Asset protection was previously out of reach for most Americans.  Thanks to a new trust called the IPUG™ Trust, Asset Protection is affordable for the average family.  In the past many families created trusts to avoid estate tax, but with the recent increases in the Federal estate tax exemptions, many use trusts to manage assets, avoid probate, and protect assets from creditors.

The iPug™ Trust not only provides advantageous tax benefits, but it also provides asset protection, while retaining Grantor control,” explains David J. Zumpano, CPA, ESQ., President and Founder of MPS and creator of the iPug™ Trust. “iPug™ Planning will  apply to 99.5% of Americans.”

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Estate Planning for Digital Assets is becoming a more important part of our estate planning.  While most online accounts simply expire when you die, Facebook has recently incorporated some changes to your account so you can specify what happens when you die.

Until recently, loved ones of the deceased only had two choices:

  1. Keep the wall public so everyone could continue to post messages and thoughts on the wall, or
  2. Request to have the page “memorialized,” which meant the profile was no longer searchable or visible to those who were not already friends of the individual.

What Facebook did not allow to happen was for someone to manage the profile of the deceased owner without  having the password.  That just changed with the Facebook Legacy Contact feature.  A Facebook user can now choose a “legacy contact.”  The Legacy Contact can manage your account  or delete the account after you pass away.

Facebook’s Updated Options and Release Stated:

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The amount you can give anyone without having to file a gift tax return in 2015 remains the same as 2014 at $14,000.

Remember that you can give your children, their spouses, your grandkids $14,000 each. In addition, if you are married, your spouse can also gift $14,000 to each person.

Generally, families use gifting to reduce the size of their estate do not need Medicaid long-term care coverage, but if you or your spouse need care and you have gifted money in the past, it may affect your ability to obtain coverage.

The $14,000 figure is the amount of the current gift tax exclusion (for 2014 and 2015), meaning that any person who gives away $14,000 or less to any one individual does not have to report the gift to the IRS, and you can give this amount to as many people as you like. If you give away more than $14,000 to any one person (other than your spouse), you will have to file a gift tax return. Filing a gift tax return does not mean you will have to pay a gift tax. Taxes are only when your reportable gifts total more than $5.43 million (2015 figure) during your lifetime.

Many people incorrectly believe that if they give away an amount equal to the current $14,000 annual gift tax exclusion, this gift will be exempt from Medicaid’s five-year look-back at transfers that could trigger a waiting period for benefits.

The gift tax exclusion is an IRS rule, and this IRS rule has nothing to do with Medicaid’s asset transfer rules. While the $14,000 that you gave to your grandchild this year will be exempt from any gift tax, Medicaid will still count it as a transfer that could make you ineligible for nursing home benefits for a certain amount of time should you apply for them within the next five years.

If you think there is a chance you will need Medicaid coverage of long-term care in the foreseeable future, see your Jacksonville elder law attorney before starting a gifting plan.

If you have been told, don’t worry about your IRA it is protected because Florida has statutory protections for IRAs, you may have misunderstood or been mislead. While Florida does have statutory protection for inherited IRA’s, this protection only applies if your beneficiaries are residents of Florida at the time of your death.

Why take a chance with naming individuals as a beneficiary of your IRA. A properly designed trust should be the beneficiary of your IRA to protect the proceeds from the creditors of your beneficiaries at the time of your death.

In June of this year, the US Supreme Court in Clark V Rameker stated that children or other “non-spouse” individuals who inherit are at risk of loss to their creditors. This was not a close call, it was a 9-0 decision and clarifies that an inherited IRA is not protected from the creditors of its owners.

While a spouse can be named, the spouse has a unique option that other beneficiaries do not have. The spouse can do a rollover IRA. This protection does not help one who dies without a spouse or has serious risks if the surviving spouse is in need of long-term care.

While in the past, most financial professionals would object to naming a trust as a beneficiary, you will start to see them realize the benefit as they become aware of the new risks to the beneficiaries that they did not foresee. They also did not understand that it is possible to create a trust where the stretch out provisions are not lost.

To maintain the stretch out provisions in an inherited IRA where a trust is a beneficiary, the trust must be a qualified beneficiary. For a trust to be a qualified pass thru beneficiary of an IRA, it must meet 4 criteria:

  1. The trust must be valid under state law;
  2. The trust must have identifiable “human” beneficiaries;
  3. The Trust must be irrevocable after the death of the settlor; and
  4. a copy of the plan document must be provided to the plan administrator

It is important to comply with these rules when naming a trust as a beneficiary of an IRA or other retirement account.

If a spouse was to maintain the decedent’s IRA status and draw out funds over the life expectancy of the decedent, the IRA would not be protected as a Roll over IRA or a new IRA.

If you would like to discuss how to properly name a trust a beneficary of your IRA, please contact our Jacksonville estate planning lawyers.

In Florida, the primary residence is often protected by the Florida constitutional homestead protections.

While in many other states, a persons homestead is not protected from creditors and can be lost to claims for Medicaid reimbursement, this is not the case in Florida. The only creditors that can make a claim against the home are those that do something with the home. These may include a roofer or the bank which financed the home.

If you or a spouse needs nursing home case, selling the home can place that asset or the money received from the sale at risk to creditors as well as Medicaid eligibility. There are several methods of avoiding probate on your homestead. Choosing the right method is not an easy decision without knowing your facts and circumstances.

Many people make the mistake of adding another individual through a deed. This mistake can cause tax problems, subject the home to creditors, cause the loss of part or all of the homestead tax credits, and create an ineligibility period for Medicaid.

