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Top 10 Things to Do When Being Sued

Posted on: April 6, 2017 at 4:43 am, in

The threat of a lawsuit, or the prospect of litigation, sends most people into an emotional state somewhere between panic and outrage, especially if that person hasn’t protected their assets ahead of time. Running a business or getting through the daily routines of personal life can be overwhelming without the added stress of a process server, marshal or sheriff coming to your home or office with a summons and complaint.
Most people have never been involved in a lawsuit, so seeing your name or the name of your business in the caption followed by the word “DEFENDANT” can be unsettling. There are ten things you should know about lawsuits that will help you make the right decisions once the process server leaves.

1. It will not go away on its own. Lawsuits must be taken seriously.

Regardless of how frivolous or inconsequential the lawsuit might seem to be, ignoring it can have serious consequences. Failing to file a formal, written answer to the allegations contained in the lawsuit can result in a default judgment against you in favor of the opposing party. A default judgment means potentially your plaintiff can go to your bank and freeze your account or go to the registry and put a lien on your home or rental property. You won’t find out about it until checks start to bounce and you “swear there was at least $10,000 in that account.”

2. That ticking sound is a clock.

The defendant in a lawsuit must file a formal answer or make a motion within a limited period of time that is set by the laws in each jurisdiction. Getting angry and tossing the lawsuit papers into a corner in your home or office to be dealt with later is a mistake. Some states limit the time to submit an answer to just 20 days or less from the date the defendant is served.

3. I can do this without a lawyer.

Without getting into all of the reasons why representing yourself in a lawsuit is a mistake, and there are many, be aware that the laws in some states, such as New York, require that an attorney appear on behalf of a corporation that is a defendant in a lawsuit. Yes, lawyers cost money that most people or small businesses cannot readily afford, but lawyers know the defenses allowed under the law and the procedures that to follow to avoid a costly errors.

4. Choose a lawyer you can depend upon.

If you are using an attorney for the first time, make certain your lawyer is familiar with the issues raised in the lawsuit. Attorney’s today are as specialized as doctors; one does not go to a brain surgeon to fix a broken leg. Ask the lawyer how many lawsuits like yours he has taken to verdict. Lawyers who settle most of the cases they handle might be good negotiators, but you also want to know that the attorney you choose can handle a trial if one is necessary.

5. Be honest with your lawyer.

The second worst mistake you can make is to attempt to defend a lawsuit without having legal representation. The worst mistake is having an attorney but failing to disclose all the facts in an honest and forthright manner. The lawyer you hire is on your side regardless of how good or how bad the facts and the evidence make you look. Lying to your lawyer, or withholding information because it portrays you in a bad light, will make it difficult for your lawyer to represent you and often times you are doing yourself a disservice because when that information you are hiding comes out in court, your lawyer will be caught off guard with no strong, well-thought out response.

6. Don’t ignore insurance options.

Some types of insurance policies provide coverage in the event of a lawsuit. Automobile insurance or homeowners insurance are two policies with which most people are familiar, but there are other types of insurance, such as malpractice or errors and omissions policies that provide coverage in the event of a lawsuit. In most instances, the insurance company will take the lead, pay for your defense, and often times negotiate a settlement.

7. Listen to the expert you hired.

You are paying your lawyer to give you expert legal guidance, but the money is wasted unless you listen and heed the advice that is given to you. Telling your lawyer how you think your lawsuit should be handled ignores the fact that your handling of the situation is probably what got you into a lawsuit in the first place.

8. Fighting over principle can get expensive and distracting.

Whether you are the defendant being sued or the plaintiff who started the lawsuit, at some point you have to consider exactly what it is that you are fighting about. Does defending or prosecuting the lawsuit make sense economically? If you find yourself spending large sums of money on legal fees, court costs and related expenses that will exceed the amount you will recover if you win, it is probably time to reevaluate your position. Perhaps it is time to stop fighting and consider a negotiated settlement to put an end to the litigation. A lawsuit that goes to trial can easily cost $100,000-200,000. Imagine trying to run your business with a lawsuit hanging over your head for 3 years. The stress distracts you from positive things like growing your business.

