A person interested in conserving their assets and conveying them to the next generation may have heard of the concept of asset protection. You will find it is not as simple as giving your assets to the kids and hoping for the best. The tools used vary greatly and one should consider the least costly and most efficient process after evaluation of all the possible solutions. The difficulty is that asset protection can mean a lot of different processes and legal tools, some simple and some very complex. This is an area where expert advice is absolutely required.
The general rule is that your assets should be available to satisfy your expenses and payment of your creditors. In order to shield assets from creditor claims, it is necessary to anticipate and plan in advance the transfer of title to assets before the claims arise. Otherwise, the transferring party has likely engaged in a fraudulent conveyance, which a court can reverse. The various forms in which asset protection can arise might be as simple as incorporation of improvements into personal residential property, placing property in a limited liability company, forming a family limited partnership, creating a domestic asset protection trust, (which is an irrevocable trust), or creating an offshore trust, held in a foreign country.
The complexity and cost of such transactions varies greatly. The right choice takes into consideration many factors, including your age, health, trustee selection, potential beneficiaries, potential liability sources, and goals. When done well, the party creating an asset protection plan can rest knowing that their goal of preservation of property has been accomplished.
I frequently have opportunity to view people, especially seniors and those taking care of seniors, in situations that are challenging them – financial, health, family situations, etc – and the way they respond to perceived crisis.
For many, challenges early in their life conditioned and toughened them so they can still puzzle through a new challenge. For those of more fortunate circumstances and few life challenges, the experiences of failing relatives is terrifying and upsetting. “But Dad has always……” (But Dad can’t any more), or “We might lose all……” (Yes, life has no guarantees to preserve inheritance) or “Why us? (Why not?)
But those with faith in the Lord rise up as on eagle wings, sometimes shedding tears, but smiling internally and eternally as they know the future. Those clients are more resilient, understanding, and survive by keeping things in biblical perspective. If one trait were used to describe these clients, it is “Thankful” in all things. Nothing guarantees that we will not have trials or that our children will inherit what we have, but if we are thankful for all we receive, there is a special joy and contentment that you have to see to believe.
In this blessed Christmas season, my hope is that you will be thankful for all, as I am thankful for all of you.
In October of 1843, Charles Dickens began writing one of the English languages most beloved stories. What began as his attempt to supplement his family’s meager income has in excess of 170 years, become cherished by many with its tale of special spirits, warmth to others and much of the byproduct of Christmas.
One of my favorite scenes is the oft overlooked part in Chapter One where the “two portly gentlemen” are let into the miser’s counting house by his employee, Bob Cratchit. They engage Mr. Scrooge to solicit resources for the poor and destitute. He summarily does not like the entreaty and presses them on their perspective. I wonder: what are the legal implications of their presence in his office that fictitious night? The laws impacting the scene if it occurred today could include: premises liability (what if one slip and fell?); propriety of their solicitation (were they registered with the State? would the donation be tax deductible?); agency (did the employee have the right to let them in?); trespassing (Scrooge would argue it.); hostile work environment we would need to ask Bob Cratchit); employment (was Bob an “at will” employee, independent contractor or salaried under contract?); fraud (were the two guys honorable at all or something akin to the IRS phone scammers we have today?); and the list goes on.
As we consider our lives and how they are impacted by an almost innumerable number of regulations and laws (state, federal and international), we can know well that life can be a complex bag of rules, tensions, met and unmet expectations. I hope this Christmas season we can all understand in our heart of hearts the question put forth by the two portly gentlemen from the pen of Charles Dickens. “A few of us are endeavoring to raise a fund to buy the Poor some meat and drink, and means of warmth. We choose this time, because it is a time, of all others, when Want is keenly felt, and Abundance rejoices. What shall I put you down for?”
It has been part of the cycle of life to do certain things in season. As we enter the fall, we see the farmers gathering the harvest, the boats of summer being put in storage, our furnace filters being replaced, leaves being raked and a host of other “fall” action items. The holidays and family-gatherings are just around the corner.
