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How My Client Saved $500K This Year on His Income Taxes

Posted on: March 8, 2017 at 1:09 am, in

With the Favorable IRS Determination Letter to Prove it

For those that have ever thought that they pay too much income taxes, this might be the most important post they ever read.

Mike was a doctor in Texas. He made a lot of money, but he worked his butt off to earn it; with 20 years of schooling, 3 years in residency, and sometimes working 90-100 hours a week, giving up half to a government that was going to waste it on a bridge to nowhere really irritated him. About 48% of the $1.1-1.4M 1099 income he made went to pay taxes and because of it, he practically had an anxiety attack when he had to write those $100,000+ checks to the IRS every quarter.
He lived in a gorgeous 7,000 square foot house, both him and his wife drove luxury cars on top of his Ferrari, Maserati, and Range Rover fun cars and his kids went to private schools, but he only spent about 150,000-175,000 per year on their lifestyle. That meant that he was paying taxes on about $1-1.2M of income that he didn’t really need.
His colleague, Chris, told Mike about us after helping him with a similar circumstance. After a 30-minute conversation to understand his situation, we presented Mike with a few income tax-saving options such as oil and gas exploration, the creation of a non-profit foundation, the charitable remainder trust, and a customized retirement planning cash balance strategy. He decided that the retirement planning cash balance option made the most sense for him and his family.
Our actuary put together a plan based on his goals. He contributed an average of about $1M to a Super 401k, Pension Cash account, 401h, and COLA retirement accounts. In about 3 years he had accumulated a bit more than $3.2M and saved $1.5M in taxes.
He told me “Rocco, I was either going to give the $500K to the IRS or I was going to give it to my myself into my retirement account – it was a bit of a no brainer.”
“I was practically getting a 100% return on my money immediately because I’m putting about double into my retirement account then I would have been able to. So now, I am not making 4-8% per year on the $500K retirement account that I would have had before, but now I am making 4-8% a year on the entire $1M. It means that the retirement account grows exponentially faster. It would have taken me 5-6 years to accumulate a retirement account of more than $3M before.”
To say that he appreciated our suggestions, was a bit of an understatement. But he was not alone:
Joe in New Jersey who ran a carpet installation business averaged net income of about $500-700K per year. We approached his situation in a similar fashion as Mike and he saved about $250K per year from his tax bill while amassing a $3.5M retirement fund in 5 years.
John on Long Island who had a real estate business netted about $500-600K a year. We were able to save him about $200K a year in taxes.
Ross lived in between New York City and Miami running a Herbalife distributorship and he averaged between 900K-1.1M net income and we used the same strategies to defer him and his wife about $350K in taxes as well.
Finally, Ron in Boston was a dentist as he was able to knock off $100K from the check that he wrote Uncle Sam as well.

Problems and Misconceptions

The problem is that when most people think about retirement planning, they are thinking about SEP account, Standard 401k, Standard IRA, or a Roth IRA.
For those making more than $250K a year, the maximum amount they can contribute with these plans is so tiny (typically a $18-59K contribution only results in tax savings if $9-25K) that it hardly helps them make a dent at all if their tax bill gets into the $200-400K range, so many don’t even bother.
The most frequent response I get when I talk to high earners about making small changes to their planning that save them up to $500,000 a year …is “….Is that legal? I have a CPA and he takes all the deductions possible. How come he hasn’t showed me something like this before?”
And one would think that your CPA would offer the best tax advice to save on taxes, right?
Yes, a CPA may know about the accelerated depreciation benefits of Section 179 or the intricate details of how to expense mileage on your car travel, but most CPA’s don’t know anything about many of these loopholes available to their business and 1099 clients, nor are they incentivized by the $5-10K they’re paid every year to find those special loopholes.
Are they really going to take a risk in making a mistake or the time to learn something new in the middle of tax season on something they are not experts in, in order to save you a few extra dollars. Not likely.
My name is Rocco Beatrice and I hold a CPA, MBA, MST (Master’s Degree in Taxes). I am the Managing Director at Estate Street Partners. In business for more than 30 years, we have an A+ with the BBB, are a member of the National Ethics Association, and have helped more than 4,100 families protect and save more than $4.3 Billion.
While I’ve been quoted on ABC, Fox, or CBS about how business owners and 1099 employees just don’t take advantage of their biggest tax loopholes, I don’t tell you that to impress you. I tell you that because I want you to know that these are not necessarily new ideas, but they work 100% of the time and are part of the IRS tax code… and I have several Favorable Determination Letter’s from the IRS to prove it!
A few years back congress passed the Pension Protection Act and your accountant may not be aware of how these changes can dramatically change your tax bill – most accountants are not.

The Secret

So what is the secret to increasing limits on cash balance retirement plans like this? The secret is that when you get a pension actuary to approve a customized plan, the limits can be as much as 20 times higher than the standard off-the-shelf plans. The IRS relies on the actuary’s number and if they bless the plan, you are golden. Our actuary has created more than 5,000 plans like these over his 46 year career so you can trust you’re getting the best experience in the business.

The Cherry On Top

And the cherry on top is that up to 33% of your contributions to a cash balance plan can be put into the ultimate in retirement accounts very few have even heard of…the 401h.
The 401h is better than the 401k, IRA, Roth IRA – really anything out there. Why? Because they offer a 100% tax-deduction on contributions, it grows capital gains free, and there is no tax on the money when it’s taken out … if used for medical “related” expenses.
And with couples over 55 expected to spend more than $460K on medical related expenses during the remainder of their life span according to AARP, not even including nursing home costs, tax-free “medical expenses” is a huge benefit. The 401h covers a huge variety of items including medical insurance, insurance deductibles, Lasik Eye Surgery, Personal Trainers, Spa Facilities, Usage Fees for Facilities, dentures, dental fees, nursing home care, and on and on and on…there is a list of literally hundreds of things it can be used for.
Believe it or not, the tax year is only weeks away from ending. If these strategies seem intriguing, then there’s not much time left because once the clock turns midnight on December 31, the carriage turns into a pumpkin and we will be forced to start planning for 2017. Since everyone procrastinates, imagine how impossible will be to get anything accomplished in December.

Getthing This Done

So how does one get this done? Just tell your CPA that you are interested these tax strategies. If they aren’t familiar, then we can help them get up to speed quickly. Yes, we’ll work with your CPA. Typically, we can review your situation in a 15-30 minute consultation. We then have our actuaries present a proposal. If it makes sense to you, your accountant with our guidance can help you execute the plan.

The Catch

So what’s the catch? The catch is that while one never pay taxes on the 401h money when used for medical expenses, with the Cash Balance plan or Super 401k accounts one will need to eventually pay taxes when they take the money out. But wait a second. Right now, we are paying 40-60% in taxes on money that we don’t immediately need. We are living on $100-200K per year.
By the time retirement comes around, there is likely going be a much lower tax bracket because you’re only going to take out what is needed to spend and we could avoid the FICA, state tax and Obama tax altogether. You might even live in a lower tax state like Florida or Texas with zero income tax.
Interested in these strategies? First ask your CPA about them. If he is not familiar, or does not want to go it alone, we can help. Contact Rocco Beatrice at or (888) 938-5872.

Top Growth Stock Mutual Funds to Invest in Over a 10 Year Horizon

Posted on: March 8, 2017 at 1:08 am, in

Man in rowboat rowing to view of mutual fund island of cash.

If you are like most of us, you want to invest over the long haul, buying the best mutual funds to invest in and not have to worry about it. Most people automatically make an assumption that growth stock mutual funds will provide the best returns over the long run. Often times this is a poor assumption, but in our research we found the best mutual funds to invest in were, in fact, growth stock mutual funds, but let us not forget, retirement investing is for your long term retirement goals, so you want to make the most of every dollar you put in there, so you can have enough money to retire… maybe even retire early.

Kiplinger puts out a great list of best performing mutual funds to invest in (10 years). They actually look at the best mutual funds to invest in during the last year, the last 5 years, 10 years and 20 years, but let us not digress. Their analysis is purely from a statistical perspective; e.g. which funds averaged the best returns. No doubt that it might be fun to take a look at the best mutual funds to invest in for the last year. Here one will often find growth stock mutual funds that had large investments in some of the highest-appreciating stocks and “got lucky.” The true testament comes for the funds that can endure and consistently outperform year in and year out through full business cycles. A full business cycle being about 5-7 years on average. (we will later explain how we define a full business cycle)

Best Growth Stock Mutual Funds to Invest In

Large company stock funds over last 10 years. Data through June 30, 2016. Source: Morningstar, Inc.
Large company stock funds over last 10 years. Data through June 30, 2016. Source: Morningstar, Inc.

Therefore, since our time horizon for this analysis is 10-15 years, we are most interested in the best performing mutual funds (10 years) over the long run. Those mutual funds to invest in which, don’t just get lucky one year, but have the skills to “get lucky” year in and year out selecting their stocks and getting out at the right time as well. Most growth funds often have a year of outperformance and maybe even 2 or 3 years. One would suggest that their outperformance really goes from “getting lucky” to actually having real talent with stock picking. However, the most skilled managers of growth stock mutual funds do it year in and year out in up markets and down markets.
By selecting the 10-year timeframe to focus our attention on, we’re looking for those best performing mutual funds to invest in that actually have gone through a major market down-turn like the one that occurred in 2008 when the S&P500 was down 37%. 2008 was one of the most painful periods for most people in their 401K. How did these funds perform during the most painful period in recent history? Did those growth stock mutual funds outperform the S&P500 during the tough years as well? Or were they susceptible to the same dips that the stock market tends to have at least once every business cycle?
Critical Big Picture Fact:
Since the year 1900 there have been 19 recessionary periods. That is one recessionary period every 6.1 years on average. The last one occurred in 2008/9.
Each one of these recessionary periods resulted in a 20%-80% loss in the S&P 500. Currently, we are 8 years from our last recessionary period.

The top 5 best performing mutual funds (10 years) illustrated have all had returns that have averaged over 11%. We can tell you this is great, but not as great as some tactical private wealth management funds that we have learned about.
What is the difference between a tactical private wealth management fund and a mutual fund?
A tactical private wealth management fund and a mutual fund both invest in underlying securities such as stocks, bonds, mutual funds, and ETFs and they both offer sector-type fund options (dividends, real estate, municipal bonds, etc.). The biggest difference is that most mutual funds, as detailed in their prospectus by law, typically have to be fully invested regardless of how poorly the market is doing. Every mutual fund defines this slightly differently, but it tends to mean they are required to have be invested by a minimum of 80% of the assets in the underlying stocks/bonds they are investing in. That means that when the market is going down, the mutual fund must keep 80% of all of their assets invested in the market regardless, as stated by rule 35D-1 under the investment Company Act of 1940. Rule 35d-1 restricts a mutual fund manager from liquidating and protecting your money during downturns in the market because they must stay 80% fully invested. This does not necessarily mean the mutual fund manager is a poor stock/bond picker, but rule 35D-1 simply prohibits them from selling securities in a down market to protect your money. This is one of the dirty little secrets of the industry.
Through our research, we found that tactical private wealth management funds do not operate within the same guidelines and restrictions of rule 35D-1. Tactical private wealth management funds offer investors more flexibility to sell the market.

The Best Growth Stock Mutual Funds to Invest In: Is There Something Even Better?

The key point here is that there is no trigger for the mutual fund manager to get out. They are relying on you to sell the mutual fund or your broker to sell for you. The only problem is that your broker gets paid only when you are fully invested in the mutual funds. If s/he takes your portfolio to cash, s/he just cut their own salary. I don’t know too many people that would proactively decide to cut their own income. Therefore, a broker telling you “sell everything” to protect you from losses in the market rarely occurs.
When there is a big loss in your portfolio, your broker will typically tell you that you need to ride the ups and downs of the market because over the long run, stocks offer larger returns than most other asset classes. And your broker would be right over a 50-100-year period, but if you’re nearing retirement (5-10 years) or are already in retirement, you may not have the luxury of taking significant losses in your retirement account during these times. If you were planning on retiring in 5-10 years and you lost 40% of your retirement, you may be changing your plans to retire in 15-20 years. If you don’t love your job, then that could be a real slap in the face.
Our research indicates that tactical private wealth management funds are different.
Tactical private wealth management funds have the ability to get out of stocks/bonds in the blink of an eye. They typically use models that warn them when the markets are looking unstable or shaky in an attempt follow market trends. In uncertain times, they have the ability to get out of stocks and go to cash until their models tell them that all is clear and they are safe to invest again. Many of them have a great track record of avoiding major market disasters and because of it, their overall returns typically outperform Kiplinger’s best performing mutual funds (10 years) through a full market cycle.