9. Don’t assume your legal expenses will be paid by your opponent.

Absent an agreement, such as a contract or a law requiring the losing party in a lawsuit to pay the other party’s legal fees, the parties are responsible for their own costs of defending or prosecuting a lawsuit in the United States. Even if you have a contract that states the loser in a dispute will pay legal fees, it is rare that courts award full legal fees.

10. Expect to be in it for the long haul.

People want lawsuits to end quickly so they can go about their normal lives and business, but answers, counterclaims, motions and discovery can take months or, sometimes, years to complete. Lawsuits begin with a flurry of activity that dies down as the case progresses beyond the initial pleadings establishing each party’s position. The pace picks up again months later as each side engages in depositions and other discovery procedures. Patience and trusting in your legal representation are keys to lawsuit success.

Bonus Tip: When You are Being Sued

Evaluate your options. Most lawyers will tell you that you cannot take action to protect assets once you know there might be a lawsuit coming. Most lawyers tell you this because they don’t fully understand fraudulent conveyance and how to manage the resulting 4-5 years statute of limitations on asset transfers. If there is an opportunity to make it difficult for someone to sue you – even late in the game – it could put you in a position to negotiate with your attacker and thus minimize the pain, stress, costs, and distraction that a lawsuit can bring.

5 Estate Planning Horrors to Avoid In Your Divorce

Posted on: April 5, 2017 at 4:46 am, in

Albert Einstein stamp

“A person who never made a mistake
never tried anything new”
– Albert Einstein
You do not want to make these mistakes.

Estate planning frequently takes a backseat to emotion in a divorce. Even when both parties agree that ending their relationship is the best solution for their marital woes, divorce can be an emotionally and financially excruciating experience. Regardless of how much you might think you have prepared for the roller coaster ride that your life becomes during, and immediately after a divorce, nothing can fully prepare you for it. Avoid the 5 estate planning mistakes:

1. Making it difficult to identify separate property.

Some states have established two classifications of property in a divorce: separate and marital. Marital property is real or personal property acquired during the marriage or property acquired together by the parties prior to the marriage. Marital property is subject to distribution by the court in a divorce action.

Separate property is usually defined as property acquired prior to the marriage by one of the parties that retains its identity as belonging to one of the parties. Separate property is not subject to distribution by a court as part of a divorce. Problems occur when courts cannot identify property as being separate. For example, a home purchased and owned by a person prior to a marriage could lose its status as separate property if marital funds are used to pay the mortgage or do renovations on the home.//
Placing separate property in an irrevocable trust established prior to a marriage can eliminate or minimize questions concerning the legitimacy of a claim that property is separate rather than marital. Homes and businesses are properties that can be transferred to an irrevocable trust to retain their separate status because ownership is in the name of the trust and not the individual.
Irrevocable trusts that were created before the marriage or even jointly during the marriage most likely will NOT count as marital assets. Often a wealthy person, prior to marriage, may place a bulk of their assets in an irrevocable trust to avoid having the awkward prenuptial conversation and still protect the assets in the event of divorce.

2. Failing to change your life insurance beneficiary.

A life insurance policy is a contract between you and the insurance company. You agree to pay your premiums in return for which the insurance company agrees to pay a specified sum of money on your death to the beneficiary you name in the policy. The insurance company is obligated to pay the person whose name you list as the beneficiary even if that person is your ex-spouse.
A recent case Maretta v. Hillman, 722 S.E.2d 32 (Va. 2012), proves just how big this problem can be. A federal employee designated his wife as a beneficiary, divorced and remarried. He then died leaving everything to his current wife. His ex-wife however claimed the over $100,000 in life insurance and his current wife took him to court. Virginia has a law stating that, upon divorce, the ex-wife is no longer considered a beneficiary on life insurance policies. This was a federal policy, however the Supreme Court ruled in favor of the ex-wife.
This could also be a good time to evaluate your life insurance needs. If you do not have children, you might not need as much insurance as when you were married.

3. Forgetting to revoke a power of attorney.

Remember those forms you filled out at the attorneys office when you created your will? Most likely, one of them was a power of attorney. This form gave your now ex-wife power to take care of your finances probably at any time, but at the very least when you become incapacitated.
The laws in a handful of states (but not most) terminate a power of attorney upon divorce, which names a spouse as the attorney in fact. This is not, however, the case in all states. The best course of action is to review your power of attorney with your legal advisor to determine the effect your divorce will have on it.

