state law usually provides that a single person’s assets are passed to his or her closest relatives. If there are no relatives then the assets are collected by the state. So estate planning is needed if a person wants a say in how his or her assets will distributed.

What documents does a single person need?

A will acts as the foundation of an estate plan and serves as the blueprint for how a person’s assets are distributed after death. A will allows this person to name a guardian for young children. A will also assign an executor to help guide beneficiaries through the probate process. The executor can be a trustworthy friend or family member. A will allows the testator, or will maker, to take his or her beneficiaries thoughts into account.

A durable power of attorney is a document that lets a person appoint someone to manage your day-to-day financial and personal affairs if that person becomes incapacitated. A married person will usually name the spouse. We recommend a single person name a trusted family member or friend with a strong financial background. A medical power of attorney allows a third person to make decisions regarding a person’s health care and treatment. This does not have to be the same person who has the financial power of attorney. The person named in a health care power of attorney should be someone who respects your health care wishes, such as a choice not to be on life support when the odds of recovery are not good.

A will or trust are  also great tools when planning for the distribution of your estate. With a will, you can direct whom will receive your assets through probate. A trust is a legal device that holds assets for one or more beneficiaries. A trust allows the beneficiaries to take the trust’s assets without going through the probate process.

While married couples can protect their assets by owning them a certain way, a single person does not have the ability to use Tenants by the entireties or have a spouse own their assets.  It may be necessary to have a properly drafted LLC or Florida Asset Protection trust to help protect assets from creditors.  In addition, the max non exempt assets a single person can have and be eligible for Medicaid is only $2000.  Using certain trusts and other planning techniques into a single person can control assets and make them exempt from creditors as well as Medicaid (there is a 5 year look back for Medicaid planning).

If you are single and currently do no have an estate plan, we urge you to contact our office at 904-685-1200.

Getting your first driver’s license can be one of the biggest milestones in a young person’s life. However, what was once a cherished rite of passage has now turned into a potential liability for parents. Under Florida law, a parent can be held legally responsible for the negligent actions of a child driving the parent’s car. Florida law also requires a parent or guardian to sign the driver’s license for a driver under 18, and this person who signs will also be held liable for the driver’s negligent driving.

A parent’s liability may not even end once the child turns 18. This state also recognizes the “dangerous instrumentality doctrine,” which states the owner of a vehicle is liable for its negligent operation. This means the owner can be liable even if the driver is an adult and unrelated to the owner.

Further, parents are at risk from creditors when a child is involved in a car wreck even if the car is tilted in one spouse’s name. In Florida when two people are married, creditors cannot normally reach the other spouse’s assets unless both spouses jointly own the property. However, both spouses can be liable to creditors if, for example, one spouse owns the car and the other spouse signed the child’s driver’s license. This can create a nightmare scenario where creditors go after assets a parent once thought was protected from creditors.

So how can parents limit their liability? One answer is to simply not let the teenager drive until they are 18, however that is quite unreasonable. At the Law Office of David Goldman PLLC, we recommend limiting liability through the use of one or more vehicle trusts.

A Florida vehicle trust protects a parent’s assets by transferring the title of a vehicle to a specifically designed irrevocable trust. Once the transfer is made, as parents you no longer own the car – the trust does. In the trust, the drivers are then named as trustees to the vehicle trust. This allows the parents and their children to still drive and use the vehicle as they always have. In a legal sense the parents become “managers” of the trust, which owns the property, and can use the car as they see fit.

The child is also named to this trust, which will then allow the teenager to drive the car without incurring liability on the parents. (This does not remove the liability that may attach to the parent who took the child to get their license) The trust is irrevocable, which essentially means the settlors, or parents, no longer own the vehicle, and the vehicle is now owned by a trust and managed by trustees.

The trust itself will state the settlor, or the person who creates the trust and transfers assets, will have no liability for the acts of any trustee or beneficiary of the trust. Further, the settlor may not have any liability resulting from the use, abuse, or misuses of the tangible assets of the trust. This means that the settlors, or parents, may not be liable for the negligent actions of a child due to their ownership of the vehicle.

Often a vehicle trust is used with other forms of ownership or asset protection to insulate a family’s at risk assets from future unknown creditors. A vehicle trust can own almost any type of vehicle including boats, motorcycles, or personal watercraft. For more information on the benefits of a Florida Vehicle Trust contact our office today.

Naming a trust as a beneficiary of life insurance policy can have a huge benefit for people with large estates that are not taxable. It is also a great way to protect the insurance proceeds from future creditors and to help beneficiaries better manage their assets

There are a few common types of trusts that can serve as the owner or beneficiary of a life insurance policy. These trustees might include: an irrevocable life insurance trust, a living trust, a special needs trust and a spendthrift trust.

Irrevocable Life Insurance Trust

This type of trust, often referred to as ILIT, is used to irrevocably purchase insurance on the life of the grantor of the trust. This means the trust will have actual ownership of the policy, rather than the person the policy is for. This is done usually to avoid the taxing of life insurance proceeds at death under the Federal estate tax.  Since the person does not actually own the life insurance policy, the proceeds are not subject to estate tax or included in that person’s estate when he or she dies.

Once a person with an ILIT dies, the insurance proceeds will be deposited into the ILIT. Usually, an ILIT is set up to provide for the other spouse during his or her lifetime, and the balance passes to the children or other named beneficiaries.

ILITs are typically used to save money on estate taxes by ensuring the life insurance proceeds would not be included in the insured person’s estate.   In 2002, the estate tax exemption was only $1 million. Since 2013, Congress has raised the estate tax exemption has been raised to $5.43 million, and $10.86 for married couples.  This much higher exemption means a large number of estates are no longer facing estate taxes. However, those with larger estates can still benefit greatly from the use of an ILIT. In addition, some families are still using ILITs incase the estate tax exception is lowered in the future.

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