I work with a lot of doctors. Most of them are just too busy to pay close attention to their personal affairs. So wills, estate planning, insurance and other personal matters, as well as their business agreements, employee issues, etc... often get overlooked. Issues are addressed on a reactive, rather than a proactive basis. There is little planning and protection, but rather reaction to situations that have already arisen.
Here's a few things you should know:
1. ASSET PROTECTION DOESN'T WORK. Well, actually it does, but you cannot create an asset protection plan once litigation has begun or is on the horizon. It will be deemed a fraudulent transfer and you can be subject to both civil and criminal penalties. No legitimate attorney should even do it for you. By asset protection, I don't mean moving your assets offshore to Nevis or the Cayman Islands. Offshore asset planning may bring more scrutiny from various government agencies than you'd like to welcome.
2. YOU CAN WRITE A WILL ONCE YOUR DEAD. Of course you can't! Tax and estate planning is voluntary and should be done, and revisited on a regular basis, as soon as possible. Dying intestate (without a will) leaves a serious mess for your loved ones to clean up. Even a poorly written will leaves a big mess. Look at Anna Nicole Smith.
3. MONEY MAKES PROBLEMS GO AWAY. To the contrary, I've found that successful professionals often attract problems. Everyone and their grandmother brings "opportunities" your way and, suprisingly (I say that with jest), every deal looks good. That's called salesmanship. Don't substitute good due diligence for things that look good and good feelings you have for people (even if friends or relatives). Look at Bernie Madoff - blind trust was his key to the castle.
Best advice is to work with someone who advocates for your success and protection. Someone who has experience in negotiating deals, analyzing opportunities, protecting assets, and protecting your family.
We offer free, no obligation consultations, to any medical professionals who'd like to visit our office. We would also be happy to answer basic questions by email.
Showing posts with label estate planning. Show all posts
Showing posts with label estate planning. Show all posts
March 17, 2009
September 8, 2008
Protecting Your Assets from Creditors & Predators
I recently submitted this article to a dozen or so medical journals for publications. Although it is directed toward medical professionals, its concepts are appropriate for any person concerned about protecting their assets.
"Medical professionals alike, especially the high-income earners, are constantly concerned over being sued. In a world of constant litigation, the all look for strategies and methods to protect the assets they accumulate through their work: their home, investments, real estate, etc…
The topic of asset protection is always being written about. Some practitioners swear by methods of “bullet-proofing” your assets. Others claim that asset protection doesn’t really work. This article has been written to explore both extremes of this industry and to find a common ground of reasonable security for the medical professional who would like to take adequate steps to protect their assets without injecting too much complication into the way they manage their affairs.
First of all, can you “bullet-proof” your assets? If you perform a Google search for “asset protection” or “bullet proofing your assets”, you will uncover may sites which profess that with the right structure in place, and having done so with no potential law suits on the horizon, you can successfully protect your assets. The Asset Protection Consulting Group, http://www.apcg.com/, writes about asset protection and uses the O.J. Simpson case as an example:
“Essentially asset protection is a legal way to put your assets beyond the reach of those who would like to take them from you by filing a lawsuit. Here is an example you are likely familiar with that demonstrates its effectiveness and legality.
Remember the O.J. Simpson case? O.J. went to trial in 1995 and was acquitted of murder charges. His story is a perfect example of how and why asset protection works. Now there’s a whole criminal side to O.J.’s case. So let’s put aside the moral issues surrounding O.J. We’re just talking about asset protection here. The point here is that the nation was able to see for the first time how an alleged murderer was able to have a judgment entered against him and no one was able to collect any money. So let’s outline what happened here. By the way, do you know how O.J.’s doing now? Do you have any doubts he’s living all right?
What happened after he was acquitted from the criminal charges? The Goldmans sued him on a wrongful death case in civil court and obtained a judgment for $33.5 million. Yet have they collected anything? All they got was his Heisman trophy. The piano he said belonged to his mother. But what happened to his money? Well he was lucky. O.J. had pensions, or retirement plans through the NFL and the Screen Actor’s Guild (SAG), and both pensions were exempt from judgments by law in California.
What about his house? He had a nice home near Beverly Hills. What happened there? The house was worth $3.5 million. He had a first mortgage for $1.5 million. The question everyone asked was what happened to the rest of the equity? Why didn’t they take it? Well, he had what are called equity stripping mortgage liens placed on it. By the time they got to the house all the equity was encumbered in favor of his attorneys. His home was leveraged to the hilt so by the time the Goldmans got to it there was nothing left for them to take.