4. Thinking a divorce cancels provisions in your “Will” pertaining to your spouse.

Many married couples name each other in their last will and testament as the executor and leave all or the bulk of their estates to each other. A divorce does not cancel or invalidate portions of your will pertaining to your spouse. It is up to you to change your will with a codicil that amends an existing will but does not terminate it, or you can prepare a new will and destroy the old one.
Some people become confused when they hear that the law in their state automatically terminates a person’s rights to inherit property from a divorced spouse. Such laws pertain to situations in which a person dies intestate without leaving a valid last will and testament. If you have a last will and testament, you must change it on your own to avoid having your former spouse share in your estate.
If you have an irrevocable trust, however, that does not name your ex-wife as beneficiary, you don’t have to do anything. A revocable trust, however, was most likely divided during the divorce already!

5. Not contacting financial institutions.

Most people remember to close joint checking and savings accounts or at least arrange to remove their former spouse from the accounts. It is surprising how many divorced individuals forget to notify financial institutions about making changes to the places that hold typically the big money such as their IRA, 401(k) or other retirement plans.
Retirement accounts or annuities usually have a beneficiary named to receive the money in the event the holder of the account dies. Contacting the financial institution or the human resources department at your place of employment will get you the information needed to update the information on your accounts including designating a new beneficiary.

Top 8 Things People Overlook with Estate Planning

Posted on: April 5, 2017 at 4:45 am, in

1. The Entire Estate Plan

What do Jimi Hendrix, Steve McNair, Michael Jackson, and Bob Marley all have in common? They all died without a proper estate plan or even a will and their heirs paid the price in legal fees, court costs, and endless delays. Many people die “intestate,” (without a will). Even though the states have continued to improve their intestate laws, your assets and your family’s lives could be stuck in probate court for 12 months or more if things aren’t completed correctly. That’s if your relatives don’t start fighting over your belongings. Or, how about this scenario? You die the day after your son turns 18. He inherits assets worth $800,000 and your life insurance pays him $1,000,000. An 18 year old with $1.8 million is a scary thought.

2. Failure to Review Beneficiary Designations and Directing of Assets

As you age or as you have aged, you acquire many different asset growing instruments. You have several different retirement accounts, life insurance accounts, investment accounts, and real property. All of these accounts may list beneficiaries. A lot of people forget about these accounts and they list people who you may no longer wish the assets to go to. Also, there may be specific ways to leave these assets in order to maximize the avoidance of taxes, avoid probate, and protect them from the nursing home spend-down.

3. Failure to Take Advantage of the Estate Tax Exemption in 2013

If you have a lot of assets, chances are you are going to be subject to federal estate tax. This year’s exemption is $5.25M, but nobody knows what it will be 5-10 years from now, so it is prudent to take advantage of the exemptions while you can. With the United States debt growing to $17 Trillion, the likelihood of these exemptions lasting forever is slim. There are exemptions amounts and there are gifting exemptions. If you don’t take advantage of these exemptions while living, your estate will pay them when you are gone. A will doesn’t do it and all versions of revocable trusts don’t either.

4. Leaving assets outright to adult children

How about this scenario? We already discussed the $1.8 million teenager, but how about this one: You pass away, and all of your estate goes straight to your son… no wait, your son’s debtors. That’s right, your child could be in debt and all of your hard earned savings goes to pay off the dumb decisions your child made. Even worse, your son gets a divorce 6 months after he inherits your 50 years of assets; blood, sweat, and tears. His ex-wife now snatches $900,000 just because they were married for 4 years.

5. Leaving assets outright to minor children

Whether because you died intestate or whether your will specified that the assets go to the children, assets to minor children will normally be managed by whomever you decided should be guardian of your children. Your sister Meg may be great at teaching and fostering great children, but not so good at investing or banking. By the time your children are 18 there could be nothing left for them.

6. Don’t overlook states’ inheritance taxes

You may not think that you have enough assets to trigger inheritance taxes because the federal exemption is $5.25M in 2013, but it has changed 30 times in the last 40 years and with the current federal deficit nearing $20 Trillion, do you really think that it will be at $5.25M in 5-10 years? Plus, did you forget about state inheritance taxes? Usually state taxes are at a smaller rate, but they also usually have a much smaller exemption. That means that your assets plus your $500,000 will put your heirs into a taxable situation. For example, Minnesota’s exemption is only $1M and the tax is 16%. Check out your state estate taxes.