Never Forget Warren Buffet’s Rules of Investing

Warren Buffet rule number 1 and number 2

If you recall the famous quote by Warren Buffet. There are 2 rules to investing money. Rule #1: Never lose money. Rule #2: Never forget rule #1.
The quote is obviously cute and silly on the surface, but it has a much deeper meaning.
The reason is math.
When you lose principle in any investment, you need to make more than what was lost just to get to break even. If you lose 40% in year 1, then make 40% the following year, you don’t get back to even – do the math.

For example, if Joe had $500,000 invested in the stock market and he loses 40%, he is left with $300,000. If he made back 40% in year 2, his nest egg would only increase to $420,000. In order to get back to $500,000, he would need to earn a return of 67% just to get back to breakeven. **These calculations are not including inflation or distributions you are taking to support your retirement needs.**
When you avoid big losses, the returns take care of themselves. That is why tactical private wealth management funds are typically so much better than even the best growth stock mutual funds.
Let us compare some tactical private wealth management funds that we have found through our research with the #1 mutual fund in Kiplinger’s Best Performing Mutual Funds to Invest in (10-year period). These returns are all net of fees and expenses so we are comparing apples to apples. As you can see from the cumulative returns chart below. The private wealth management funds are the blue line, Kiplinger’s #1 on their list of best performing mutual funds to invest in (10 years) is olive, and the other lines are benchmarks such as the Barclays U.S. Aggregate bond fund in yellow, 60%/40% (S&P500/Barclays U.S. Aggregate) stock/bond mix in orange, and the S&P 500 in black. The average return for the tactical private wealth management funds through a full market cycle (analysis period) are higher by around 2.5% (13.59% vs 11.09%) over this 10-year period.
Kiplinger's best performing mutual funds to invest in 10 year period.
Kiplinger’s best performing mutual funds to invest in 10 year period. Source: Informa Business Intelligence Zephyr OnDEMAND

Manager vs Benchmark Return Jan 2007 to June 2016.
Manager vs Benchmark Return Jan 2007 to June 2016. Source: Informa Business Intelligence Zephyr OnDEMAND

Over 10 years the difference can be staggering. For example, if we start with $500,000 in Kiplinger’s top fund, and extrapolate 10 years with an average return of 11.09% your Kiplinger’s top fund investment will be worth $1,420,862. While the same extrapolation over 10 years with an investment in a tactical private wealth management fund we achieve a 13.59% average return and end up with $1,788,014. That is $367,000 more for the tactical private wealth management fund.
In reality, most retirees and pre-retirees are going to live through multiple business cycles. What does an extra 2.5% do for you over 20 years? Well for example, if we start with $500,000 and extrapolate 20 years with an average return of 11.09% we get $4,060,309 for Kiplinger’s top fund, not bad. While the same extrapolation over 20 years for the tactical private wealth management fund with 13.59% average return is $6,393,991. The tactical private wealth management fund returns $2.3M more. What could you do with an extra $2.3M? Perhaps you could retire a year or 2 earlier than you had planned, but, of course, we have to remember that past performance is never an indication of future results.
But as we said earlier, these comparisons really are not fair, because the tactical private wealth management funds do not have the same level of drawdowns as most mutual funds, especially the growth stock mutual funds, due to the fact that mutual fund prospectus restrictions don’t allow them to avoid big market losses, while tactical private wealth management funds can go to cash and avoid the big losses, while at the same time being able to take advantage of the market decline by putting their cash back to work in the market in near the lows. See the drawdowns over the last 10 years of the funds from below. During the depths of the 2008 crash the tactical private wealth management funds were down about 11% while the Kiplinger’s Top Fund (NASDX) at its lows was down a full 50% during the same period. Do you remember how losing 50% felt?
The drawdown report below shows how much each investment was down a during any given point in time within the market cycle. All of the funds we are analyzing are shown below.
Drawdown investment report market cycle.
Drawdown investment report displaying when markets were down at any given time. Source: Informa Business Intelligence Zephyr OnDEMAND

There is another great caveat here: the best performing mutual funds to invest in as reported by Kiplinger, are high risk / high return growth stock mutual funds. The tactical private wealth management funds described herein are only moderate risk funds that typically trade with 50% less risk than the market (S&P 500). This is reflected in the drawdown report above, but one must seriously consider the amount of risk they are taking in order to achieve the returns they are getting. In the world of low interest rates and the everlasting reach for yield, one must consider the quote by the founder of PIMCO and current Janus Fund Manager, Bill Gross:
Janus Fund Manager Bill Gross

“At some point you should not worry about the return on your money, but rather the return of your money.”

Being 8 years into a business cycle does not leave much time for one to consider their options in the authors opinion. Estate Street Partners is not an investment advisory firm, but if you would like to learn more about tactical private wealth management funds, we can refer you to an appropriate advisor. Call us today for more information at (888) 938-5872.
We look forward to our visit with you and your professional representatives to assist you with the advancement of your estate planning.
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Rocco Beatrice, CPA (Certified Public Accountant), MST (Master of Science in Taxation), MBA (Master of Business Administration), CWPP (Certified Wealth Protection Planner), CAPP (Certified Asset Protection Planner), CMP (Certified Medicaid Planner), MMB (Master Mortgage Broker)
Managing Director, Estate Street Partners, LLC
Riverside Center Building II, Suite 400, Newton, MA 02466
tel: 1+888-938-5872 +1.508.429.0011 fax: +1.508.429.3034

“Helping our clients resolve their problems quickly, effectively, and decisively.”
The Ultra Trust® “Precise Wealth Repositioning System”

Advantages of Using a Nevada Asset Protection Trust for your Asset Protection Trust

Posted on: March 8, 2017 at 1:06 am, in

The Ultra Trust® irrevocable trust asset protection plan is the best way to protect your assets without going offshore and without risking trouble with the IRS and government.

Photo of Rocco Beatrice

Author: Rocco Beatrice
Over the last decade, asset protection has become a topic of interest among many individuals and families across the United States. Asset protection strategies have been around for centuries, and one of the most commonly discussed today, since the Nevada self-settled trusts statutes changed in 1999 and subsequent changes to their statute of limitations for gifting into these trusts in 2010, is the Nevada asset protection trust type of family trust.

Nevada asset protection: map of United States with Nevada state highlighted.
Nevada asset protection: map of United States with Nevada state highlighted.

Of all asset protection strategies, the Nevada asset protection trust, on the surface, stands out as being one of the most secure methods of securing personal and family fortunes since the change in statutes.
Many asset protection attorneys have recommended the Nevada asset protection trust to their clients for these very reasons. A Nevada domestic asset protection trust (DAPT) is essentially an irrevocable trust instrument that has special features enabled by the statutes of the Silver State. To understand why asset protection attorneys are turning their attention to Nevada DAPTs, it helps to learn about the history of trusts and recent trends in how society perceives wealth.

The Need for an Asset Protection Trust

The 21st century has become one of the most paradoxical times in terms of how global economies are shaping the way demographic societies develop. The vanishing middle class and the change in the mechanisms that rule the redistribution of assets have become major issues of contention.
The concept of asset protection dates back to the 12th century, when the legal instruments we know as trusts today were created in England. The original purpose of trust was to protect the assets of English knights who served the Crown during the Crusades.
History shows that trusts were created for the purpose of asset protection, and the family trust was perfected over the centuries for this purpose as well as for estate planning, gifting to charities, and keeping family fortunes away from the reach of outsiders and third parties; after all, what is a family trust but an effective way of preserving wealth? A modern real estate family trust, for example, is essentially an updated version of the early trusts used by knights.
United States is the most litigious nations in the world. Map of the United States displaying state ranking of number of torts in each state.
United States is the most litigious nations in the world. Map of the United States displaying state ranking of number of torts in each state. (Click on image to see larger map)

Now that we know that about the historic need for asset protection, understanding the current need becomes easier. The United States has become one of the most litigious societies in the world, and this is something that has been exacerbated with the redistribution of wealth in the 21st century.
To a certain extent, the expression “the rich get richer while the poor get poorer” has become axiomatic in modern times. The so-called “one percent” who make up the wealthiest and most powerful individuals and families in the world have indeed become wealthier over the last few decades. The United States middle class is becoming smaller every day. These changes are caused by ineffective redistribution of wealth schemes.

Individuals and families who make up the American upper middle class and above are in serious need of strong asset protection strategies for business owners such as the Nevada version of the asset protection trust. Basically, families who enjoy unencumbered assets worth $100,000, or whose annual incomes are greater than $100,000 per year, face problems that have been created by the uneven redistribution of wealth in the 21st century.
Whereas early family trusts offered protection from feudal lords, usurious creditors and zealous Crown revenue collectors, family fortunes these days are in danger of being decimated by excessive taxation, irresponsible heirs, zealous creditors, frivolous plaintiffs, gold diggers, and other unpleasant characters.
It is generally accepted that the “one percent” have become so powerful as to be considered untouchable, and thus not many people bother with trying to tap their fortunes. The truth is that those within the “one percent” make extensive use of strategies similar to the Nevada asset protection trust, which happens to enjoy many irrevocable trust advantages.
With a diminished American middle class, revenue collectors and creditors are focusing their money-grabbing efforts on the upper middle class and above because they know that they cannot penetrate the asset protection fortresses of the “one percent.” A similar philosophy is practiced by frivolous plaintiffs and gold diggers who want to make an easy score from those who are not protected by a Nevada asset protection trust.
There is no question that there is a strong need for asset protection these days, and the pesky trend of uneven wealth redistribution will continue to make the Nevada DAPT an important financial strategy.

Understanding the Nevada Asset Protection Trust

Financial planners and asset protection attorneys have been closely following the legislative action in Nevada since 1999, which is when Chapter 166 of the Revised Statutes was amended to pave the way for the creation of an irrevocable grantor trust that would become the strongest form of asset protection in the United States.
Chapter 166 of the Nevada Revised Statutes is known as the Spendthrift Trust Act, and was originally created to place restraints on voluntary and involuntary transfers from trusts to benefits. Asset protection lawyers saw that their clients could certainly benefit from an irrevocable grantor trust created under Nevada state law.
A Nevada DAPT has numerous advantages and can serve many purposes, but its most efficient use is for wealth preservation. As mentioned earlier, a Nevada asset protection trust is also known as a domestic asset protection trust (DAPT), a term that helps to differentiate these instruments from offshore trusts.
To understand the basics of a Nevada DAPT, it helps to learn how an irrevocable grantor trust works. When an asset protection attorney recommends an irrevocable grantor trust to his or her clients, it is because of the way irrevocable trust advantages can help in relation to wealth management and preservation.
An irrevocable grantor trust can be a family trust, a small business trust, or even a real estate family trust. It can also be a DAPT in the sense that it assures the protection of assets for the discretionary benefit of the grantor. As its name suggests, an irrevocable grantor trust does not normally allow for revocation or amendments once it is settled, which is why many asset protection attorneys recommend them to their clients.
As opposed to revocable trusts, which have been used as family trusts as well as real estate family trusts, irrevocable grantor trusts offer real asset protection features relative to an irrevocable grantor trust from a different state by virtue of the Nevada statutes and favorable case law. Although revocable trusts allow grantors to serve as their own trustees and beneficiaries, the revocable nature of these instruments make it too easy for creditors, plaintiffs and others seeking to tap into trust assets to convince a court to issue an order to enact revocation in their favor. Such is not the case with Nevada asset protection trusts since they enjoy the irrevocable trust advantages that create legal barriers against those who wish to claw at the trust assets.
There are two special advantages related to the creation of an irrevocable grantor trust in Nevada: First of all, this is an instrument that is designed to be completely self-settled, which means that the grantor can serve as one of the trustees for the purpose of retaining control of the assets.
The distributions and disbursements from a Nevada asset protection trust can be set up in a discretionary manner instead of being mandatory. Another powerful feature of an irrevocable grantor trust is the trust protector. This is advantage similar to the offshore trusts offered in certain Caribbean jurisdictions. When the grantor of a Nevada asset protection trust appoints a trust protector, he or she is essentially assigning a guardian angel with broad powers such as the legal right to remove trustees and to settle conflicts between beneficiaries.
If an irrevocable grantor trust is to be used as a family trust, an asset protection attorney may recommend that the grantor’s spouse and children be the initial beneficiaries so that they can share distributions. In this fashion, the trust assets enjoy greater protection.