Every person who owns and resides on real property in Florida on January 1 and makes the property his or her permanent residence is eligible to receive a homestead exemption up to $50,000. The first $25,000 applies to all property taxes, including school district taxes. The additional exemption up to $25,000, applies to the assessed value between $50,000 and $75,000 and only to non-school taxes
To apply for a homestead tax exemption, complete this Form.

In some situations, a ladybird deed or enhanced life estate deed may be a valid solution while in others a trust may offer a less expensive route and offer better protection for the beneficiaries.

An improper transfer or change in ownership can have many adverse effects including violating the 5 year Lookback for transfers on Medicaid.

To find out which option makes the most sense for your family, you should contact a Florida estate planning lawyer who is familiar with elder law issues and discuss your circumstances in detail.

We often get asked about the iPug™ Trust and how it can be so different than a traditional revocable trust or a standard irrevocable trust. The iPug™ takes the best parts of an irrevocable trust and mixes them with the best parts of a revocable trust to create a new type of irrevocable trust where you are in control and can make changes to the beneficiaries and management of the trust just like you can with a revocable trust.

Why Do People Love iPug™?
Because iPug™ Protects You and Your Family From:

  • Lawsuits
  • Nursing Homes
  • Those that want to take away what you worked hard for.
  • Children’s indiscretions, their spouses and divorce.

An iPug™ Keeps You In Control By:

  • Allowing you to control your assets until death.
  • Allowing you to retain some, all, or none of thel income from your assets.
  • Permitting you use of your assets during life.
  • Ensuring you are able to qualify for Medicaid in the shortest period of time possible (often less than three years).
  • Favorable income and estate tax treatment.

Asset Protection Planning includes many complex laws, including, trust law, Medicaid law, probate law and contract law. If you have been using a traditional trust or will to protect from probate, it may be time to upgrade your planning to include asset protection. An iPug™ trust can be used with your current estate plan with some minor changes to your will and trust documents.

If you live in Florida and own property in another state an ancillary administration will be necessary upon the death of the owner(s) of that property. This special probate administration will be in addition to the administration you have where you lived. This is required because real estate or real property is treated differently than personal property.

There are several ways to avoid the additional administration:

  1. The real estate could be owned in a business entity. This converts the ownership from one of the real estate to one of a personal property interest in the stock or membership of the business entity.
  2. The real estate could be owned in a trust. Because the trust survives you, the trust will distribute the property according to the terms of the trust. The trust can also be used for other property and may even enable you to avoid the probate of your entire estate.
  3. The real estate could be retitled using a ladybird or enhanced life estate deed. This special type of deed, available in some states, is very similar to a deed with a beneficiary designation.

Florida’s statutory probate fees apply for an ancillary administration like other forms of probate in Florida. The legal fees start at $1500 and are typically 3% or less for the first million dollars of value. If your property is located in another state, the fees may not be as reasonable as they are in Florida.

We would be happy to discuss your specific situation and help you determine if a business entity, trust, or enhanced life estate deed could benefit your family and help to avoid the costs and delays invovled with probate. Note: some methods of avoiding probate can protect assets from creditors of your and your estate.

Many times we get questions from clients asking if their revocable trust provides asset protection from creditors. The answer to this is the typical legal answer “It Depends”. That is it depends on who owes the money. In Florida a revocable trust can provide some limited protection against the creditors of your beneficiaries through a spendthrift clause, but it will not provide protection from the creditors of the person who creates the trust. Upon your death, the assets in your revocable trust are available to your creditors.

There is a new type of irrevocable trust that is similar to a revocable trust in terms of management, control, and no negative tax effects. This special irrevocable trust is called an IPUG and can be structured to provide asset protection for the items placed in the trust.

An IPUG can be designed to protect an entire asset, the principal, or the income from the asset. The most common design is to protect the entire assets. If you are concerned about protecting your assets from future creditors and the creditors of your children, an IPUG may be the right choice for you.

More articles on what an IPUG is and the benefits of using an IPUG trust.

In Florida, a multi member LLC, has asset protection characteristics. Prior to 2011, Florida law was not clear on whether a charging order was the exclusive remedy for a creditor of a member of a multi member LLC. Assets in a Florida multi member LLC are protected from the reach of the member’s creditors so that the debts of one member do not cause harm to the other members. Once a creditor receives a judgement, they can apply for a charging order and stand in line to receive distributions that are made to that member. The problem with this is that a charging order also subjects the creditor to the tax gains that a member is allocated. For this reason, it is difficult to find a lawyer who will take a case on a contingency basis against a multi member LLC. Even if a creditor is successful, the potential downside from the tax liability is huge and can be painful.

In Young v. Levy, the 4th DCA ruled that the trial court erred in entering a writ of garnishment upon the member’s interest in a multi member limited liability company because as of 2011 the charging order is the exclusive remedy that a creditor of a member of a Florida multi member LLC can obtain as per Florida Statute 605.433(5).

A Florida multi member LLC is not real asset protection like is available with some of our IPUG Asset Protection Trusts, but the LLC can, in the right circumstances, give you the ability to wait out your creditors and make it expensive for them to try. This, in turn, can give you a great ability to negotiate a favorable settlement.

In many cases, a trust may be a better solution, but that cannot be determined without reviewing your specific circumstances and goals.

It is important to make sure that you are not violating fraudulent transfer or conveyance rules when transferring assets to a Florida multi-member LLC.

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