Articles Posted in Asset Protection

Why Estate Planning matters during the Coronavirus (COVID-19) and what you can do to prepare.

On March 17th, the outbreak of Coronavirus has grown to at least 4,226 cases, and numbers are still growing. According to the CDC, Florida alone is ranging from 101-200 reported cases, and the elderly is a suspectable target. The elderly and those with any underlying medical problems such as high blood pressure, heart problem, and diabetes are more like to see an increase in this serious illness. As Coronavirus continues to sweep through the nation, this leaves many individuals with the feeling of uncertainty. Many advisors are continuing to tell individuals to “stay the course” and ride this rollercoaster out. This advice leaves people uneasy when looking back from the lessons that were learned in 2008. Time is valuable right now to take action for this pandemic. We have an obligation to prepare and protect our loved ones in this infectious crisis. While this topic is always a hard conversation to have, estate planning is now more than ever a critical tool that can be used to assure that your wishes are carried out in the event of death or incapacity. There are four essential estate planning documents that can help ease the uncertainty of this pandemic and provide a plan for the Coronavirus.

A Healthcare Durable Power of Attorney:  A Power of Attorney is a legal document that gives someone you choose the ability to have the power to act on your behalf and make decisions. This can be done through a Healthcare Durable Power of Attorney, which is essential during an outbreak like Coronavirus. This will ensure that you receive the healthcare needed if you become ill.   Until May 1, we are offering a free Healthcare power of attorney with COVID-19 specific provisions.  See this article.

In Florida, an estate plan provides you a plan for what happens to your assets at your death. Another crucial part of your estate plan, specifically your will, is where one nominates who will be the guardian of any minor children. Although the court will decide what’s in the best interest of the child(ren), having an estate planning document that details your preference in place will hold considerable weight. Estate planning is important for anyone who has legal capacity, whether it may just entail power of attorney or medical care or extend to a full-featured plan, which would include trust and a will.  Today with the current situation with COVID-19, it is more important than ever to have a Medical Power of Attorney that permits the use of experimental, non-FDA approved, medications for the treatment of COVID-19.

While preparing a will or a trust is essential, it is also important to consider coordinating beneficiary designations on life IRAs, insurance, retirement plans, and so forth. A will should also includes planning during your lifetime and in case of your incapacity. Often the creation of an estate plan involves an array of topics such as asset protection and qualification for public benefits for the client, or the client’s loved one. Many times, spouses will take it upon themselves to devise a plan online without the proper instruction; let’s go through a scenario.

Here we have Tyler and Debra, who have created a plan with an online package. In this package, they prepare a trust and retitle the brokerage account and house into the name of the trust.  The couple also prepares wills. While preparing, each document language states that it will include everything be left to one another at the death of the survivor and divided assets among their three children. Tyler and Debra felt as if they had a great plan in place and that they would have no concerns involving probate. One thing they did not consider is that they could not change the ownership of Debra’s IRA during her lifetime. The first mistake that was made was not checking the beneficiary designations on the IRA. Before Debra married Tyler, she had a boyfriend as a known beneficiary for her IRA. This caused Debra’s previous boyfriend to obtain a bulk of the IRA asset and not her current husband, Tyler. This situation happened even though Debra named Tyler as the primary beneficiary of all her assets in her will and trust. Situations like these happen all the time and demonstrate why it is vital to revisit your plan and make changes to previous beneficiaries.

The Florida Asset Protection Trust.

Most financial planners are unfamiliar with some of the modern twists available with Florida Asset Protection Trusts.  This is a special type of 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.
  6. The inability to transfer the ownership of insurance, annuities, life insurance and other securities.

While our Florida Asset Protection Trust is an irrevocable trust, this trust does not have any of the traditional problems that are discussed above nor it is a “self-settled trust” as defined by the IRS.  Because the Florida Asset Protection Trust is not self-settled, there is no 10 year lookback on transfers in the case of a bankruptcy. The Florida Asset Protection trust that we use is an Irrevocable Pure Grantor trust  (IPUG™). With this special type of Florida Asset Protection trust many of the advantages  and flexibilities that are traditionally only found with a revocable trust can be provided while maintaining the strong asset protection that can only be accomplished with 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 our Florida Asset Protection trust is superior to the traditional revocable trust and does not pose the problems that a traditional irrevocable trust presents:

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How a Community Property Trust Can Save Tens or Hundreds of Thousands of Dollars in Capital Gains Taxes
Community property trusts can save your clients tens of thousands of dollars in capital gains taxes, and that is just one of their many benefits. This lesser-known strategy is not necessarily the best fit for all couples either because of their assets or state of residence. However, for households you work with that can make the most of them, it is a planning tactic that could have a significant impact on keeping more of the value of their estates in the family.