What is a Family Trust?

One of the many irrevocable trust advantages of a Nevada asset protection trust is that it can be used to keep wealth in the family. If we pose the question “what is a family trust” to a seasoned asset protection lawyer, the answer will likely be: a legal instrument that provides an ideal ownership situation for all beneficiaries. In a family trust, relatives are usually designated as the beneficiaries of the assets, which means that they get to enjoy them without actually owning them.
Asset protection attorneys often mention the legal and financial burden of ownership when they discus family trusts. Ownership is the basis of legal claims by creditors, frivolous plaintiffs, gold diggers, freeloaders, and others who may want to claw at the family fortune. One of these claimants, for example, may want to file a lawsuit to place a lien on the apartment occupied by a grantor’s daughter who is attending college. Let’s say the claimant performed maintenance work on the apartment and thinks that he was underpaid. If this prospective plaintiff consults an attorney about this matter, chances are that he will be informed that the young lady does not really own the apartment, and that he is basically barking up the wrong tree.
Eliminating the burden of ownership is one of the greatest benefits of irrevocable trusts, but the traditional reasons for establishing a family trust can certainly be satisfied with a Nevada asset protection trust. An asset protection attorney explaining family trusts may mention that they are one of the best estate planning tools for all families, particularly for those whose members will potentially not get along in probate court.
Legendary musician Prince George Nelson's legal estate of the Prince of Paisley Park engaged in probate court.
Legendary musician Prince George Nelson’s legal estate of the Prince of Paisley Park engaged in probate court.

There is a famous someone who may have needed an asset protection attorney to review how irrevocable trust advantages could have benefited him in life. The estate of Prince George Nelson, one of the most brilliant musicians to hail from Minneapolis, is a legal mess.

The Ultimate Safeguard of a Nevada Asset Protection Trust?

As previously mentioned, Nevada’s version of the Domestic Asset Protection Trust fully came to be one of the strongest financial safeguards with a 1999 amendment to the Nevada Revised Statutes.
We have already explained that an irrevocable trust allows the grantor to create a legal instrument that he or she can retain control of as co-trustee, and with the help of a trust protector, the grantor can be also be a discretionary beneficiary. Asset protection means keeping third parties away from property, investments, valuable artwork, and generally anything else that may be of value.
Asset protection attorneys will always recommend creating a Nevada irrevocable trust when the skies are clear, which means before issues such as a divorce, lawsuits or a crash of the financial markets may come about. The reason for this recommendation can be found in the 1999 amendment to Chapter 166, the Spendthrift Trust Act of Nevada.
One section of Chapter 166 states that once a Nevada DAPT has been active for two years, the trust veil cannot be pierced. In a way, this is similar to what the state of Delaware offers to partners of limited liability companies, and it is also similar to the way some offshore trusts operate. After assets have been transferred into a Nevada asset protection trust, creditors have virtually no chance of establishing a legal claim against the assets after two years have passed.
It is important to note that the Nevada provision that locks down assets after two years applies to future creditors, which is why a Nevada DAPT can greatly help individuals or families who come into sudden wealth due to inheritances or sales of assets.
Creditors and plaintiffs who believe they are entitled to file claims against the assets in trust can only challenge the transfer of assets into the irrevocable trust, and they have two limitations in this regard. First, they must file their legal challenges within two years from the date of the trust being funded; second, they have six months to file after they discover or suspect a dubious transfer being made.
After the two aforementioned limitations, creditors and prospective plaintiffs also have the burden of presenting discovery in a timely manner. The Nevada Revised Statutes consider discovery to be on the date it appears on public records; so, if a creditor and claimant fails to perform due diligence, he or she may be late to the party with regard to filing legal claims.
Ever since the statute of limitations on fraudulent transfers for Nevada trusts was enacted, case law does not reflect a single instance of the trust veil being pierced or trust assets being clawed by creditors or claimants as long as they are within these time limitations, but there is even a better way to avoid the claims of fraudulent conveyance. This is what makes the Nevada asset protection trusts so advantageous, but prospective grantors should be thoroughly advised on how to enact the transfers in a way that makes this provision more effective – The Ultra Trust combined with the Derivative Financial Instrument™.
State From Asset Transfer Date From Date of Reasonable Discovery
Alaska 4 years 1 year
Delaware 4 years 1 year
Nevada 2 years 6 months
With our Ultra Trust&reg & Derivative Financial Instrument™ Immediately Immediately
Finally, the recent “Panama Papers” scandal that revealed how the offshore trust industry is used by the rich and powerful is making many Americans think twice about placing their assets in the Caribbean or other jurisdictions abroad.
Although offshore trusts are highly recommended for asset protection purposes, the Panama Papers case brings up valid concerns about activists and journalists working with insiders at these offshore law firms, waiting for the right moment to leak confidential information to the press.
The last thing a grantor wants is to see his or her name listed alongside those of corrupt politicians, drug cartel financiers and disgraced athletes. The Nevada asset protection trust industry has not fallen victim to a Panama Papers-style attack, and this has a lot to do with the fact that it enjoys the support of U.S.-based law firms. Moreover, a Nevada asset protection trust is less expensive to create and maintain than its offshore counterpart.

The Nevada Asset Protection Trust and Daily Life

Asset protection trusts should not be used as checking or savings accounts; however, they can be structured in a way that allows grantors and beneficiaries to access assets in a discretionary manner.
In general, the grantor cannot be the recipient of mandatory distributions; this is a resolution that allows for maximum asset protection. Still, the grantor can be a beneficiary along with his or her spouse, children and relatives, who can enjoy discretionary distributions.
When a Nevada asset protection trust is being managed by a fiduciary trustee, the grantor and beneficiaries can agree on a discretionary distribution and make a formal request. Let’s the family agrees on a $250,000 distribution; the trustee will ensure that the request complies with the law and with the trust agreement. It may take a few days to complete the distribution in a manner that does not pierce the trust veil; for this reason, a Nevada DAPT cannot be considered to have the same flexibility as a money market account with a Visa debit card.
With regard to the minimum assets level at which asset protection trusts can be recommended, the situations will vary. In general, families with net worth of at least $1 million are good candidates for irrevocable trusts based in Nevada. Nonetheless, asset protection attorneys also see young families with annual incomes of $100,000 interested in asset protection; these are usually families who are holding on to investments projected to drastically increase in value. In other words, they may not be the target of money grabbers yet, but they see their situation changing in the near future.
As previously mentioned, asset protection lawyers set up irrevocable trusts in ways that will not arise suspicion among third parties and officials. To this effect, a law firm or trust protector may not recommend depositing every single asset item in trust if doing so may seem as a fraudulent action. This type of advice may extend to distributions, which should not be made in a manner that makes an irrevocable trust look like an ATM.
While it is true that Nevada created some great statutes making the Nevada Asset Protection Trust extremely good, making a Nevada Ultra Trust and combining it with the Derivative Financial InstrumentTM is even better.
The Ultra Trust® has been around for thirty years; being challenged by some of the most powerful groups in the country: the Attorney General of New York, the Attorney General of California, the IRS, and the US Attorney in Washington D.C., among others, without a single detrimental client outcome. Why not put the odds in your corner?
Rocco Beatrice, CPA, MST, MBA, Managing Director, Estate Street Partners, LLC.
Mr. Beatrice is an asset protection award winning trust and estate planning expert.

15 Things to consider when creating a trust

Posted on: March 8, 2017 at 1:06 am, in

In the realm of financial planning, creating a trust can be one of the most important steps in terms of achieving solid asset protection and designing an adequate estate plan. Creating a trust does not have to be a difficult process, but it does require thoughtful consideration and planning.
Financial planning for family: grandparents with grandson and granddaughter.
Choose the right legal or financial professional to create your trust for your family

Most individuals, and even most estate planning attorney’s unfortunately, are not familiar with trust law and how statutes can affect estate planning across different jurisdictions. It is unreasonable to expect someone who is not a legal or financial professional to be able to easily understand how to create a trust; however, certain key aspects of creating a trust can be sufficiently learned so that a do-it-yourself option becomes available.

The following 15 key points are of the essence when creating a trust. Once this information is fully understood, potential grantors will understand how to create a trust to the point that they can begin the process of setting one up by themselves.

1 – The Need and Purpose of Creating a Trust

Trusts were created when the Renaissance period reached the nascent common law system of the English royal court. These legal instruments were born out of an important necessity: when English knights marched across Europe as Crusaders, they conveyed property ownership to individuals whom they trusted to handle affairs such as managing land, paying feudal dues, etc. If the knight did not return to England after a battle, the terms of the trust would establish that the estate would transfer to beneficiaries, who were usually the spouse and children. In the absence of a trust, the Crown would simply claim royal rights over the deceased knight’s property, often leaving his surviving spouse and family penniless.
Asset protection is like a puzzle
Good asset protectton is like a puzzle placing together the right pieces in the right place

The historic needs of trusts have not changed. They are still legal documents that establish a fiduciary relationship whereby personal ownership of assets is relinquished and the property is transferred so that it can be managed by a trustee for the benefit of others.
The modern purposes of trusts are: asset protection, wealth management, avoiding probate, Medicaid planning, and estate planning. Individuals and couples whose assets including real estate are worth more than $100,000 should consider creating a trust for their own benefit and to protect the financial futures of their loved ones.

2 – The Laws and Rules Governing Trusts

In the United States, trusts fall under the laws of property, which can be different from one state to another. The most important aspects of trusts that can differ from one state to another are: validity, construction and administration. Validity deals with state-specific laws and rules that may render a trust invalid from one jurisdiction to another. For example, at one point many states adopted a rule against perpetuity, which is intended to prevent legal instruments from placing restrictions on property for too long; however, states such as Florida allows property interest that is non-vested in a trust to remain for 360 years instead of the suggested uniformity of 21 to 90 years.
Although there seems a fair amount of uniformity in terms of the laws that govern probate, wills and trusts across all states, it is imperative that individuals who set up a trust in one state to draft new documents when they move to another state or make sure that your trust is amendable to change the situs. Once someone learns how to create a trust, the second time around will be substantially easier.

3 – Parties to a Trust

Trusts are legal relationships that require at least three parties: grantor (also known as settlor), trustee and beneficiary. Each of these parties can be represented in plurality, which means that there can be more than one grantor, trustee, and beneficiary.
When learning about how to create a trust, the grantor must assume a decision-making role that includes certain responsibilities such as choosing the type of trust, appointing the trustee, naming the beneficiaries, relinquishing property, and transferring the assets into the trust. Depending on the type of trust and the way the assets are transferred, the grantor may incur into gift taxes; nonetheless, skilled trust advisors can come up with a strategy that can alleviate this financial burden even if your estate exceeds the federal limits for a gift exemption. The role of the grantor is pretty much completed after the assets are transferred and the trust papers are properly filed and settled.
The trustee is the party that takes over the management of the trust. The duties and responsibilities of the trustees are defined by the grantor during the construction of the trust. In some cases, grantors initially serve as trustees until they appoint someone else; some individual grantors set up their trusts in a way that will appoint a trustee only when they become unable to assume management.
The beneficiaries are the parties who are named to eventually receive the benefits of the assets in trust contingent on a trigger event – usually the death of the grantor(s). Beneficiaries also have duties and responsibilities: they may have to pay taxes based on the assets they receive as benefits, and they are also responsible for requesting an audit the work of the trustee to ensure that the trust is being managed in accordance to the law and to the wishes of the grantor.

