Asset Protection

May 27, 2015

How did the court in Clark v. Rameker change estate planning in Florida?

The U.S. Supreme Court recently ruled that an inherited IRA is not a “retirement account” for purposes of protection under the Bankruptcy code. This now means that inherited IRAs are available to satisfy creditor’s claims in order to pay off debt.

The court characterized an inherited IRA as money that is set aside for the original owner’s retirement rather than money set aside for a designated beneficiary’s retirement. The court reached this conclusion using three elements to differentiate an inherited IRA from a participant-owned IRA:

The beneficiary of an inherited IRA cannot make additional contributions to the account, while an IRA owner can.
The beneficiary of an inherited IRA must take required minimum distributions from the account regardless of how far away the beneficiary is from actually retiring, while an IRA owner can defer distributions at least until age 70 1/2.
The beneficiary of an inherited IRA can withdraw all of the funds at any time and for any purpose without a penalty, while an IRA owner must generally wait until age 59 1/2 to take penalty free distributions.

April 15, 2015

Powers of Attorney and Gifting Provisions

by David M. Goldman

With the current estate tax exception of $5.43 Million for an individual and $10.86 Milliion for a married couple, some estate planners have begun to question whether gifting provisions in a Durable Power of Attorney pose more risk than reward. While it is true, that these provisions can be abused by individuals, there are several situations when estate taxes is not the primary concern and removing gifting provisions could pose a substantial risk to the individuals.

In Florida, individuals must initial next to any gifting provision for them to be valid under current law. Generally there are those provisions which permit the amount under the annual gift tax exemption (currently $14,000 a year per person) and those which permit larger gifting. While many estate planners may not see a need for these anymore, elder law attorneys use them all the time to protect the assets from loss due to the need for nursing home coverage for the individual or their spouse. So while it may be true that less than 0.2% (2 in 1000) people are actually subject to estate taxes, many more will need long term care. Without these important gifting provisions, individuals could end up being bankrupt or leaving little or no money for their surviving spouse to live on.

In addition, there is no guarantee that the estate tax exemption will continue to increase or remain the same. Congress could change the numbers in the future and without gifting provisions, your family may not be able to decrease the amount of your estate that would be subject to estate taxes.

March 23, 2015

Funding Your Revocable or Irrevocable Trust

by David M. Goldman

In Florida, a trust is not valid until funded. Many trusts need to be funded prior to your death to be used in the way intended. Often, individuals create trusts and forget to fund them during their life and do not receive the benefits that their trusts were designed for. There are 4 major ways to fund a trust.

Purchase items in the name of the trust. New property or items can be purchased in the name of the trust. When you purchase a new item or asset, the sale can be made out to the trust. Anyone can purchase these items, it need not be the creator or settlor of the trust.
Assign items to the trust. Generally, when a trust is created, many items can be transferred to the trust by the use of an assignment of personal property. This document will transfer personal property which does not require a deed or title to the trust. This is good for personal property like clothing, jewelry, and other minor issues. One needs to be careful not to assign firearms to your trust unless it is a gun trust as many traditional trusts do not properly deal with firearms issues properly and can cause legal and criminal issues for those who survive you. If you sign an assignment of personal property, you should exclude firearms unless the firearms are being assigned to a gun trust.

March 17, 2015

Nevis LLC and Asset Protection gone wrong? Is your Foreign Trust at Risk also?

by David M. Goldman

Last month the United States District court in Orlando found that the membership interest in a Nevis LLC was subject to Florida jurisdiction. The court also found that Florida law, not Nevis law, applies to the creditor’s application for a charging lien because the situs of the asset determines what laws are applicable to issues related to the charging lien.

This rationale would seem to apply to Foreign trusts as well as Foreign LLCs. It appears that a Corporation or LLC where there were actual certificates for the membership interests that were not located within the state of Florida may have a different result.

The court rejected the claim that jurisdiction was in Nevis. They stated that unlike with a corporation, a membership interest “accompanies the person of the owner.” and as a result is subject to Florida jurisdiction if the owner of the certificate is subject to the jurisdiction. With some foreign LLCs a single member can have charging order protection, but under this court’s ruling, a single member foreign LLC would not receive charging order protection as only a multi-member LLC has charging order protection as an exclusive remedy.

March 6, 2015

Florida Asset Protection: What is an IPUG™ Trust? How does an IPUG™ Trust work?

by David M. Goldman

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.”

December 11, 2014

Why Not to Name Kids as a Beneficiary of your IRA

by David M. Goldman

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.

November 12, 2014

What is the iPug™ Trust Your Family’s New Best Friend

by David M. Goldman

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.

October 29, 2014

Revocable Trusts and Asset Protection

by David M. Goldman

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.

September 30, 2014

4th DCA and Charging Order Protection for Florida LLC

by David M. Goldman

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. Sometimes, 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 of not being able to collect on the judgement 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 Florida 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.

July 16, 2014

The Benefits of Creating a TAP Trust for Protecting Retirement Assets

by David M. Goldman

A TAP trust is an extremely versatile trust designed to hold a variety of assets. This type of trust helps the grantor avoid needless estate taxes without the restrictions of other trusts.

The TAP trust can hold a variety of assets that include: real estate, stocks, insurance policies, bonds, and a few other business interests. A TAP trust can even own an IRA after the grantors death.

A TAP trust can set up as a grantor, or non-grantor trust. This distinction will decide h A non-grantor trust is taxed like a separate taxpayer with all income directly taxed to the trust at a trust income tax rate. However as a grantor trust, all income is taxed on the personal income tax of the grantor at an individual’s tax rate.