7. Use no-contest clauses properly

Lawyers love to talk about the no-contest clause when you are in their office. The no-contest clause basically states that anyone who contests the will, collects nothing. Sounds bulletproof, right? I mean who would challenge that will? Well, if the will is not legal, then neither is the no-contest clause. Additionally, even if the will is effective, what stops a person who is collecting nothing from contesting the will. Nothing does, because they have nothing to lose. So, maybe you want to leave that person some money so if they challenge the will they lose it. Even better, you don’t want to use a will at all.

8. Picking the right trust for the right purpose

There are basically two types of trusts: revocable and irrevocable. If you want to avoid probate, but not protect your assets and/or plan for Medicaid, the revocable trust is for you. With this type of trust, you can take your assets out whenever you want, but Medicaid and your creditors can also. An irrevocable trust can hold your assets with all the benefits of an irrevocable trust, but if written correctly, it can protect assets from creditors. The difference here is that once the trust is set up and you put asset into it, you no longer own them, but you can still get the benefit from them – similar to leasing a car; it is in your driveway to drive whenever you like, but you don’t own it.

Five Estate Planning Things You Need to Know After Getting Married

Posted on: April 5, 2017 at 4:45 am, in

1. You both own everything.

You and your spouse are now the joint owners of all of the marital assets with a few exceptions and a few state specific variables. This means that if one spouse’s income has a lot more than the other, it doesn’t matter. Those savings accounts and even retirement accounts may be split evenly upon divorce.

2. Children of prior marriages are forgotten.

Of course the children aren’t forgotten, but they are forgotten in the estate planning world. Most state intestate (without a will) laws state that your assets go to your spouse in the event of an untimely death. That leaves your children from a prior marriage directly out of the line of descendants that will receive your assets. Unless your spouse gives them assets in their will, as a beneficiary of a trust, or outright, your children of a prior marriage will never see any of it without proper estate planning.

3. Children of the current marriage may be forgotten.

If you die and your spouse takes all of the estate, your spouse can do whatever they please with all of that money. They can take trips around the world, spend it on their new love interest or even give it to their family. In most states, there is no law saying it has to go to your children. That’s right, your children with your current spouse may never get any of your estate without the right planning.

4. There is twice the chance of long term care eating up your assets.

People don’t generally think of long term care when they are under retirement age, but the sooner one acts, the sooner the time clock starts running on Medicaid’s 5 year look-back clock. To qualify for Medicaid to pay for you or your spouse’s nursing home care, you have to own very little; like less than $2000. Now you have two people to worry about. To get to the point where Medicaid thinks you own very little, the nursing home will bill you either to death or until you own very little and ultimately qualify for medicaid. If you give your money away and not enough time has passed, you won’t qualify for Medicaid and have to pay out of pocket. This can really be a problem if the person who you gave it to won’t give it back or cannot because they already spent it!

5. Your spouse could end up with half of your business, with the right to make decisions.

What could be worse than a spouse to whom you are divorced from telling you what to do with your business? Well, how about a spouse who decides you are not being cooperative, so they get a court to order you to sell the business.

What can you do to protect your assets after you get married:

In addition to the run-of-the-mill estate planning documents, a will, power of attorney, health care proxy and living will, one document can help with all of these estate planning items: An Irrevocable Trust. When you are married, you and your spouse can choose to put money into an irrevocable trust. The assets will be safe in the trust from you or your spouse and the trustee who is in charge of the assets will have to distribute them in the manner prescribed by you – not the manner the State tells you. Thus, those particular assets are divided when, presumably, the couple is still in love and thinking rationally, rather than when you are at each others’ throats. With less to fight over at divorce, the process could be simpler, but the Irrevocable Trust can also help with the other matters listed above.
The instructions in the Irrevocable Trust can say whatever you and your spouse want them to say. When forming the trust, you can include your kids from a past marriage. You can also tell the trustee to hold the funds and only give them out for certain expenditures or landmarks, like college funding or on their wedding day. All the of kids can be provided for, but not just by giving them a bucket of money and letting them run free. The assets are protected by the trust and thoughtfully given out by the trustee.
Putting assets in an Irrevocable Trust may also help you qualify for Medicaid. When you put assets in an Irrevocable trust, you are effectively getting them out of your name and into the name of the trust. You don’t own them anymore, although you can benefit from them – think about it like leasing a car. When you apply for Medicaid, if the lookback period has gone by, those assets will not be counted towards your net worth. For example, if you were to put $1.3M in an Irrevocable Trust, 10 years ago and applied for Medicaid with $20 in your personal bank account, Medicaid would pick up the tab for long term care. If you kept the $1.3M in your name, then you, or your spouse would not qualify for Medicaid and the long term care facility would upwards of $12,000 or more a month for your care until nearly all the assets are gone.
If you have your own business or are starting one you should learn about LLCs and Irrevocable Trusts. You can put your new or existing LLC in a trust and specify how you want the profits distributed. In the event of a divorce, the business would continue to run exactly how it has run, the profits are distributed exactly how they have been and that pesky ex-spouse is written out of a controlling interest. After all, while a marriage is doing well, the spouse will say, “Oh honey, that’s your business. I never want to interfere,” but if the marriage goes sour, “I want to own your business, and if I can’t own it, I want it sold and half the profits, or if I can’t own it or sell it, I want to run it.” Better to decide when things are good with a well written Irrevocable Trust such as The UltraTrust.

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.
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.

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.

Top 5 Revocable Living Trust Pros and Cons

Posted on: March 8, 2017 at 12:54 am, in

How does one protect assets before or during a divorce? Common steps to divorce asset protection for gifts, family heirlooms, and real estate. You will need to consult with a divorce lawyer, professional appraiser, and estate planner. Definition of Equitable Distribution and fair market value of assets in divorce.

last will and testament.

Last wills and testament with a revocable living trust

A common question considered by individuals who are preparing their estate planning is whether a will or a living trust would be a better option to serve their estate planning needs. Everyone has slightly different goals and nobody has the exact same needs. There are many benefits to choosing a Revocable Living trust instead of a will, but there are also some drawbacks. Which is better is a very personal decision. Many people use both a will and a trust to ensure that their assets are distributed according to their wishes, but they are very different. Still other people use an irrevocable trust instead of a living revocable trust. Here are the highlights of the top 5 pros and cons of the living revocable trust:

1. Revocable Living trusts do not go through probate – Pro

One of the primary reasons a person might choose a living revocable trust to distribute his or her estate is that trusts allow the heirs to avoid going through probate. Probate is the legal process of distributing assets under a will, and it requires going to court. The administrative costs associated with probate can be as high as six to ten percent of the estate’s value, which could get expensive when an estate has substantial assets. If there are challenges or issues it is likely going to be closer to ten percent than six.

Revocable Living trusts do not avoid all costs associated with probate – Con

The estate must still pay state or federal estate taxes or other taxes, which means that the administrator may have to hire an accountant or tax attorney to assist. An estate attorney may still be needed to assist with transferring assets from the revocable living trust to the beneficiaries. The successor trustee may also be entitled to a fee for the time spent administering the trust.

2. Faster distribution of assets – Pro

The law requires that probate be completed in each state where a person owns property at the time of his or her death. Thus, the more states where a person has assets, the more expensive probate will be. Probate can also be time-consuming, especially if the process must be completed in several states. Therefore, having a revocable trust instead of a will may reduce the amount of time that passes before assets are transferred to the Settlor’s heirs.

Revocable Living trusts carry upfront costs – Con

There are still some costs associated with establishing a trust. It may be necessary to pay an attorney to create the trust, write necessary documents, and transfer ownership of personal assets into the trust. The process could cost anywhere from $1,000 to $2,500. There may also be costs associated with settling the estate if the heirs or beneficiaries to the trust dispute the asset distribution or validity of the trust documents. The estate may have to pay to value assets in the trust or settle creditor claims against trust assets. Therefore, establishing a trust doesn’t avoid one hundred percent of the costs of probate, but many individuals could likely still save money.

3. Revocable Living trusts’ distribution is private – Pro

Another big advantage to avoiding probate is that probate proceedings are public. A person who wishes to keep his or her finances private and protect the heirs from public scrutiny may prefer to create a revocable trust instead. The contents of trust documents are not public record. If it becomes necessary to probate assets not included in the trust, the probate records would note the existence of a trust, but not the contents or the value of the assets. Many people choose to create a revocable trust for this reason.