4 – How Creating a Trust Can Help a Family

In every trust, there is an implied desire of keeping property and assets safe for the benefit of families. This implied desire is the historic factor that prompted the creation of trusts in the first place.
Structure your family trust properly: married couple with son and grandparents
Structure your family trust properly so conditions can be placed on distribution of assets when someone passes away

Trusts can be structured in ways that serve the interests of individuals who can be grantors, serve as trustees and also become beneficiaries; notwithstanding this asset protection strategy, creating a trust is something that is more commonly associated with effective financial planning for families.
With a properly structured family trust, conditions can be placed on the distribution of assets when someone passes away. Gift and estate taxation can be reduced or eliminated, and family affairs can be kept away from public scrutiny by means of skipping probate court proceedings. Family fortunes can be protected from lawsuits and overzealous creditors, and trustees can be appointed with the understanding that they must adhere to the terms of the trust and help to make it grow.

5 – Creating a Trust With a Do-It-Yourself (DIY) Platform

Asset protection and wealth preservation are part of an industry that generates billions of dollars in administration fees each year. Attorneys and CPA firms that offer trust creation services often charge hefty fees their planning expertise. As a result, many individuals and families shy away from setting up trusts to protect wealth that they have worked hard to accumulate over several decades.
Although there is a certain amount of complexity involved in the creation of an effective trust that can provide solid asset protection and efficient estate planning, there is also a several DIY approaches that take each step into account making it easy that prospective grantors can take advantage of.
DIY trusts are the result of advances in software and database technology and are so sophisticated and accurate today, that even most attorneys use them for their clients trusts. Using an online platform that presents grantors with questionnaires about their finances, civil status and estate planning goals. The questions are related to the 15 key points discussed herein; once all the answers have been provided and the questionnaire is completed, two reviews take place. One review is automatically conducted by the software; the other review is conducted by seasoned professionals with years of experience in creating trusts. Once the correct documents are drafted, they are sent to the grantor for execution accompanied with instructions and guidance.
Once prospective grantors become familiar with the 15 key points presented in this article, going through the DIY process of creating an irrevocable trust or creating a living trust becomes a task that is not only easy to manage, but also beneficial in terms of avoiding considerable legal fees. This is one of the greatest advantages for those who learn how to create a trust.

6 – Choosing the Trustee

Proper selection of a trustee is crucial when creating a trust. Some individuals who choose a living trust as an instrument primarily for asset protection and not so much for estate planning may be tempted to serve as grantors, trustees and beneficiaries, but there some caveats in this regard. A similar situation arises in family trusts, whereby parents may want to automatically choose their oldest child to serve as trustee.
The choice of trustee should take into account a few factors: knowledge, experience, potential conflict of interest, access to the assets, management abilities, cost, and relationship. Grantors are likely to immediately think about appointing relatives as trustees because they feel that they can trust them to manage their assets and handle their financial affairs, but this could be a problem insofar as creating a burden for a trustee who has his own family and work responsibilities.
Independent trustees should always be preferred because they fulfill the aforementioned factors and they create a fiduciary duty which is golden in the eyes of a court. Fiduciary duty is synonymous with a legal obligation to protect the assets. A CPA, for example, is a professional under the oversight of a state regulator. Appointing a CPA to handle trustee duties is the best course of action for grantors who believe that appointing multiple trustees is a wise choice. While there are no limits with regard to whom you choose or the number of trustees who may be appointed, the conflict of interest factor is amplified with the presence of more individuals acting in a fiduciary capacity.
If for some reason the grantor feels that he or she must appoint various trustees, a trust protector provision may be included to ensure that potential conflicts between trustees can be quickly resolved.

7 – Creating a Trust with a Trust Protector

Grantors who choose to appoint an independent trustee such as a CPA, friend, in-law, or lawyer do not have to worry about completely and permanently ceding all control of the assets and property transferred to the trust. Within the trust contract, a trust protector provision can assign powers to an individual or an entity for the purpose of replacing the trustee as needed.
The trust protector strategy began being used by asset protection lawyers that operate in offshore financial havens such as the Cayman Islands, Cook Islands, and other jurisdictions and has since been implemented into the better domestic trusts. The trust protector provision used by offshore havens allows someone in the United States, for example, to
Prospective grantors in the United States do not have to go offshore for the purpose of strong asset protection. A handful of states recognize that trustees and trust protectors can coexist within a fiduciary agreement. One such state is Delaware, where an individual or entity serving in this capacity is called an adviser under section 3313 of the Delaware Code.
The powers that can be assigned to a trust protector may include: the ability to replace trustees as needed, the right to control spending, the power to veto distributions, and the ability to step in whenever a conflict between trustees arises.

8 – Revocable vs. Irrevocable Trusts

Of all the legal strategies that can be applied when creating a trust, the most important to understand is the difference between revocable and irrevocable trusts.

Watch the video on revocable trusts vs irrevocable trusts

Revocable trusts are designed to give grantors an opportunity to easily undo the terms of the agreement so that they can retain control and ownership over their assets. Revocable trusts can also be modified at will by grantors.
Irrevocable trusts are designed to give grantors maximum benefits in terms of asset protection, estate planning, tax advantages, Medicaid planning, and others. Unlike revocable trusts, grantors do not retain ownership or control of assets held in irrevocable trusts, and the terms cannot be modified as easily.

Generally speaking, irrevocable trusts are the better choice for individuals and for families, and they can be set up on DIY basis.

9 – Married Couples and Trusts

Couples who are either legally married or who live together under the terms of a common law marriage or civil union can draft trust agreements that reflect their lifestyle and their financial goals. To this effect, a joint irrevocable trust can be created to meet the needs of most couples. In such case, one or both spouses act as the grantor, but each spouse can designate beneficiaries who can receive a share of property owned in common.
The terms that govern the property held in a joint trust can be dictated by both spouses. The estate planning benefit, when one spouse dies, the assets and property remain in trust for the enjoyment of the benefits. A provision can be included in the trust for the purpose of a final distribution to take place once both spouses pass away.
Preplan a divorce with prenuptial agreements: husband and wife in bed with wife in distress
You can preplan a marriage with a prenuptial agreement

Individual trusts can also be created by married couples who wish to keep their property separate. Reasons for doing this include: second marriages and the desire to not cede control of assets and property to a spouse. Couples who are engaged and wish to keep their property separate throughout their union can also set up individual an irrevocable trust vs a Prenup which work 100% of the time in divorce situation whereas a prenup usually creates more problems than it solves; there is nothing more romantic than asking your wife to preplan a divorce with a prenup before you commit to spending the rest of your life together.

10 – Naming Beneficiaries and Distributing Benefits

Creating a trust is something that is done for the benefit of others, who are usually spouses, children, and relatives; these are the beneficiaries. By creating a trust, grantors have certain advantages and can even create incentives with regard to financial planning for children and minor beneficiaries.
One common concern among grantors as they grow older is whether their children and grandchildren could be negatively affected when they inherit a substantial amount of money. When it comes to beneficiaries who are minors, a trust allows grantors to specify those incentives and conditions that must be met before the trustee can make a distribution. Age is an example of a broad condition; in these cases, a minor must reach certain ages before distributions are made. An incentive would be a specific condition, which could be graduating from high school or from college to encourage that beneficiaries pursue education or careers.
Avoiding lump sum inheritances that may be squandered by potentially not-yet-mature beneficiaries is a popular and wise provision among trust grantors in the United States.
Guardians can also be nominated for minor beneficiaries when creating an irrevocable trust, and this is a designation that should also be made in a will.

11 – Exclusions from a Trust

When learning how to create a trust, prospective grantors must think about every angle that could apply in terms of estate planning and distribution of wealth over the next 50 years. One particular angle that certainly merits careful thought is not so much who will be the beneficiaries; it is important to think about who must be specifically left out of the trust.
Similar to leaving people out of a will or disinheriting someone, a trust can be set up in a discretionary manner so as to designate who should really benefit from the estate and who shouldn’t. Exclusions can be specified in DIY trusts, but they must not run afoul of provisions against disinheritance in certain states.

12 – Depositing Assets in Trust

Transferring assets into a trust is known as “funding the trust.” Just about any type of asset or property can be transferred to an irrevocable trust, and this includes personal and business assets. Cash, life insurance policies, investment accounts, precious metals, and even companies can be transferred, but grantors should keep in mind that they are ceding ownership to the trust, which means that business and investment decisions will be made by the trustee after consulting with their financial advisor, you.
A trust can have a home with a mortgage charged against it: home in white box
A trust can have a home even though a mortgage is charged against it

With regard to real estate, if the property is shared with a business partner in what is known as a tenancy-in-common agreement, your equity share can be deposited into the trust. Personal checking accounts, everyday vehicles that have no luxury or collectible value, 401(k) and retirement accounts, and assets that are not really valuable typically are left out of the trust.
If your home has a mortgage, it can still be added to the trust and, due to the St. Germain Act of 1982, the bank cannot call your loan due or accelerate your payment schedule with them. If you stop paying your mortgage, however, they can still foreclose on the home because they are still the first lien-holder. What they cannot do is go after other real estate or assets that are properly put into the trust.

13 – Jurisdiction and Venue

When choosing the state where the trust will be created, it is important to know about the applicable statutory provisions; this is known as the trust situs. The significance of choosing the trust situs cannot be ignored, and this was something that was partially discussed in the second point of this article with regard to the rule against perpetuities. Some states offer stronger asset protection than others; however, when real estate property will be transferred into the trust, the trust situs should be the same state where the real estate assets are located.
This means people with a summer home in Michigan or a winter home in Florida and Colorado, will likely need to set up more than one trust.

14 – Reasons for Creating a Trust

Protect your assets before entering into a nursing home: ill husband in bed with wife nursing him
Protect your assets before entering into a nursing home

Learning how to create a trust is mostly a matter of function; understanding the reasons for creating a trust and how financial goals will be achieved takes more thought and consideration. When the goals are clearly defined, drafting the trust agreement is easier.
The most common goals chosen by trust grantors include: passing wealth efficiently by avoiding the probate process, reducing estate taxation, preserving assets for charities, retaining control over wealth distribution, and protecting assets by keeping them within the family instead of a creditor or nursing home.

15 – Building a Legacy With Trusts

Irrevocable trust asset protection schematic diagram of the different types of relationships involved
An irrevocable trust asset protection diagram of the different types of relationships involved. (Click the above diagram to enlarge)

At some point in life, prospective trust grantors shift their focus from wealth creation to wealth preservation. Trusts are not merely for estate planning; they can be used in life to structure distributions to minors as they grow older and start building their lives, or they can also be used to alleviate tax burdens so that gifting to charities can be conducted for maximum benefit.
A properly managed trust can help to build a legacy by providing business continuity over a family fortune across generations. This is how a legacy can be built; financial success does not have to always live in the present, it can also be preserved and protected so that a family can always enjoy its benefits.

We look forward to our visit with you and your professional representatives to assist you with the advancement of your estate planning.
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Rocco Beatrice, CPA (Certified Public Accountant), MST (Master of Science in Taxation), MBA (Master of Business Administration), CWPP (Certified Wealth Protection Planner), CAPP (Certified Asset Protection Planner), CMP (Certified Medicaid Planner), MMB (Master Mortgage Broker)
Managing Director, Estate Street Partners, LLC
Riverside Center Building II, Suite 400, Newton, MA 02466
tel: 1+888-938-5872 +1.508.429.0011 fax: +1.508.429.3034
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This statement is required by IRS regulations (31 CFR Part 10, 10.35): Circular 230 disclaimer: To ensure compliance with requirements imposed by the IRS, we inform you that any U.S. federal tax advice contained in this communication (including any attachments) is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any transaction or matter addressed herein.

