Asset Protection & Estate Management
OUTLINE:
By N. Richard Grassano CPA
5/15/2015
1) Estate Gift Limits
2) Trusts (Revocable & Irrevocable)
3) FLP
4) Advanced Asset Protection Vehicles
2015 Estate & Gift Tax Exclusions
$5,430,000 Estates per person
$14,000 Gifts (form 709)
Tax Rate = 40% *
Form 706 Required upon first death to achieve exclusion portability **
There are ways of gifting above $14,000 without a tax effect. (i.e. 529 Plans)
Direct Educational Gifts Too
* Complicated Calculations of Exemptions / Credits / Exclusions
** Necessary to use the remaining $10,860.00 for a couple
Typical Simple A/B Trusts
A
B
C
C
Often times obvious & overlooked
I.
II.
III.
IV.
After splitting ownership of jointly owned assets reversible trusts are created
When 1st spouse passes, trust becomes irrevocable with income rights to
surviving spouse
Avoids most probate, but 706 still required (portability)
Eventually both trusts pass to beneficiaries
No Creditor Protection
w/ Revocable Trusts
HOWEVER simple isn’t always safest
“TRUST” NEEDS – 1. Grantor 2. Trustee 3. Beneficiary
(NORMALLY)
Revocable / Irrevocable Trusts
Revocable Trust
• Designed to eliminate probate
• DOES NOT eliminate estate taxes
• Extension of your will
Irrevocable trust
• Selected assets are transferred to an INDEPENDENT Trustee
• NOT part of your estate, and therefore are NOT subject to estate taxes
• Probate is eliminated
• Protection from creditors
• Grantor can be named a beneficiary
Family Limited Partnership
OWNER
G.P.
(normally)
1%
GENERAL PARTNER
HEIRS
Receives:
- Limited Partnership Units
- General Partnership Units
Contributes:
- Property & Other Assets
FAMILY PARTNERSHIP or LLC
Controls Partnership
Limited 99%
NON FAMILY PARTNER
Control Companies / Assets
COMPANIES / ASSETS
Useful for gifting also!
Can be used to spread income to family and reduce some lawsuit expense
G.P. controls entity
L.P. possess discounted estate values
Can be used for professional practices for “safe assets”
Issue: Most FLPs are organized so judges can force distributions
Definition: “Safe Assets” are assets that cannot create a lawsuit on its own
We Are A Litigious Society
Our system allows anyone to sue anyone for anything
It has become a way of life for some groups…
How to protect yourself
I. Taint your assets
II. Create extreme expense for discovery
III. Create a “team” plan – the sooner the better  (Attorney, Accountant, Fin.
Advisor)
IV. Never be the aggressor
Utilizing the proper “ownership” of assets can eliminate 98% of the problem.
The “Deal”
Hint: May have Foreign Components!
Living Trust (A or B)
FLP High Risk
S-Corp
LLC / S-Corp
Holding Co.
Goodwill
of Practice
FLP Safe Assets
LLC 2
Owns Building
& Equip.
LLC
Owns Home
LLC
Other Real
Estate Inv.
NOTES:
Since living trust owns holding corp, it owns every asset represented beneath.
Other “Protected” Assets
I.
II.
III.
IV.
Pension Assets
Life Insurance Policies
Annuities
Jointly Owned Assets
Take Home Message
• There are no one-size-fit-all plans in estate
planning (that work…)
• Countless mechanisms exist to help steer the
outcome YOU desire
• Make yourself an unappealing target to your
rivals, creditors, and the IRS…