Other groups ward against these techniques and quote various court cases and legal decisions that demonstrate their point. Almost all reported cases are those whereby the debtors had transferred or attempted to transfer their assets into an asset protection structure once litigation or potential litigation is on the horizon. Of course, the logical course of events are such that with arrangements that work, litigants will settle and often for pennies on the dollar.
This article is about creating structures that add “layers” to your assets, making it more difficult and costly for litigants and creditors to attach them with a judgment from a court of competent jurisdiction. By creating entities such as corporations and limited liability companies in different states and even foreign jurisdictions, it becomes difficult for a judgment creditor to attach assets since judgments cannot be obtained and enforced within statute of limitation time limits. Also, suing and enforcing judgments in multiple jurisdictions becomes very costly to do so. Remember however, your “structure” must have a legitimate business purpose beyond just that of avoiding creditors.
Here’s an example:
Dr. J establishes a Delaware “Series” Limited Liability Company. This type of entity allows you to segregate assets, for liability purposes, from each other within the same entity. The sole member of the LLC is a Nevada Corporation which is filed blindly as allowed under Nevada law using a nominee appointed for such purpose. Therefore, Dr. J’s information remains out of the public record. All stock in the Nevada Corporation (which can be issued as “bearer” certificates) is owned by another limited liability company created in the jurisdiction of Nevis, in the British Virgin Islands. Created in 1995, Nevis past legislation that allows for the creation of an LLC without public filings and a statute of limitations on judgments of only six months. The Nevis LLC could be owned by an asset protection trust in the Cook Islands located in the Pacific Ocean enroute to Australia.
Now, this is an extreme example and probably includes more “layers” than would be necessary in most situations. Probably a Delaware Series LLC would suffice or a Nevada entity could be used if the professional wishes to file blindly. As an alternate, off-shore jurisdictions could be used where it is suspect as to whether a foreign court would even enforce a US-obtained judgment.
The point in these examples are this: given a complex and costly structure, most litigants will think twice about instituting suit. Generally, a good litigation attorney would first conduct an asset search to determine if the prospective defendant had anything worth pursuing and the suit might end there or insurance settlement offers may be accepted.
There is one important key to creating an effective structure: putting it in place well before any problems arise. So called “rainy day” planning should be completed as soon as possible. Whenever working with new clients, we seek to create an asset protection strategy, as part of the doctor’s estate plan, that contemplates the accumulation of assets over time. In almost all cases where defendants have lost and forfeited assets that they were trying to protect, the persons had transferred assets at a time when the potential litigation had already reared its ugly head. Fraud and fraudulent transfers never work, no matter how complex the structure.
Also, remember this: never use a structure, especially off-shore arrangements, to avoid the payment of federal income taxes. The IRS can always access assets and you can be liable for criminal charges as well."
"Medical professionals alike, especially the high-income earners, are constantly concerned over being sued. In a world of constant litigation, the all look for strategies and methods to protect the assets they accumulate through their work: their home, investments, real estate, etc…
The topic of asset protection is always being written about. Some practitioners swear by methods of “bullet-proofing” your assets. Others claim that asset protection doesn’t really work. This article has been written to explore both extremes of this industry and to find a common ground of reasonable security for the medical professional who would like to take adequate steps to protect their assets without injecting too much complication into the way they manage their affairs.
First of all, can you “bullet-proof” your assets? If you perform a Google search for “asset protection” or “bullet proofing your assets”, you will uncover may sites which profess that with the right structure in place, and having done so with no potential law suits on the horizon, you can successfully protect your assets. The Asset Protection Consulting Group, http://www.apcg.com/, writes about asset protection and uses the O.J. Simpson case as an example:
“Essentially asset protection is a legal way to put your assets beyond the reach of those who would like to take them from you by filing a lawsuit. Here is an example you are likely familiar with that demonstrates its effectiveness and legality.
Remember the O.J. Simpson case? O.J. went to trial in 1995 and was acquitted of murder charges. His story is a perfect example of how and why asset protection works. Now there’s a whole criminal side to O.J.’s case. So let’s put aside the moral issues surrounding O.J. We’re just talking about asset protection here. The point here is that the nation was able to see for the first time how an alleged murderer was able to have a judgment entered against him and no one was able to collect any money. So let’s outline what happened here. By the way, do you know how O.J.’s doing now? Do you have any doubts he’s living all right?
What happened after he was acquitted from the criminal charges? The Goldmans sued him on a wrongful death case in civil court and obtained a judgment for $33.5 million. Yet have they collected anything? All they got was his Heisman trophy. The piano he said belonged to his mother. But what happened to his money? Well he was lucky. O.J. had pensions, or retirement plans through the NFL and the Screen Actor’s Guild (SAG), and both pensions were exempt from judgments by law in California.