8 Advantages of Choosing an Irrevocable Grantor Trust as Your Family Trust

Posted on: March 8, 2017 at 1:04 am, in

8 Advantages of Choosing an Irrevocable Grantor Trust as Your Family Trust

What is a Family Trust, what is their Origin, and how can they help me?

We get many calls every week asking “what is a family trust, where did they originate, how could they help me?” There are many types of “family trusts.” Some are specifically for the purposes of holding real estate such as a real estate family trust, and some designed to hold only life insurance like an irrevocable life insurance trust (ILIT) and others are for more general purposes. In general, although the use of a family trust dates back a few centuries, lawyers and estate planning firms have mostly overlooked the irrevocable grantor trust as a preferred instrument for this purpose. While most ill-advised attorneys tend to promote the revocable living trust, we, along with most asset protection attorneys are of the opinion that an irrevocable grantor trust makes the best family trust in most circumstances, and the following eight reasons explain why.

Benefits of a Family Trust #1 – An Irrevocable Grantor Trust Protects Assets

King of British Empire creates feudal taxes in the likeness of estate taxes.
King of British Empire creates feudal taxes in the likeness of estate taxes.

Creating a postmortem real estate family trust was one of the earliest purposes of trusts upon their establishment in the 15th century. The historically controversial King Henry VIII of England did not like the use of trusts too much; in those days, feudal taxation was excessive to the point that the Crown supported the appropriation of property as soon as knights passed away. In this case, early real estate family trusts were created upon the execution of wills, which meant that relatives could benefit from land that could not pass to the Crown. King Henry VIII was not in agreement with this practice and thus prohibited these real estate family trusts by royal decree; upon his passing due to health issues related to obesity, the English Court of Chancery reauthorized the use of trusts.

Although feudal taxation would be gone long before the fall of the British Empire, it survives in spirit in the form of estate taxes. This taxation standard is the basis of the idiom about there being nothing certain but death and taxes, for it is true that even the dead are required to pay tax in the absence of legal instruments such as an irrevocable grantor trust in today’s world.
Estate taxes are present at both the federal and in many states at the state level. Essentially, these are death taxes, a vestige of the Henry VIII days that seeks to collect revenue even after the taxpayer shuffles off this mortal coil. Modern statutes are not draconian in this regard; some exemptions and the use of an irrevocable grantor trust are allowed.
In situations like these irrevocable trust advantages are outstanding. An irrevocable grantor trust basically serves the same purpose as they did when real estate family trusts were created in the midst of the Renaissance period: to protect property and assets from the claims of third parties, including the tax authority. In the past, these third parties were the Crown, the feudal lords, the lenders, and potential usufructuary actors who would jump at the chance of claiming a piece of a knight’s property once he passed away. The modern versions of these third parties in the United States would be the Internal Revenue Service (IRS), the state revenue collection agencies, creditors, opportunistic or frivolous plaintiffs, and even gold diggers.
Irrevocable trust advantages go beyond the estate tax. A modern irrevocable grantor trust can do more than simply avoiding the payment of death taxes; they can provide individuals and their loved ones with guaranteed income while effectively transferring property and assets to heirs in a manner that is more efficient than traditional wills. Asset protection attorneys dedicated to estate planning and wealth management have been known to recommend about a dozen trust structures to families; however, only a properly written, executed, and funded irrevocable grantor trust is known to provide “bulletproof” protection if they are properly structured and managed. Any irrevocable grantor trust broken in the last 150 years of litigation, the only ones broken were ones that had issues with how they were written, executed, or funded.

Benefits of a Family Trust #2 – Irrevocable Trust Advantages Include Providing Ideal Ownership Situations

What are other examples of irrevocable trust advantages? It all boils downs to a legal theory known as the “burden of ownership.”
There is no question that we live in highly litigious times. Frivolous lawsuits that seek to establish a claim over property or assets are filed every day, and this is a situation that is often magnified after death. A good example in this regard would be legendary musician Prince, whose unfortunate death was followed by numerous siblings and half siblings coming forward to meet under contentious circumstances as they suspected that the late Minneapolis star did not leave do any estate planning what-so-ever, not even a will.
State ranking of Ameria of the number of torts
A graphic map of the number of torts per state. (click on image to see larger detail. 383KB)

Legal analysts and asset protection attorneys following the Prince case have commented that the burden of ownership is something that will haunt his estate for years to come as his survivors continue to fight in court. In the absence of an irrevocable grantor trust, Prince Roger Nelson’s estate will pay a huge estate tax with relatives ready to file claims for the remainder that establish his ownership of assets and their rights as heirs apparent.
The burden of ownership is what makes frivolous lawsuits happen in the first place. The first legal hurdle that a plaintiff must clear is that of establishing that the respondent actually owns the assets or property being claimed. The case cannot move forward and should be dismissed when the court finds that the lacks this basis; in other words, claims can only be made against property that is legally owned by the respondent.
When an irrevocable grantor trust, the burden of ownership is effectively removed. Assets placed within a properly written, executed, and funded irrevocable trust are not owned by individuals; instead, they are owned by the legal entity established by the terms of the trust, but unlike a corporate structure, the trust has no shareholders, just beneficiaries. This does not mean that families cannot enjoy automobiles, homes, art, liquid funds, investments, etc; all these assets are still available for the use of beneficiaries, and they can even be sold and transferred by the trustee as instructed by the trust.
Prince photo
Prince could have set up an irrevocable trust

In the case of the late Prince, for example, an irrevocable trust could have been set up so that the income from the rights and royalties to the music he created could be paid to his family in perpetuity. Prince could have effectively separated himself from his music, but only in the ownership sense, and he could have pulled this off in a very private way so that no one except for select confidants would have known about the true ownership.
Doing away with the burden of ownership is something that can certainly be considered one of the irrevocable trust advantages. Once again, the notoriously litigious society that we live in makes this a necessity for many families.

Benefits of a Family Trust #3 – Income Tax Returns

One of the most famous examples of an effective irrevocable trust structure being used was made known to the public during the 2012 electoral campaign of former Massachusetts Governor Mitt Romney.
As a candidate to the Presidency of the United States, Romney was required to provide a series of financial disclosures that revealed his use of a series of irrevocable trusts that effectively will allow his family to avoid a 35 percent tax rate on assets valued at more than $5M at the time of the trigger, his death.
What the public learned about Mitt Romney's irrevocable trusts and how they protected assets
What the public learned about Mitt Romney’s irrevocable trusts and how they protected assets

What the public learned during Romney’s campaign about irrevocable trusts and how they shield assets from taxation was unprecedented. His family’s estimated net worth inside the trusts back then was $250 million, but this mostly came from financial disclosures of his investment banking firm Bain Capital. Due to the privacy features of irrevocable trusts, it is very possible that the American public will never know the exact net worth of Romney and his family.
Despite his use of irrevocable trusts, Romney was still able to produce the requisite income tax returns that candidates are expected to show to the public. This tradition of American politics did not help Romney’s campaign much because it proved that he took advantage of certain credits and exemptions that reduced his personal income tax burden. What the public never got to see, however, was any tax return from the irrevocable trusts that the Romney family members reportedly benefit from.

The American public will probably never get to see the tax returns produced by the Romney family trusts, and this is due to the bold privacy protections of irrevocable trusts. This does not mean, however, that the trust itself is invisible to the IRS; it has its very own tax identification number and files its own tax return, but it is understood that the beneficiaries are not the legal owners of the assets held therein.
Irrevocable grantor trusts used for the purpose of family wealth preservation and management are not illegal instruments of tax avoidance, either the trust or the individual will pay taxes due on income, it is typically just a different process. Form 1041, U.S. Income Tax Return for Estates and Trusts are filed each year by thousands of trustees and CPAs across the country. Tax advantages and reduced liability shall not be confused with tax avoidance.

Benefits of a Family Trust #4 – The Probate Process

The statutes of all 50 states of the Union have at least two elements in common: a criminal code and a probate code. In the United States and across the world, the intent of the probate process is to establish the legal validity of wills and other instruments that individuals executed before they passed away. In other words, the probate process ostensibly puts the courts in a position of representing the legal interests of the departed.
Probate process in America is a legal avenue for wealth redistribution
Probate process in America is a legal avenue for wealth redistribution

In reality, the judicial probate process in all 50 states serves as a legal platform of wealth redistribution, whereby debts and taxes are paid before the heirs can establish a claim to what is left of the estate.
Probate proceedings happen to be matters of public record; this is particularly useful in cases of intestacy, which is when individuals pass away without leaving a trust or even a will. As mentioned above, this may seem to be the case with the Prince estate, and it is bound to get more convoluted as time passes and more dirty laundry is hung out to dry on news headlines.

No family wants to go through the probate process because of the cost (5-10% of assets), public scrutiny, delay in distribution of assets, and opportunity for outsiders claims and as any asset protection attorney will tell you, it can be completely avoided. Trusts can certainly prevent the ugliness of public probate proceedings. In terms of avoiding probate and keeping family life out of the public view, nothing is more efficient than a trust, and this is something that cannot be stressed enough: any trust can keep family affairs in the family when the time comes to settle an estate. Moreover, a trust should also be structured in a certain way for this privacy and anti-probate features to be effective.

Benefits of a Family Trust #5 – Setting Up an Irrevocable Grantor Trust for Generations

Families who wish to protect their assets so that they can pass from one generation to another should choose their instrument carefully. Two important benefits of a family trust should always be longevity and equity in terms of asset control.
A revocable living trust cannot guarantee longevity, nor can they ensure families that one of their members could suddenly exert total control over property and assets. Most grantor trusts are of the revocable living trust type, which means that the Grantor, as owner of the assets that will be deposited in trust, will retain too much control. One notorious example in this regard is the family trust created by media mogul Sumner Redstone, majority shareholder of Viacom/CBS.
Sumner Redstone, owner and CEO of Viacom Inc.
Sumner Redstone, owner and CEO of Viacom Inc., convinced members of family trust to allow him to retain control

The Viacom/CBS media empire found itself at odds when the National Amusements trust, which has 80 percent voting power in the Viacom/CBS affairs, moved to oust two top executives. According to probate filings, Redstone convinced the members of the family trust to approve keeping him in control despite his advanced age and questionable competence to handle financial affairs.
As the Viacom/CBS case progressed in court, legal analysts argued whether giving Redstone so much control over the trust was a wise business decision for Viacom/CBS. To be clear, the National Amusements trust is irrevocable, but it is structured in a way that makes Redstone the only beneficiary as long as he is alive, which means that he can appoint or dismiss trustees as he pleases.

There are better ways to establish irrevocable trusts that would not run into the issues seen by the Viacom/CBS sordid state of affairs. The first step is to ensure that the trust is not a revocable living trust, which gives the Grantor too much control over decisions on how to manage the family fortune. The idea is to establish solid permanence for the family by stripping ownership from the Grantor and appointing an independent Trustee. The trust must be structured in a way that can benefit the family from one generation to the next, and this requires a structure that does not allow arbitrary the removal of assets or beneficiaries. In some cases, a Trust Protector may also be appointed for the purpose of hiring and dismissing trustees.

