Asset Protection

June 23, 2014

You Thought the IRA was Protected From Your Kid’s Creditors!

Last week, The Supreme Court unanimously ruled that the funds contained in an IRA are not protected from creditors after bankruptcy.

You may need to reevaluate how your estate plan deals with your IRA. If your beneficiaries live in Florida, this may not be a concern because the Florida Legislature has an IRA exemption statute which includes inherited IRAs. As it is difficult to predict where your beneficiaries will live at the time of your death, you may not be able to count on the Florida statutes to protect your beneficiaries.

We have recommended to make an asset protection trust the beneficiary of your trust to protect from the retirement funds from the loss that could be associated with creditors of our client’s beneficiaries (typically their spouse or children). Many have not seen the need for this and as a result, there may be many families using traditional beneficiary designations which place their retirement funds at risk.

August 31, 2013

Florida Asset Protection

by David M. Goldman

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.

May 9, 2013

The Future of Estate Planning: The Multigenerational Life Plan

by David M. Goldman

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:

Firearms;
Digital Assets;
Asset Protection;
Life Planning;
Controlling from the Grave; and
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

May 4, 2013

Taking Advantage of the Liberal Asset Protection Laws in Florida

by David M. Goldman

Each 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

September 7, 2012

Last Will and Embezzlement

by David M. Goldman

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

by David M. Goldman

In 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.

September 4, 2012

Who Ownes your Itunes Account? and Bruce Willis

by David M. Goldman

Last 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?

August 10, 2012

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

by David M. Goldman

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.

July 26, 2012

Can Life Insurance be subject to Creditors in Florida?

by David M. Goldman

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.

July 11, 2012

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

by David M. Goldman

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: