Asset Protection Vehicles – Basic to Advanced

Key Exemptions – California opted out of the default federal exemptions for debtors & instead utilizes its own state law exemptions.

Health Savings Accounts

529 Education Funds

Homestead Exemptions

Retirement Plans & IRAs

Life Insurance

Annuities

Before considering advanced asset protection vehicles, it is often advised to afore focus on exemptions, revocable trusts, & insurance.

first, consider which existing assets are exempt?

Second, determine what exemptions can still be maximized?

In addition, insurance is another important way to protect assets.

Trusts

Not a piece of paper or property; trusts are a relationship that can be created by a writing, agreement, or involuntarily such as with a constructive trust.

Estate Planning Trusts

In the context of estate planning, trusts come in two forms: irrevocable & revocable

Revocable trusts generally are used to avoid probate, or to keep assets separated (for example, to avoid commingling with marital assets). They are highly flexible, inexpensive & generally do not have major tax consequences other than with respect to estate taxes.

Irrevocable Trusts are much more effective for asset protection & preserving entitlement to government benefits than revocable trusts. But they carry major tax consequences, which can be good if prepared & maintained carefully or disastrous if mishandled.

Advanced Asset Protection

Asset Protection Trusts

LLCs & Corporate Entities

Domestic v Foreign Trusts & Entities

Indemnity Plans versus Reimbursement Plans

Tax-Qualified Plans

Proposed “For the 99%” Act

The proposed “For the 99% Act” if enacted would result in significant changes concerning estate & gift tax exemptions & estate tax rates. Certain advanced tax reduction trusts including Generation-Skipping Trusts & Grantor Retained Annuity Trusts would receive significantly worse treatment. Valuation discounts for closely held businesses are proposed to be significantly reduced & the entire value of Grantor Trusts are proposed to be included in a decedent’s taxable trust.

APTs

Under American law, to succeed as such, Asset Protection Trusts need to be irrevocable & contain a spendthrift clause.

Efforts by the Settlor to retain control or limit the discretion of the trustee may cause the Trust to fail to protect assets; however settlors may appoint protectors & investment advisors.