4. The Settlor retains control of assets during life – Pro

A revocable trust allows the Settlor to maintain control of assets during his or her lifespan. Assets that are acquired after the trust is formed may be added, and the Settlor may also remove and sell assets, change beneficiaries, or choose to dissolve the trust entirely. Nothing is final during the Settlor’s lifetime.

The Settlor needs to retitle the assets but for asset protection she still owns them – Con

The Settlor must retitle all assets in the trust’s name. Transferred property belongs to the trust, but because any part of the trust can be revoked at any time, including dissolving the trust, that means a creditor can force you to do the same and can get access. The Settlor does not receive tax benefits from the trust during life and will be required to keep impeccable bookkeeping records to help avoid issues down the road.

5. A trustee or power of attorney may help manage assets – Pro

The Settlor is often a trustee, but it is possible appoint a successor trustee, which gives someone else the authority to make decisions if the Settlor becomes mentally or physically incapacitated. A durable power of attorney may have some of the same powers as a successor Trustee, but in neither case does the trustee or a person with power of attorney own the assets he or she manages. In addition, assets managed by a power of attorney rather than a trustee must still go through probate when the Settlor passes away.

Revocable Living trust does not receive the same tax benefits as an estate – Con

An estate is a separate legal entity like an irrevocable trust may enjoy significant tax benefits after the Settlor passes away. A revocable trust does not receive these same benefits. However, depending on the size of the estate, some people may find it more desirable to avoid probate administration costs even if it means spending more in taxes.

Revocable Living trusts does not apply to assets that are not included – Con

Most people who establish a revocable trust still need to draft a will to address the distribution of any assets that are not transferred into to the trust. If a mistake is made or the Settlor prefers to keep some assets liquid, a pour-over will tells the administrator of the estate what to do with those remaining assets. A will directs the distribution of assets acquired after the trust is funded, if the Settlor is not able to transfer the asset before death. The will controls the distribution of personal property like photographs, clothing, and household items. Absent a will, any assets not included in the trust would be distributed according to state laws on intestate succession. These laws divide property depending on a person’s relationship to the Settlor and do not consider how the deceased individual might have wanted to distribute the assets.
Every plan is different depending on the needs of the individual. Contact an expert to help you make that assessment and evaluate all of your options in order to come to a solution that makes sense for you and your family.

Estate Street Partners Protect Assets from Lawsuits, Divorce, Medicaid Spend Down

Posted on: February 26, 2017 at 5:43 am, in

Estate Street Partners offers advanced financial advice to ensure maximum asset protection from lawsuits, divorce and Medicaid spend down

Set up a Personalized, Court-Tested Medicaid Trust now in only a few hours
Protect your assets from lawsuits, divorce, Medicaid.
Hello, my name is Rocco Beatrice. I am the Managing Director for Estate Street Partners. We provide financial solutions to your problems of wealth and help protect your assets. We coordinate with your financial goals. We bring to the table the different disciplines, the accountants, the lawyers, the appraisers, the tax guys all for the purpose of protecting your assets and wealth against potential frivolous lawsuits, divorce, the Medicaid spend down, and to minimize your taxes on your income streams, to defer your capital gains taxes, to eliminate the probate process, and to eliminate the Estate tax. And finally, to facilitate tax efficient transfers of your assets and wealth to whomever you’d like to your heirs, children or beneficiaries (in the second generation) and to enable a top, reliable asset protection plan.
Continue to read part 2 of 11 the Ultra Trust® benefits as one of the best irrevocable trust plans for protecting your assets here: What is the Ultra Trust®?

Rocco Beatrice, CPA, MST, MBA, Managing Director, Estate Street Partners, LLC.