Benefits of a Family Trust #6 – Keeping Family Fortunes From Being Lost Abroad

In the later decades of the 20th century, major changes in the laws and regulations of the United States prompted some families to consider going offshore for the purpose of protecting their assets.
The offshore asset protection industry came of age during the Reagan years and grew exponentially as the World Wide Web developed. As a result, more American families became convinced by their asset protection attorney that the best asset protection strategy available to them could be found in offshore financial havens such as the Cayman Islands, the Bahamas, Switzerland, Panama, and other nations where fiduciary laws and regulations favored privacy and the protection of wealth.
Offshore financial havens take advantage of their regulatory climate to safeguard assets and keep them away from aggressive creditors, frivolous plaintiffs, freeloaders, gold diggers, and other unpleasant characters whose purpose in life is to claw away at family fortunes.
Although the offshore asset protection strategy is often considered to be pretty bold and effective, it has unfortunately attracted lots of attention in the 21st century. The so-called “Snowden Effect” of activism and Wikileaks-style whistleblowing resulted in the Panama Papers scandal of 2016.
The estate planning and wealth management's world industry learn from the Panama Papers
Panama Paperss give the estate planning and wealth management’s world industry a lesson

The estate planning and wealth management industry has learned some hard lessons in the wake of the Panama Papers, particularly about the zeal that drives activists and journalists to investigate and expose what they consider to be scandalous. It has already been established that the bulk of the Panama Papers revelation consists of individuals, families and business entities that simply wished to legally take advantage of offshore jurisdictions to protect their assets. Unfortunately, the names of American families have been run through the mud along with the names of unsavory characters who also used offshore financial havens for nefarious purposes.
Any expert asset protection attorney will tell you, there are two clear realities about offshore family trusts: they are effective tools for asset protection, but they are also overkill for most American families as the cost to maintain one ranges from $5-10,000 annually. The fact that they are also being targeted by surreptitious activists and data journalists who claim to operate in the name of transparency is alarming.

What any expert asset protection attorney will agree with, is that many American families do not realize is that bold asset protection and wealth preservation can be achieved domestically with a properly written, executed, and funded irrevocable trust, which can also be combined with a limited liability company (LLC) for even bolder protection. There is no need to get tangled up in high maintenance costs or a cloak-and-dagger affair such as the Panama Papers.

Benefits of a Family Trust #7 – Gifting Versus Irrevocable Grantor Trusts

Many an asset protection attorney suggests gifting as a strategy for individuals who wish to transfer a lump sum to their survivors. They may even recommend transferring funds into an irrevocable trust as a gift. This is a severely flawed strategy that must be avoided at all costs.
Irrevocable trusts are superior to plain gifts in the sense that the Grantor will relinquish all control. First of all, lump sum gifts tend to be used irresponsibly, which happens to be against the precepts of estate planning. Second, a gift made to an irrevocable trust may expose those assets in a potential court case.
Plaintiffs represented by seasoned asset protection attorney who are skilled in the ways of asset protection can easily uncover gifts made into irrevocable trusts. If a family wishes to place assets in trust for the benefit of their heirs, then the Grantors must be properly advised on how the transfer must be executed. Gifts into trusts may appear to be questionable to a judge, who could in turn issue an order to reverse the asset transfer.
Any asset protection attorney will tell you that irrevocable trusts are better options than outright gifts, but they must be structured in a certain way that protects the interests of the family. Reduction of capital gains taxes is just one aspect of this strategy, which may also call for Independent Trustees and a Trust Protector.

Benefits of a Family Trust #8 – A True Legacy and Peace of Mind Can Be Attained With an Irrevocable Grantor Trust

Primary benefits of a family trust are to keep assets within the family, and no other legal instrument can achieve this as efficiently as an irrevocable grantor trust.
For married couples who are planning on having children, there may always be a concern about what could happen to their fortune should one spouse pass away. If the surviving spouse gets married again, there is always a chance that the estate of the departed husband or wife could be enjoyed by the members of the new family instead of what the couple had originally planned.
With a properly constructed irrevocable trust, a provision can be stipulated for the benefit of true beneficiaries, who can be the children of the couple who agrees to form the trust in the first place.
When setting up an irrevocable trust to protect family assets, the ultimate goal is to establish a legacy. A frank discussion with estate planners should provide the guidance for the objective of the irrevocable trust. From drafting to funding and from execution to management, an irrevocable trust can truly help families build their legacies in perpetuity.

We look forward to our visit with you and your professional representatives to assist you with the advancement of your estate planning.
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Rocco Beatrice, CPA (Certified Public Accountant), MST (Master of Science in Taxation), MBA (Master of Business Administration), CWPP (Certified Wealth Protection Planner), CAPP (Certified Asset Protection Planner), CMP (Certified Medicaid Planner), MMB (Master Mortgage Broker)
Managing Director, Estate Street Partners, LLC
Riverside Center Building II, Suite 400, Newton, MA 02466
tel: 1+888-938-5872 +1.508.429.0011 fax: +1.508.429.3034
email: [email-obfuscate email=”” link_title=”Email Rocco Beatrice” class=”email_obfuscate_class” tag_title=”Question from”]
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“Helping our clients resolve their problems quickly, effectively, and decisively.”
The Ultra Trust® “Precise Wealth Repositioning System”
This statement is required by IRS regulations (31 CFR Part 10, 10.35): Circular 230 disclaimer: To ensure compliance with requirements imposed by the IRS, we inform you that any U.S. federal tax advice contained in this communication (including any attachments) is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any transaction or matter addressed herein.

Irrevocable Trust Structure

Posted on: March 8, 2017 at 12:58 am, in

Asset Protection: Part 3 of 4, by Rocco Beatrice, Sr.

The bolt part of the Ultra Trust®.
Our Ultra Trust®

Our Ultra Trust® is an intellectual property right registered with the U. S. Patent Office, financially engineered to remove yourself from the probability of becoming the next creditor victim. This whole website is devoted to the best methods and strategies of asset protection and our Ultra Trust®.
Irrevocable Trust Asset Protection chart of the different types of relationships in a trust document.

What’s an asset protection trust? What’s a Trust?

A “TRUST” is nothing more than a “CONTRACT” between the person who wants asset protection (the Settlor), the person who will manage the assets (the Trustee), for the benefit of all Beneficiaries – whomever you choose.
The Trust Agreement requires the transfer of assets to be protected from the original owner (Settlor) to a legal entity for the purpose for which the Trust Agreement was created.
What type of trust, Grantor, or Non Grantor? What’s the distinction? A Grantor Trust take a special consequence within the tax code. Our Ultra Trust® is a “Grantor-Type Trust” for tax purposes is treated as a disregarded legal entity. The disregarded entity is “Income Tax Neutral” meaning that the original Grantor retained strings attached so that for purposes of the IRS income tax reporting, the original owner (grantor(s) retains the assets in his complete control, thus our Ultra Trust® is a “pass-through” to his form 1040 i.e. real estate tax deduction and mortgage interest deduction on his person income tax return, INCOME TAX NEUTRAL.
Revocable, Irrevocable trust, what’s that mean? Revocable is when the original person with the assets transfers (repositions) the assets to a trust with strings attached. The Grantor, the Trustee, and the Beneficiary are the same person. Effectively you have done nothing, because it’s between you and you for the benefit of you. A revocable trust does absolutely nothing for asset protection because you can be forced to revoke it by a creditor or court. Many lawyers recommend revocable trusts for avoiding probate, recognizing that the trust is not worth the paper it’s written on for protecting assets against frivolous lawsuits and the avoidance of estate taxes or the 5 year Medicaid spend-down provisions.


A properly written, executed, and funded irrevocable trust, such as the Ultra Trust®, is an extremely powerful asset protection device. The opposite of revocable is “irrevocable.” No strings are attached by the Grantor. “Irrevocable” means that nobody can force you to revoke it, and thus if executed correctly, gives phenomenal asset protection benefits. Once assets are transferred from the Grantor(s) to the Trust, the Grantor has no control, other than possibly some very limited powers. It’s this clear-cut lack of control and ownership that makes this trust very powerful asset protection device. You can’t be sued for assets you no longer own or control. The fiduciary duty of an independent trustee of an irrevocable trust is critical and viewed by the courts as golden. The Trustee must preserve the assets entrusted to him at any cost. Courts take a very unpleasant view on a Trustee who has abused his fiduciary duty. Breach of fiduciary duties by a Trustee could be considered and intentional tort subject to punitive damages.
OUR irrevocable Ultra Trust® asset protection trust when combined with a Limited Liability Company (LLC) or Family Limited Partnership (FLP) is an asset protection fortress, short of a foreign asset protection trust. A foreign asset protection trust is the Rolls Royce of asset protection, the irrevocable trust with an LLC is the Cadillac / Mercedes / Lexis.

WHAT’S A TRUST PROTECTOR? You won’t get this from your lawyer

Because you are concerned about the power and discretion granted to the Trustee, we add the Trust Protector to create the checks and balances you need to feel comfortable, while reinforcing the bullet-proofing of our Ultra Trust®
The power of the Trust Protector is derived from the Trust Contract. The Agreement sets forth the dual function of the Trustee and the Trust Protector to give you a backup plan if the Trustee is not cooperative. While the Trustee can be a bank, CPA, trust company, or other financial institution, the Trust Protector is usually a person close to the family, a CPA, accountant, or lawyer who is already the family consiglieri.
The Trust Protector’s powers can take any form, limited only by the wishes of the Grantor(s) and their imagination. Generally, the powers granted the Trust Protector are:
1. Ability to remove or replace the Trustee without any explanation (Donald Trump style: “You’re Fired.” Often this is the only power granted to the Trust Protector. In cases where the Trustee is a corporate body (bank, trust company, insurance company, or professional trustee) if the Trustee is unresponsive or not performing to the Trust Agreement for the benefit of all Beneficiaries, or changes in management, or investment choices, the Trust Protector can fire and replace the Trustee, at will, without explanation to the current Trustee.
2. Ability to change the Trust’s situs to take advantage of law changes or necessary steps to act in the best interest of beneficiaries if they move from low tax states to high tax states, i.e. from CA or NY (high tax states) to NH, TX, or NV (low tax states) or changes in laws occurring long after the initial implementation of the Trust Agreement.
3. Ability to resolve deadlocks between co-trustees or in squabbling between the Trustee and/or Beneficiaries.
4. Ability to veto spending over a certain amount. This level of control is significant if disbursements of the Trust are in excess of pre-arranged amount requiring two signatures, the Trustee and the Trust Protector i.e. in excess of $20,000.
5. Ability to veto distributions to Beneficiaries. Before distributions are to occur the Trust Protector may want to investigate the financial stability of the Beneficiaries. For example, if the beneficiary is being sued, The Trust Protector may withhold distributions, or the Beneficiary is undergoing divorce proceedings, or the Beneficiary may be too young, is under duress, mentally incompetent, unable to manage, or otherwise unavailable. The Trust Protector can override/veto the Trustee and withhold distributions temporarily or permanently make other arrangements such as buy the assets necessary for the benefit of the beneficiary (buy a house, a car, sign a rental agreement, but have the Trust own the assets, make loans, or make other provisions.
6. Ability to veto investment decisions. This checking and balancing of investment decisions are based on the Trust Protector’s experience, prudence, and the Trust Agreement guidelines in protecting the assets for the Beneficiaries.
7. Ability to sue and defend lawsuits against the Trust assets. The fiduciary duty of the Trustee and The Trust Protector as to save the assets of the Trust, at any cost, for the benefit of all classes of Beneficiaries.
8. Ability to terminate the Trust. If in the opinion of the Trust Protector there are insufficient funds or the cost of administration is greater than available cost/benefit, the Trust Protector may terminate the Trust, as for example, if all beneficiaries have received their distributions based on age (over the age of 21) and there’s one minor beneficiary currently 10 years old, and there aren’t enough assets to administer the Trust for the next 11 years, the Trust Protector has the power to make the final distribution and terminate the Trust.
The Trust Protector’s role is created by the Trust Agreement to add an additional layer of protection and is usually a person most familiar with the Grantor’s long term financial and personal goals. A Trust Protector usually is the balance of power between the Trust Agreement, the Trustee, The Grantor, and the Beneficiaries. Neither the Trustee or the Trust Protector should be anyone related to the family by blood or marriage. Both positions should be independent of each other acting in the long-term interest of the beneficiaries.
Read part 1 of 4: Asset Protection Strategy
We look forward to our visit with you and your professional representatives to assist you with the advancement of your estate planning.
Rocco Beatrice Senior profile photo
Rocco Beatrice Sr sig
Estate Street Partners logo

Rocco Beatrice, CPA (Certified Public Accountant), MST (Master of Science in Taxation), MBA (Master of Business Administration), CWPP (Certified Wealth Protection Planner), CAPP (Certified Asset Protection Planner), CMP (Certified Medicaid Planner), MMB (Master Mortgage Broker)
Managing Director, Estate Street Partners, LLC
Riverside Center Building II, Suite 400, Newton, MA 02466
tel: 1+888-938-5872 +1.508.429.0011 fax: +1.508.429.3034
email: [email-obfuscate email=”” link_title=”Email Rocco Beatrice” class=”email_obfuscate_class” tag_title=”Question from”]

“Helping our clients resolve their problems quickly, effectively, and decisively.”
The Ultra Trust® “Precise Wealth Repositioning System”
This statement is required by IRS regulations (31 CFR Part 10, 10.35): Circular 230 disclaimer: To ensure compliance with requirements imposed by the IRS, we inform you that any U.S. federal tax advice contained in this communication (including any attachments) is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any transaction or matter addressed herein.