Fall is a good time to also get your affairs in order so you can spend a comfortable, content winter by the fire or go south. And everyone has a best way to do that – some with simple account registration changes, others with wills and powers-of-attorney, and some with trust arrangements. Each family situation is different and what is a good fit for one might be too complex or too expensive for someone else.
Yes, trusts are great and the best tool in some situations, but don’t buy the sales pitch “You need a trust” until you meet with us, to explain where trusts work best and whether it fits your situation. A Corvette is a great, fun car to drive but try driving to work in one through the snow. When you have the right vehicle, you save money.
We can survive the winter that is coming but it will be much easier if we prepare now.
My dad always said, “Do not loan it, unless you are willing to give it away.” You know the scenario. Your neighbor or brother borrows your bolt cutters and “man they’re gone!” You have a better chance of retrieving keys from a river of molten lava than seeing those bolt cutters or your mom’s cake pan return to their proper place. Now imagine what it looks like when the receiver thinks the property (i.e. cash, vehicle, even house) is a “gift”, while the giver thinks it is a “loan.”
Yep, I’m sure you’re chuckling but you know it’s true. As attorneys we experience this all the time. I had a client whose ex-in-laws demanded repayment of a “loan”. The exes gave some property to the client and client’s spouse during the marriage. Now that the marriage was no more, the exes are calling the gift a loan, demanding repayment with interest in an amount pulled out of thin air. The problem was there is nothing in writing.
There are numerous practical problems in gifting. First, will the contested amount be worth your time and money with an attorney. Think of a $500 lawnmower. Who is going to engage a lawyer at $200-400/hour for the hope, as there are no guarantees of winning any suit in court, to get a used $500 lawnmower or $500 back. Second, they say relationships are the only thing you take to heaven. How many relationships have been ruined over “stuff”? I will not represent someone whose core purpose is to harm others.
Remember this: If you are loaning it out, be willing to give it away. If you are not willing to give it away, get it in writing and preferably secure your loan with right to the borrower’s property in a proportionate amount. If the amount is significant to you, engage an attorney in the beginning. It will save you a lot of future angst. Finally, if it is a gift, there are scenarios where memorializing it in writing is not only prudent but wise.
Today, we mark the onset of a New Year. While we all get used to writing or typing 2015 and not 2014, this day presents us a fresh marker to number the days in our lives. We are stewards of our lessons going forward. One lesson I take from 2014, and all the years prior, is that failure is an inside job. In an era where no one takes personal responsibility for their actions, I have concluded that I am the best person to sell Me a bad idea. When a friend convinced me to play dodgeball in front of one of our large garage windows as a junior higher, I said, “Self, that is a great idea! You will have a lot of fun. Now where’s the ball?” You get the picture, and so you have been your best salesperson for many of those significant decisions in life.
This past year our law firm has helped bridge poor planning by “do-it-yourselfers” and peace for their families. In those instances, the planners may have received their bad planning ideas from the internet, a co-worker, a less than persnickety uncle, or a bank teller. However, the individual is the one who ultimately approved and took confidence in their bad idea.
In the spirit of a fresh start, let’s plan with a purpose and be ever leery of those bad ideas. If you need solid, well-constructed estate planning, contact our office. I have heard it said that “Ninety percent of all those who fail are not actually defeated. They simply quit.” You see, it is an inside job. Let 2015 be a year where you have been intentional in meeting goals for your marriage, your children, grandchildren, business, church, synagogue or work. Have a great year!
We all face estate planning choices – treat the kids equally? Oldest in charge? But then we look at the talents and life situations of our kids and they aren’t all equal. Some have more kids (our grandchildren!) and some have more financial success. These decisions require thought and reflection.
We hare experienced in this area and would be glad to lead the discussion. Generally, well-made plans that are explained to children now avoids surprises and old jealously disputes later. Let’s talk.