These trusts offer a huge benefit to couples who take advantage of them. There’s also a lot to gain for their financial advisors. Thanks to the double step-up for property held in this type of trust, your clients will retain a significant amount of wealth that would otherwise go to the IRS because of capital gains tax. So it is a solution that provides better cash flow for your clients and more assets under management for you: a win-win for all parties.

What is community property, and what is a community property trust?

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Florida Asset Protection Trusts and Domestic Asset Protection Trusts Can Be Effective Prenuptial Agreements

Planning for a divorce is never easy or fun, but divorce is an unfortunate reality in today’s world where almost half of all marriages end in divorce.  Without legal planning, a spouse seeking a divorce is likely entitled to an equitable portion of the marital property.  The traditional way to protect property from a divorce was through a prenuptial agreement or postnuptial agreement; now there may be a better alternative by using a Florida asset protection trust.

So what happens if there is no legal planning?  If the married couple fails to plan for the dissolution of marriage adequately, then the division of marital property will be left to the discretion of a judge during the process of an expensive and time-consuming divorce process.
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One issue that has come before the Supreme Court is what is actual fraud, and does actual fraud included fraudulent transfers.  Stated in another way, is it fraud to accept a fraudulent transfer.  For a long time the answer depended on the judicial circuit.  Now the Supreme Court has provided a firm answer.

So before we can determine the importance of the Supreme Court’s decision it is important to understand what actual fraud is in the context of bankruptcy law.  The bankruptcy code bars the discharge of “any debt… for money, property, [or] services… to the extent obtained by… false pretenses, a false representation, or actual fraud.”

So how does the reception of fraudulent transfers fit within this definition of actual fraud?

The first step in answering this question is to determine how fraud is defined.  The modern law concerning fraudulent transfers comes from the Uniform Fraudulent Transfers Act (UFTA), which was adopted in most states including Florida.  The UFTA defines fraudulent transfers against present and future creditors as “a transfer made under obligation incurred by a debtor if made with actual intent to hinder, delay or defraud any creditor of the debtor.”

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In Florida it can be crucial to do Estate Planning For Second Marriage

More and more Americans are getting remarried which is causing estate planning to become more complex.  People are living much longer than in the past, which means that the rate of remarriage is occurring at a much higher frequency.  A second marriage adds new obligations and rights for the new people in your life, while still keeping the obligations from your first marriage.

The effect of multiple marriages is that it could create multiple claims on a person’s estate.  Many estate planning issues can be resolved with careful planning.  Here are some key issues for estate planning for a second marriage.

1. Length of the New Marriage

The first issue that is common in estate planning is the duration of the subsequent marriage.  For instance, say a person has a spouse with early Alzheimer’s.  This person also has a retirement plan that named his children outside the marriage as beneficiaries.  The couple has been married for eight years, and the person would be destitute without the spouse’s IRA.  It may be time to think about changing the estate plan to include the new spouse, which would desperately need the funds from the retirement plan.

2. Children from the First Marriage or outside the current marriage

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Yes A Spendthrift Provisions Can Protect Against Civil Judgments

What is a Spendthrift Provision? One of the best forms of asset protection we can provide is through a trust that contains a spendthrift provision.  In a revocable trust, a spendthrift provision has some significant benefits such as protection against your beneficiaries’ creditors.

So what exactly does a spendthrift provision do?  A spendthrift provision is a provision within a revocable or irrevocable trust that limits the beneficiary’s access to trust.  This restriction protects the trust property in two ways, it prevents a beneficiary from selling his or her interest in the trust property as a beneficiary, and it prevents the beneficiary’s creditors from compelling the trustee to make distributions except where this would void public policy like in the case of alimony, child support and some civil judgements.
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In Florida, Medicaid is a federal and state level program that offers health care assistance to members of the program.  Medicaid is a complicated program that is administered differently on a state-by-state basis.  There are many common misunderstandings regarding Medicaid.  This article will help to debunk some common myths and set the record right.

1) Status of a Home in Florida

FALSE. One common myth is that Florida residents cannot own a home and also qualify for Medicaid.  This is not true.  Florida does place a cap on the amount of gross income and assets a person can own and qualify for Medicaid.  A person with too many assets or income is ineligible to receive Medicaid benefits.

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