What about his house? He had a nice home near Beverly Hills. What happened there? The house was worth $3.5 million. He had a first mortgage for $1.5 million. The question everyone asked was what happened to the rest of the equity? Why didn’t they take it? Well, he had what are called equity stripping mortgage liens placed on it. By the time they got to the house all the equity was encumbered in favor of his attorneys. His home was leveraged to the hilt so by the time the Goldmans got to it there was nothing left for them to take.
Other groups ward against these techniques and quote various court cases and legal decisions that demonstrate their point. Almost all reported cases are those whereby the debtors had transferred or attempted to transfer their assets into an asset protection structure once litigation or potential litigation is on the horizon. Of course, the logical course of events are such that with arrangements that work, litigants will settle and often for pennies on the dollar.
This article is about creating structures that add “layers” to your assets, making it more difficult and costly for litigants and creditors to attach them with a judgment from a court of competent jurisdiction. By creating entities such as corporations and limited liability companies in different states and even foreign jurisdictions, it becomes difficult for a judgment creditor to attach assets since judgments cannot be obtained and enforced within statute of limitation time limits. Also, suing and enforcing judgments in multiple jurisdictions becomes very costly to do so. Remember however, your “structure” must have a legitimate business purpose beyond just that of avoiding creditors.
Here’s an example:
Dr. J establishes a Delaware “Series” Limited Liability Company. This type of entity allows you to segregate assets, for liability purposes, from each other within the same entity. The sole member of the LLC is a Nevada Corporation which is filed blindly as allowed under Nevada law using a nominee appointed for such purpose. Therefore, Dr. J’s information remains out of the public record. All stock in the Nevada Corporation (which can be issued as “bearer” certificates) is owned by another limited liability company created in the jurisdiction of Nevis, in the British Virgin Islands. Created in 1995, Nevis past legislation that allows for the creation of an LLC without public filings and a statute of limitations on judgments of only six months. The Nevis LLC could be owned by an asset protection trust in the Cook Islands located in the Pacific Ocean enroute to Australia.
Now, this is an extreme example and probably includes more “layers” than would be necessary in most situations. Probably a Delaware Series LLC would suffice or a Nevada entity could be used if the professional wishes to file blindly. As an alternate, off-shore jurisdictions could be used where it is suspect as to whether a foreign court would even enforce a US-obtained judgment.
The point in these examples are this: given a complex and costly structure, most litigants will think twice about instituting suit. Generally, a good litigation attorney would first conduct an asset search to determine if the prospective defendant had anything worth pursuing and the suit might end there or insurance settlement offers may be accepted.
There is one important key to creating an effective structure: putting it in place well before any problems arise. So called “rainy day” planning should be completed as soon as possible. Whenever working with new clients, we seek to create an asset protection strategy, as part of the doctor’s estate plan, that contemplates the accumulation of assets over time. In almost all cases where defendants have lost and forfeited assets that they were trying to protect, the persons had transferred assets at a time when the potential litigation had already reared its ugly head. Fraud and fraudulent transfers never work, no matter how complex the structure.
Also, remember this: never use a structure, especially off-shore arrangements, to avoid the payment of federal income taxes. The IRS can always access assets and you can be liable for criminal charges as well."
April 16, 2008
Why You Need A Will (and When)
Many people are confused as to when and why they should put a will together. I am writing this blog to hopefully give some people more direction toward making the right decision (at least before all their kids are grown!).
When Do You Need a Will?
First of all, let's address the obvious. If you are married and have minor children, you definitely need a will. You should also have living wills and powers of attorney (discussed further below).
Second, if you are single, have very few assets, have no dependents and do not care what happens to your property when you die, you don't need a will. You should however, consider a living will.
If you are married without kids, you probably should have a will especially if you intend to have kids in the not so distant future. Also, include living wills and powers of attorney. Even if you don't have a lot of assets yet, dying without a will makes things real difficult on survivors you leave behind.
If you have a large estate, as well as loved ones (or charities) you care about, you need a complex will with advanced tax provisions drafted by a competent and experienced estate planning attorney. This plan might include revocable and/or irrevocable trusts, living wills, powers of attorney, and other complex documents such as GRATs, CRATs, QPRTs, QDOTs, amongst others. (If you have been through this process already, you may recognize a lot of these acronyms even though you may not be completely clear as to what purpose they serve).
So, Why Do You Need a Will and Other Documents?