Avoiding Fraudulent Conveyance: Derivative Financial Instrument®

Posted on: March 8, 2017 at 12:56 am, in

Avoiding Fraudulent Conveyance: Derivative Financial Instrument®

The bolt part of the Derivative Financial Instrument®
Our Derivative Financial Instrument®

Asset Protection: Part 4 of 4, by Rocco Beatrice, Sr.

Our Derivative Financial Instrument® is the most decisive critical part of your estate planning:
Combination lock to unlock the Derivative Financial Instrument®
Derivative Financial Instrument®
Our Derivative Financial Instrument® is a financial intermediation of a contractual method of [E]xchange in money or money’s worth, designed and implemented, to avoid fraudulent conveyance claims by a [P]ast; [P]resent; and a [F]uture (not yet born) creditor.

Our Derivative Financial Instrument® is engineered for estate planning to avoid the [T]trigger for: – IRS income taxes, gift taxes, estate taxes, and probate.
When timely and properly implemented, our Derivative Financial Instrument® will set the legal defense for potential civil conspiracy issues that may be advanced by the [P]ast; [P]resent; and [F]uture (not yet born) creditor.
The bolt part of the Derivative Financial Instrument®
Our Derivative Financial Instrument® is a restricted> long-term cash – asset class derivative contract executed at “fair market value,” non-marketable, non-amendable, non-assignable, non-transferable, non-anticipated, non-encumberable, whose market value is derived from the underlying asset, indexed to an IRS supported interest rate, terminating at death.
Our Derivative Financial Instrument® is the most critical decisive component to our Ultra Trust©

The bolt part of the Derivative Financial Instrument®
Our Ultra Trust© is an Irrevocable Grantor-Type Trust under Internal Revenue Code (IRC) 671-679 and IRS Regulation 7701-7. When implemented with an Independent Trustee, and an Independent Trust Protector, secured to our Derivative Financial Instrument®; our Ultra Trust© is financially engineered to avoid Fraudulent Conveyance claims, defend a claim of Civil Conspiracy, eliminate the Probate process, eliminate Estate Taxes, mitigate and eliminate the Medicaid and/or Medicaid state recovery under the Federal Medicaid Act 42 USC 1396 et. Seq., providing you with a secured unchallengeable estate plan.

The nut and bolt part of the Derivative Financial Instrument®
Unchallengeable Estate Plan: Our Ultra Trust© locked to our Derivative Financial Instrument®

In finance, a “derivative” is a contract that derives its value from the performance of an underlying entity. The underlying entity can be a class of assets, i.e. cash or near cash, a futures contract, an option, collateralized debt obligation, insurance contract, a credit default swap, a stock, a time deposit, a general debt obligation , bonds, mortgages, or any underlying asset used as “the medium of [E]xchange.”
Intermediation is the process of matching positives with negatives to develop a desired outcome in a new contractual obligation method of [E]xchange between third parties.
The underlying entity(ies) considered in our Derivative Financial Instrument®:
  • Estate Planning
  • Gift Taxes
  • Intentionally Defective Grantor Trust (IDGT)
  • Grantor Retained Annuity Trust (GRAT)
  • Grantor Retained Unitrust (GRUT)
  • Commercial Annuity
  • Private Annuity
  • Installment Sale
  • Self Canceling Installment Note (SCIN)
  • Treasury General Counsel’s Memorandum (GCM) 3953, May 7, 1986
  • Estate of Moss v. Commissioner, T.C. 1239 (1980) acq. in result, 1981-2 C.B.1
  • Estate of Costanza v. Commissioner, T.C. Memo 2001-128; reversed and remanded
  • 6th Circuit, No. 01-2207, February 18, 2003
  • Estate of Frane v. Commissioner, 998 F. 2nd ( 8th Circuit 1993)
  • Lazarus v. Commissioner, 58 TC 854, August 17. 1972
  • Estate of Musgrove, 33 Fed Cl. 657 (1995)
  • Estate of Kite, T.C. Memo. 2013-43
  • Estate of William M. Davidson, U.S. Tax Court Docket No. 013748-13
  • United States v. Davis, 370 U.S. 65 (1962)
  • International Freighting Corp. v. Commissioner, 135 F.2d310 (2nd Cir. 1943),
  • United States v. General Shoe Corp., 282 F.2d 9 (6th Cir. 1960);
  • Wood v. Commissioner, 39 T.C. 1 (1962)
  • CCA 201330033; Treas. Reg. § 25.2512-8
  • Revenue Ruling 80-80, 1980 1 C.B. 194
  • Revenue Ruling 55-119, 1955 – 1 C. B. 352
  • Revenue Ruling 86-72, 1 C.B. 253
  • Revenue Ruling 68-392, 1968 -2 C. B. 284; and 69-74, 1969-1 C. B. 43
  • Treasury Regulation 1.1275 4(c); (j); and § 25.7520-3
  • Treasury Regulations § 1.72-6(e); and 1.1001-1(j), October 2006
  • Life expectancy (determined under Reg. 1.72-9, Table V)
  • Federal Medicaid Act 42 USC 1396 et. Seq.
  • Internal Revenue Code (IRC) 72; and (IRC) 7520
Fair Market Value:
Fair market value is defined as “the price at which the property would change hands (the [E]xchange) between a willing buyer and a willing seller, neither being under any compulsion to buy or sell and both having reasonable knowledge of relevant facts to the transaction.” The fair market value of our Derivative Financial Instrument® is generally determined under the annuity tables prescribed by the IRS. See 26 U.S.C. 7520(a); Treas. Reg. 20.7520-1. These tables provide a factor composed of an interest rate component and a mortality component that is used to determine the present value of an annuity. Treas. Reg. 20.7520-1.
Fraudulent Conveyance:
A fraudulent conveyance, or fraudulent transfer, is an attempt to avoid debt by transferring money to another person or company. In civil litigation the creditor attempts to void the transfer and make the asset available to him in satisfaction of his claim.
A transfer will be fraudulent if made with actual intent to hinder, delay or defraud any creditor. Thus, if a transfer is made with the specific intent to avoid satisfying a specific liability, then actual intent is present. However, when a debtor prefers to pay one creditor instead of another that is not a fraudulent transfer.
Under the Uniform Fraudulent Transfer Act you would be committing a crime, see Section 19.40.041
…. (a) a transfer made or obligation incurred by a debtor is fraudulent as to a creditor whether the creditor’s claim arose before or after the transfer was made or the obligation was incurred, if the debtor made the transfer or incurred the obligation: (1) with actual intent to hinder, delay, or defraud any creditor of the debtor.”…
Fraudulent conveyance has to do with transferring assets at “less than the fair cash value” thereby defrauding a potential creditor or the “intentional divesting of assets” which would have been available for satisfaction of his creditor claim. This intentional disregard, can become a sticky-wicky, for a judge who does not like to be undermined in “his” court-room.
Civil Conspiracy:
The “civil conspiracy theory” has been defined by the courts as: (1) an agreement (2) by two or more persons (3) to perform overt act(s) (4) in furtherance of the agreement or conspiracy (5) to accomplish an unlawful purpose /or/ a lawful purpose by unlawful means (6) causing injury to another.
To be convincing, the creditor must allege not only the conspirators committed the act but also the act was tortious in nature. The conspiracy alone is not enough to trigger a claim for civil conspiracy without the underlying tort.
Avoiding the “Trigger:”
Gifting, by definition, is a Fraudulent Conveyance or Fraudulent Transfer because there is NO Exchange at the fair market value. Our Derivative Financial Instrument® solves this problem because the [E]xchange is at the fair market value.
REMARKABLE: Our Derivative Financial Instrument® is contract for which, NOT EVEN BANKRUPTCY COURT CAN UNWIND because it’s at Fair Cash Value and not to the detriment of the Creditor. The Derivative Financial Instrument® protects the assets even after the owner loses a lawsuit. This is because the courts cannot set aside the purchase . . . it’s not voidable by a creditor as a fraudulent transfer, nor by a bankruptcy court as an “executory contract.”
The “Trigger” for Estate Taxes is the value of ALL assets owned by the individual at the DATE OF DEATH, “the Gross Estate.” Our Ultra Trust© eliminates the “Trigger” because on the date of death, ALL assets are owned by your Ultra Trust© with an independent Trustee, and Independent Trust Protector. You cannot file an estate tax return. You cannot Trigger the estate tax return, you own nothing on the date of your death. Your Gross Estate is below the taxable threshold.
Read part 1 of 4: Asset Protection Strategy
Read part 3 of 4: Irrevocable Trust Structure
We look forward to our visit with you and your professional representatives to assist you with the advancement of your estate planning.
Rocco Beatrice Senior profile photo
Rocco Beatrice Sr sig
Estate Street Partners logo

Rocco Beatrice, CPA (Certified Public Accountant), MST (Master of Science in Taxation), MBA (Master of Business Administration), CWPP (Certified Wealth Protection Planner), CAPP (Certified Asset Protection Planner), CMP (Certified Medicaid Planner), MMB (Master Mortgage Broker)
Managing Director, Estate Street Partners, LLC
Riverside Center Building II, Suite 400, Newton, MA 02466
tel: 1+888-938-5872 +1.508.429.0011 fax: +1.508.429.3034
email: [email-obfuscate email=”” link_title=”Email Rocco Beatrice” class=”email_obfuscate_class” tag_title=”Question from”]

“Helping our clients resolve their problems quickly, effectively, and decisively.”
The Ultra Trust® “Precise Wealth Repositioning System”
This statement is required by IRS regulations (31 CFR Part 10, 10.35): Circular 230 disclaimer: To ensure compliance with requirements imposed by the IRS, we inform you that any U.S. federal tax advice contained in this communication (including any attachments) is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any transaction or matter addressed herein.

Asset Protection Strategy Consideration

Posted on: March 8, 2017 at 12:56 am, in

Asset Protection Strategy Consideration

bolt nut Asset Protection of UltraTrust
Our Asset Protection System

Asset Protection: Part 2 of 4, by Rocco Beatrice, Sr.

You see the writing on the wall.
You’re not certain if this litigation is going to begin in a month, six months, or year; but you definitely feel the stress related to it. The thought is consuming and dominating your daily life. If you have never gone through this nightmare, I can tell you: … IT’S EXHAUSTING.
Our Asset Protection System is financially engineered to protect your wealth against unscrupulous lawyers, internet prying eyes about you, your family, your finances, scam artists, identity thieves, and other con-artists, and “I’m from the Government and I’m here to help you.”
90% of the time asset protection gets dismantled due to fraudulent conveyance
Regardless of what structure that you use, whether it be a limited partnership (LP), a family limited partnership (FLP), a domestic Limited Liability Company (LLC), a domestic corporation, a domestic Sub S corporation, a domestic trust, or even an offshore trust, if the judge sees that your transfers were without fair market consideration (i.e. you never got paid a fair price for them when you gave them away), they can be clawed back by the court.
Man with head in sand because he won't deal with the problem of protecting his assets.
Something this stressful gets some people so overwhelmed with fear and anxiety that it causes them an inability to take action. They think that if they keep pushing it aside, and bury their head in the sand, that the problem is somehow going to go away on its own.