Mr. Beatrice is an asset protection award winning trust and estate planning expert.
To learn more about irrevocable trusts and senior elder care visit:

An Irrevocable Trust vs. an A/B Trust: Pros and Cons

Posted on: February 21, 2017 at 4:23 am, in

The A/B Trust used to be one of the most popular estate planning products in a lawyer’s arsenal. Here’s how it previously worked: The first spouse dies and that spouse’s assets are placed into a trust using the first spouse’s estate tax exemption. The second spouse dies and their assets go to the children using the second spouse’s estate tax exemption. The assets in the first spouse’s trust then are passed to the children, thereby using both spouses estate tax exemption.
After years of this, the estate tax code was re-written combining the spouse’s exemptions making the A/B trust obsolete for this purpose. Some lawyers continue to use this method of estate planning even though it does some things poorly and others not at all. Although an A/B trust will pass the assets to the beneficiaries as good as other products, it has problems in the areas of privacy, asset protection, and Medicaid planning.
First, an A/B method of estate planning offers absolutely NO asset protection benefits while both spouses are alive and minimal protection after one spouse passes. In fact, if an attorney for a lawsuit checks a person who created an A/B trust for assets, they will see that they still own the assets in their name. While both spouses are alive, depending on how the lawyer drew up the estate plan, either each spouse has their assets in their own name with a will including a testamentary trust (a trust that doesn’t exist until death) or they each have their own revocable trust with half the marital assets.The A/B Trust used to be one of the most popular estate planning products in a lawyer’s arsenal. Here’s how it previously worked: The first spouse dies and that spouse’s assets are placed into a trust using the first spouse’s estate tax exemption. The second spouse dies and their assets go to the children using the second spouse’s estate tax exemption. The assets in the first spouse’s trust then are passed to the children, thereby using both spouses estate tax exemption.
Having assets in one’s own name or assets in a revocable trust doesn’t help for asset protection. In both scenarios, one has access to the assets, which means that one’s creditors can attach these assets as well as courts in the event of a lawsuit. After one spouse passes, the will creates an irrevocable trust or, alternatively, the revocable trust becomes irrevocable. The deceased spouse’s assets are now in an irrevocable trust and protected from creditors and the courts, but chances are that the prime years to get sued or go in debt happened a long time ago. Why not have an irrevocable trust in the first place?The A/B Trust used to be one of the most popular estate planning products in a lawyer’s arsenal. Here’s how it previously worked: The first spouse dies and that spouse’s assets are placed into a trust using the first spouse’s estate tax exemption. The second spouse dies and their assets go to the children using the second spouse’s estate tax exemption. The assets in the first spouse’s trust then are passed to the children, thereby using both spouses estate tax exemption.
An A/B trust also offers little protection from a Medicaid spend-down. Again, like above, while the spouses are alive, they will be subject to a Medicaid spend-down in order to qualify for long-term care benefits. The community spouse can keep a predetermined amount, but the rest will be spent down to a minimal amount ($1,500-2,000, depending on the state). Also, again, once one spouse dies, those assets are protected from the spend-down, but the other half of the assets are subject to the other spouses long-term care bills. An irrevocable trust would protect 100% of all of the assets.The A/B Trust used to be one of the most popular estate planning products in a lawyer’s arsenal. Here’s how it previously worked: The first spouse dies and that spouse’s assets are placed into a trust using the first spouse’s estate tax exemption. The second spouse dies and their assets go to the children using the second spouse’s estate tax exemption. The assets in the first spouse’s trust then are passed to the children, thereby using both spouses estate tax exemption.
An A/B trust doesn’t really do anything well. Instead of protecting half of the assets, a good irrevocable trust can protect all of the assets. The irrevocable trust takes all of the assets out of both spouse’s names so that they don’t own them anymore. If they don’t have title, the assets aren’t counted by Medicaid, aren’t included in the calculation for the estate tax, and cannot be found in a public record as being owned by you, thus they can’t be taken by creditors in the event of a lawsuit. In fact, if an attorney for a prospective lawsuit checks a person who created an irrevocable trust to hold assets, they won’t see any assets in your name and the lawyer probably won’t be interested in taking the case against you on a contingency basis. The lawsuit is stopped before it starts. There is a downside of an irrevocable trust; the persons creating it don’t have ownership of the assets past what they put in the trust documents. So, for the scared, there is the A/B trust and for the protected, the Ultra Trust irrevocable trust.The A/B Trust used to be one of the most popular estate planning products in a lawyer’s arsenal. Here’s how it previously worked: The first spouse dies and that spouse’s assets are placed into a trust using the first spouse’s estate tax exemption. The second spouse dies and their assets go to the children using the second spouse’s estate tax exemption. The assets in the first spouse’s trust then are passed to the children, thereby using both spouses estate tax exemption.