When you die without a will (called dying "intestate"), your property and minor children get subjected to the rules created in the particular state in which resided at your death. Although courts are always concerned about the best interests of your surviving minor children, the disposition of your property is often another story. The intestate rules which apply to property distribution generally favor the state and the general public, not the individual and their family. Tax rules are written as such to take the largest amount of tax unless some prior planning has been done. In addition, many states have a costly probate process - the process of submitting your will to court and disposing of your assets. Planning can be done to minimize the costs of probate. In addition, regarding minor children it is important that you and your spouse choose guardians for them - do not leave surviving family members to battle it out and argue over what they think your wishes are.
Also, between surviving spouses and surviving children, every state has different rules as to how much of the estate your spouse is entitled to. Dying without a will can make financial survival very difficult for your survivor.
With situations of divorced parents, second marriages, same-sex couples, having a written document is a must. In most situations, your property will not pass as you intend.
You should have a living will if you wish to avoid being kept alive by artificial means. Take the Terry Schiavo case out of Florida. She did not have a living will or advanced healthcare directive (sometimes called a medical power of attorney). Her husband applied to the court for permission to remove her from life support. Her parents opposed the position of her husband and it became a national and political issue.
Powers of attorney are often valuable between spouses and business partners to act on each others behalf in situations of abscence and disability. They are various types of powers of attorneys including durable powers, nondurable powers, and springing powers.
Life is a random walk. There is no better time than the present to get just the basics of your affairs in order. I often find people shy away from completing wills because of the price (I charge from $1,800 and up for wills, living wills and powers for both spouses in New Jersey - obviously price will vary from firm to firm and from area to area). People can often be penny-wise and pound-foolish. Don't put such a small price on your family's safety and financial security.
Beyond the appropriate documents, take the time to organize your affairs to make the process after your death easier on survivors. We are publishing a book - "For My Heirs: A Journal of Guidance and Last Instructions" just for this purpose. If you'd like more info, please contact our office.
I welcome comments and questions, so feel free to post them.
When Do You Need a Will?
First of all, let's address the obvious. If you are married and have minor children, you definitely need a will. You should also have living wills and powers of attorney (discussed further below).
Second, if you are single, have very few assets, have no dependents and do not care what happens to your property when you die, you don't need a will. You should however, consider a living will.
If you are married without kids, you probably should have a will especially if you intend to have kids in the not so distant future. Also, include living wills and powers of attorney. Even if you don't have a lot of assets yet, dying without a will makes things real difficult on survivors you leave behind.
If you have a large estate, as well as loved ones (or charities) you care about, you need a complex will with advanced tax provisions drafted by a competent and experienced estate planning attorney. This plan might include revocable and/or irrevocable trusts, living wills, powers of attorney, and other complex documents such as GRATs, CRATs, QPRTs, QDOTs, amongst others. (If you have been through this process already, you may recognize a lot of these acronyms even though you may not be completely clear as to what purpose they serve).
So, Why Do You Need a Will and Other Documents?
When you die without a will (called dying "intestate"), your property and minor children get subjected to the rules created in the particular state in which resided at your death. Although courts are always concerned about the best interests of your surviving minor children, the disposition of your property is often another story. The intestate rules which apply to property distribution generally favor the state and the general public, not the individual and their family. Tax rules are written as such to take the largest amount of tax unless some prior planning has been done. In addition, many states have a costly probate process - the process of submitting your will to court and disposing of your assets. Planning can be done to minimize the costs of probate. In addition, regarding minor children it is important that you and your spouse choose guardians for them - do not leave surviving family members to battle it out and argue over what they think your wishes are.
Also, between surviving spouses and surviving children, every state has different rules as to how much of the estate your spouse is entitled to. Dying without a will can make financial survival very difficult for your survivor.
With situations of divorced parents, second marriages, same-sex couples, having a written document is a must. In most situations, your property will not pass as you intend.
You should have a living will if you wish to avoid being kept alive by artificial means. Take the Terry Schiavo case out of Florida. She did not have a living will or advanced healthcare directive (sometimes called a medical power of attorney). Her husband applied to the court for permission to remove her from life support. Her parents opposed the position of her husband and it became a national and political issue.
Powers of attorney are often valuable between spouses and business partners to act on each others behalf in situations of abscence and disability. They are various types of powers of attorneys including durable powers, nondurable powers, and springing powers.
Life is a random walk. There is no better time than the present to get just the basics of your affairs in order. I often find people shy away from completing wills because of the price (I charge from $1,800 and up for wills, living wills and powers for both spouses in New Jersey - obviously price will vary from firm to firm and from area to area). People can often be penny-wise and pound-foolish. Don't put such a small price on your family's safety and financial security.
Beyond the appropriate documents, take the time to organize your affairs to make the process after your death easier on survivors. We are publishing a book - "For My Heirs: A Journal of Guidance and Last Instructions" just for this purpose. If you'd like more info, please contact our office.
I welcome comments and questions, so feel free to post them.
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