This is exactly what happened to someone that called us a last year, but it happens at least once every year. Mike originally reached out to us at a time that there was a high risk of a court battle coming, but nothing was set in stone yet. Because he hadn’t actually been served papers indicating that he’s been sued, he thought there might be a chance that there may never be a lawsuit, so he decided to hold off taking action to avoid the cost.
A few months later from our phone call he found out through a series of checks that bounced that his bank accounts were frozen. The creditor got a preliminary judgment and brought it to his bank, freezing the accounts without even his knowledge.
At that point, not only was there nothing that anyone could do, but he couldn’t even access funds to retain a defense attorney because all of his money was frozen.
You don’t have to go through what Mike went through.
BUT… I’m sure you’re thinking, “well, by using an offshore trust, the judge doesn’t have any jurisdiction, so a ‘judgment’ is not executable and It’ll be fine” and you’d be partially right… except for one small detail:
1. Offshore trusts typically cost $5-10,000 a year to maintain
2. If you have committed a fraudulent conveyance, most judges now put you in jail until you comply with a court order to bring the money back into the United States.
Offshore trusts for real estate work even less well:
Real estate that is physically located in a state that the court does have jurisdiction (even if the property is owned by an offshore trust), can be unwound if it is found that you gave up the asset without getting anything for it.
And while setting up a structure and transferring assets into it well before a problem arises is the best advice, the issue of “fraudulent conveyance” still will come up because there is a 4-5-year statute of limitations for any transfer if you do not get paid for it.
This means that, even if you take action before a lawsuit happens, but less than four – five years from the transfer of the assets, you could still be at risk of a fraudulent conveyance claim. So, if you take the wrong advice, you could lose more than “just money, you could be held civilly and criminally liable” taking advice from every 3rd lawyer who claims to be “the Asset Protection Expert.” Most lawyers use the “gifting method” to transfer assets. “GIFTING” is a Fraudulent Conveyance.
Under the Uniform Fraudulent Transfer Act you would be committing a crime, see Section 19.40.041
… (a) a transfer made or obligation incurred by a debtor is fraudulent as to a creditor whether the creditor’s claim arose before or after the transfer was made or the obligation was incurred, if the debtor made the transfer or incurred the obligation: (1) with actual intent to hinder, delay, or defraud any creditor of the debtor.”…
Your lawyer could also be held liable, and possibly lose his license under the theory for civil conspiracy:
The “civil conspiracy theory” has been defined by the courts as (1) an agreement (2) by two or more persons (3) to perform overt act(s) (4) in furtherance of the agreement or conspiracy (5) to accomplish an unlawful purpose or a lawful purpose by unlawful means (6) causing injury to another.
Read part 1 of 4: Asset Protection Strategy
Read part 3 of 4: Irrevocable Trust Structure

Asset Protection Strategy

Posted on: March 8, 2017 at 12:55 am, in

Asset Protection Strategies

It happened!

Asset Protection: Part 1 of 4, by Rocco Beatrice, Sr.

And now, someone may be planning / plotting / threatening / bullying to sue you. “For everything you’ve got.”
A LAWSUIT IS ON THE HORIZON. You knew that you should have done something before a “lawsuit” was more than just an “idle warning” … You gave it some serious thought. You intended to do it, later… but, … it just never got done.
“Later” became a week, then a year, and now it has been at least three years. And, it just never got done. Sounds familiar?
OUR DYSFUNCTIONAL LEGAL SYSTEM. Contingent fee lawyers, and there’s more graduating from law school. It’s nothing new to you, you heard someone-else’s horror stories, divorce stories, victim stories. You just did not expect it – to become your story.
The internet is full of information. Every 3rd lawyer claims to be the “Asset Protection / Estate Planning” expert. Hundreds of books, thousands of articles. Who can you trust?
My 45 years of personal experience dealing with lawyers and lawsuits in business, right down to the “nuts and bolts.

ASSET PROTECTION is about giving your creditor two (2) options:
1. You dictate the terms of settlement to your creditor.
2. You file for bankruptcy, and your creditor gets NOTHING.
Which is better, diarrhea or throwing-up?
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Read part 3 of 4: Irrevocable Trust Structure

What is a Trust Protector?

Posted on: March 8, 2017 at 12:55 am, in

What is a Trust Protector and Do I Really Need One? Can it protect me and my money? How does a Trust Protector act as a check and balance? What does a trust protector do exactly?

In our gratification-obsessed society, everything is subject to change – even our most intimate relationships.
Today, you’re in a very different place than 10 or 15 years ago. You’ve probably lost touch with many of your old friends. You might live in a different household, a different job, and practice different hobbies. The past is gone forever.
15 years from today, chances are good that things will look different still. While a typical irrevocable trust provides the strongest framework for preserving your hard-earned assets, it lacks the flexibility that your ever-changing circumstances demand.
Simply put, you need a trust protector to back you up. That’s why it’s so important to upgrade to a Trust package with the special power of appointment and trust protector. This added protection gives you the flexibility to respond to unforeseen changes and dilemmas.

Why a Trust Protector?

In many countries, trust protectors are a requirement in an estate plan. While this isn’t true of the United States, legal experts are virtually unanimous in their agreement that trust protectors are a crucial component of any irrevocable trust and estate planning.
A trust protector is a third-party individual – separate from the trustee – who understands the dynamics of your family. He acts as a check on the actions of the trustee and maintains a fiduciary responsibility to the trust. By protecting the assets of the trust from the inevitable squabbles that occur whenever there’s money to be had, he lives up to his name.
The validity of the trust protector has been upheld time and again. The court’s decision in McLean Irrevocable Trust v. Patrick Davis, P.C. (Mo. Ct. App. 2009) clearly establishes the legal basis for the office’s existence and provides a framework for the definition of its roles.
A subsequent case brought by the same plaintiff, McLean Irrevocable Trust v. Ponder, is even more pointed. Here, the court ruled that a trust protector has a fiduciary obligation to take action against unresponsive, incompetent or malevolent trustees.
The trust protector doesn’t have the luxury of looking the other way. He’s like an insurance policy that automatically comes to the rescue whenever a trust’s integrity is threatened – just like the crucial insurance policies that we carry on our homes, cars, and businesses. The trust protector provides the same backup planning.
As we outline in this comprehensive article on “The Trust Protector: Power & Responsibilities”, a trust protector can legally do the following:
  • Replace your trustee at will
  • Serve as a mediator for squabbling trustees and beneficiaries
  • Veto large disbursements in accordance with existing agreements
  • Change the trust’s state of incorporation if you relocate or to avoid taxes
  • Veto questionable investment decisions and beneficiary distributions
  • Address legal challenges to the trust
  • Terminate a dwindling or unnecessary trust
The true beauty of the role, though, lies in its versatility. A trust protector can do as much or as little as you need. He’s the perfect ally in any trust-related jam.
Let’s see 2 real life examples of what a trust protector can do.

Best Friends, Just Not for Life

Meet Sal.
After graduating from college, Sal started painting houses to make ends meet. Two summers in, he had saved up enough to buy a truck and some tools. Before long, he was working as a foreman for a contracting company that replaced roofs, wiring systems, and insulation in aging suburban homes.
Soon enough, he got sick of repairing other peoples’ homes and decided to buy and fix up his own. His first buy was a sad-looking foreclosure in a working-class neighborhood just outside of Philly, but he worked on it until it was the pride of the block. He booked a cool $100,000 profit from its sale.
Soon, Sal was a mini-real estate mogul who managed a portfolio of eight properties in the area. He had a great system: He’d fix up each house, sell it for well above market price, book the profits and plow the principal back into a new property.
To protect his years of hard work and preserve a legacy for his growing family, Sal set up an irrevocable trust and named his young son as its sole beneficiary. He chose Dave, his former college roommate, to be its trustee. Dave came from a well-off family, so he understood how to manage money and he refused the offer of being paid to serve as trustee.
The experience wasn’t always conflict-free. Sal had a knack for identifying market peaks, but Dave didn’t always listen to his advice. Sal’s properties were always the trust’s most valuable assets, and the proceeds from their sales provided much-needed liquidity.
Fifteen years later, matters have come to a head. Sal’s son has been helping his dad fix up houses for years and finally wants what – he thinks – is due to him. He approaches Dave and proposes using $100,000 of the trust’s funds to buy a late-model Porsche for his personal use. As a wealthy man who is used to having a nice ride, Dave happily agrees to the plan.
Sal is disgusted. Dave has refused to sell any houses for several years, so the trust is low on cash. A frivolous car purchase would further risk the solvency of the trust and, should an unforeseen event occur, potentially jeopardize everything Sal has achieved.
If Sal had a trust protector, he could put a stop to this nonsense by firing Dave or at least vetoing his questionable purchasing decision. Sal’s son certainly deserves a decent vehicle, but perhaps the trust protector could have forced the trustee to purchase a Camry over a Carrera.
As it stands, Sal can do nothing but watch Dave approve the purchase of a car that he doesn’t really approve of.
Let’s turn to Susan.
As an emergency-medicine doctor, Susan has earned a tidy sum over the years. She’s approaching retirement, though, and her family’s history of metastatic breast cancer has given her pause. To ensure that she qualifies for government medical benefits in the event of a grave illness, she sets up an irrevocable trust with her three adult children as beneficiaries.
As an experienced attorney who’s also nearing retirement, Susan’s brother-in-law Paul is more than happy to serve as the trustee. Things start off well, but Susan’s mother-in-law falls ill about a year later. With her father-in-law lacking the strength to care for her and Paul’s career winding down, Paul steps up to care for her. Susan and her husband, a busy vice president at a local manufacturing company, are grateful.
As Paul’s mother becomes sicker, caring for her turns into a full-time job, and Paul retires a year ahead of schedule to accommodate her needs. Since his dad isn’t in great shape, Paul is in heavy demand. He spends several hours per day at his parents’ house, handling everything from laundry and cooking to basic structural repairs and drug administration.
Paul is a fundamentally decent man who’s under an incredible amount of strain. Meanwhile, Susan remains wrapped up in her demanding career. As their parents’ medical bills pile up, Paul tentatively begins to use the trust’s liquid assets to pay for wound-care supplies, prescription drugs, orthopedic equipment and other important medical supplies. Later, he starts withdrawing modest amounts of cash to pay for their food and home supplies. He never asks for his brother’s permission or stops to consider the ethical ramifications of his actions, but he assumes that his brother and sister-in-law would approve.
Eventually, though, Paul crosses a line. Instead of using the trust’s funds to pay for medical supplies or sustenance for his ailing parents, he begins to make deposits into his own private bank account. He convinces himself that he’s merely being compensated for his time, but the truth is clear: He’s pilfering funds from Susan’s trust without her knowledge.
When Susan finds out, she’s placed in a tricky bind because Paul is a family member taking care of her father-in-law. After all, is she really going to sue Paul after he has been so helpful? While she’s sympathetic to the needs of her husband’s parents, she’s furious that her nest egg is being used in an ethically questionable manner. Without a trust protector, though, she can’t remove Paul as trustee or check his actions in any meaningful way. She’s stuck – and her legacy is threatened as a result.

Protecting Your Assets for All

It’s true that some individuals who use irrevocable trusts and trust protectors to preserve their legacies are quite well-off, but most are regular folks who have worked hard their whole lives and need a safe, secure means to protect their assets.
Maybe they’ve built a moderately successful business but don’t want to “spend down” or forgo pass-through profits to qualify for Medicaid. Perhaps they’ve inherited a modest nest egg from a deceased parent that they hope to preserve for their kids.
Maybe they just don’t want their heirs to pay probate and estate taxes on whatever’s left over when they’re gone. Who can blame them? It was their blood, sweat and tears that earned this nest egg.
Whatever the reason for their existence, irrevocable trusts have proven their worth time after time for the last 150 years in courts throughout the country. When combined with a powerful insurance policy – the trust protector – these instruments are virtually unstoppable. See the legal precedents for the Ultra Trust irrevocable trust here.
This begs the question: If you’re willing to pay for insurance on your home, why wouldn’t you do the same for your legacy? After all, your trust protector might ultimately be responsible for preserving your home – and everything else that’s rightfully yours – for your loved ones.