Salt Lake City Estate Planning

Reasons for Going “Offshore” With Your Accounts

If you're not running for president, and don't have to worry about public relations, what are the legitimate reasons for moving money offshore?

Offshore accounts have been in the news recently and not without reason. For one thing, the IRS has been gunning for foreign accounts for some time. It just doesn’t like them.

Likely, you have seen a discussion (or two… or three) of the topic in connection with Mitt Romney and his use of such accounts. The truth is that such accounts are not all illegal or unpatriotic, and indeed, might just be a good idea.

If you’re interested, there are a few ideas to be gleaned from a recent article through SmartMoney regarding offshore accounts. Is the real reason tax minimization? Not always. The article suggests that taxes truly aren’t the sole motivation. Although it should be said that there are advantages, even though the U.S. government still thinks it’s owed a piece on everything you own internationally.

For one thing, an offshore account has a measure of “jurisdictional safety,” or more simply put, the U.S. courts have a harder time seizing your assets to satisfy litigation against you. Whatever the reason, it’s a growing trend.

One more offshore and growing trend: expatriation. As pointed out in a recent Forbes article, the rate of expatriation has soared 16% in 2011 over 2010. In many ways, the use of offshore accounts and some form of expatriation work together. One thing they do share is that neither is easy and both involve further layers of taxation (like the government would allow such an easy out).

If it is something worth thinking about – say if there are foreign and golden sands in your retirement future - it’s worth planning now, especially in light of global politics.

Reference: SmartMoney (February 13, 2012) “The Real Reasons the Rich Are Moving Cash to the Caymans”; and

                Forbes (February 14, 2012) “Celebrity Leavings: Bidding Stars Adieu” 

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The Three Deadly Mistakes of Succession Planning

So we all know a succession plan is needed. But having the wrong plan can be just as disastrous.

It’s said that a little knowledge can be a dangerous thing (“drink deep, or taste not the Pierian spring”). However, what is less often said, yet is ultimately just as true, is that just a little planning can be a dangerous thing. Improper and rushed planning will do you no good (and perhaps even harm).

This is especially the case with succession planning. Oftentimes, the lifeblood of a business is at stake even more than its assets. In that vein, then, a recent article in Registered Rep magazine described the three deadly mistakes of succession planning. The original article has an emphasis on financial advisors, but with a little rhetorical tweaking these mistakes are universal in application.

Don’t “build the wrong bench.”

Don’t stock your management team with the wrong people. Who are the wrong people? That depends on your business, but certainly for a family business that can mean a disinterested family member. It can just as easily mean someone who doesn’t share enough in the business goals or, in the other direction, one who doesn’t think outside of the box enough to see past them.

Don’t turn succession into a contest.

It makes for a great story when we read or hear about executives jockeying into position for a spot at the top, whether on TV or in real life. However, this jockeying doesn’t make good business sense (and come to think of it that’s usually the moral of the story when it is on TV). Competition for succession within a business can be destructive rather than character-building, and the business itself is what suffers.

Don’t act out of fear.

It’s the most obvious and yet also the most difficult when you’re facing big questions. Rather, it’s important to center yourself on the task and get appropriate legal counsel to ensure the success of the process.

Reference: Registered Rep (January 20, 2012) “The Three Deadly Mistakes of Succession Planning”

Visit the Asset Protection Planning section of our website today to see how we can help you avoid succession planning mistakes.

 

Asset Protection Requires Proper Planning

Many people faced with mounting pressure from creditors are unaware of how to protect their assets, and very often it is too late once they are already in financial trouble.

It’s unclear how long this economic slump will last. One thing is certain, however, it’s not likely to change anytime soon. And, while the “times” have taken their toll on people, so have “creditors.”

If you want to protect your assets from “future creditors,” then know that planning must take place well in advance.

As a reminder of some of the basics of asset protection, I happened upon this article on the topic of “fraudulent conveyance.” Simply put, creditors and the laws that protect them have every reason to be wary of those last minute tricks some people try to pull to hide their assets (it would be pretty difficult to be a creditor if last minute tricks were allowed).

As a result, laws are set up to void slick moves to defraud just creditors. In fact, they are aptly designated “fraudulent transfers.” Bottom line: If there’s already a creditor in the picture, and one that’s sniffing around no less, then it’s already too late.

Of course, you have every reason to want to protect your assets. Who doesn’t? Accordingly, make sure you seek qualified legal counsel before making moves with your assets that will be ineffective… or get you in legal trouble.

Reference: NuWire Investor (January 17, 2012) “Asset Protection in Uncertain Times”

Please visit Asset Protection section of our website to see how we can help you protect your assets today.

 

 

Foreign Accounts – In the News Again

Here's an irony: Even as the U.S. government is cracking down on illegal foreign accounts, other new laws and proposals could present big incentives for the wealthy to move more money offshore.

If you’ve been keeping up with the IRS news, then you’ve probably been watching the developments on the treatment of offshore accounts. On one hand the IRS has been stepping up its treatment of foreign accounts and noncompliant taxpayers, but with the other hand it has been offering amnesty and incentives for coming clean. As a result, we’ve entered the third period of amnesty for foreign accounts.

With all the commotion over illegal foreign accounts, it’s good to know that not all foreign dealings are illegal (or even especially taxed by the IRS), as a recent article from the Wall Street Journal points out. In fact, there’s actually an expanding number of legal ways to follow offshore dealings and with great tax advantages.

With offshore funds, specifically hedge funds, a number of different deduction possibilities come into play and a number of taxation levels fall away with jurisdiction issues. For example, holders can take state-tax and other deductions curtailed by the alternative minimum tax, avoid some or all of the 3.8% Medicare tax on investment income taking effect in 2013 for most couples with adjusted gross income above $250,000 ($200,000, single), and avoid limitations on itemized deductions for upper-bracket taxpayers.

Of course, there also are significant drawbacks to bear in mind, but those depend on how you employ the accounts. Finally, while powerful, funds aren’t the only means for taking advantage of acting as an “international citizen” first.

Reference: The Wall Street Journal (December 10, 2011) “What’s Next for Offshore Accounts?”

Please contact our office to see how we can help you move your money offshore.

 

 

 

Unclaimed “Death Benefits” Await Claims

One billion dollars. That is the amount of money state regulators estimate is sitting on life insurers' books and owed as death benefits, some of it languishing there for decades.

To make a broad but warranted generalization, life insurance companies generally don’t like to pay out death benefits. After all, they make their profits on betting not to pay out death benefits or to pay out less in death benefits than they take in as premiums.

A recent article in the Wall Street Journal may give you pause regarding whether you might be owed some life insurance money.

According to state regulators, as much as one billion dollars is languishing in the form of uncollected life insurance death benefits. All is right by the insurers, however, as most policies require the beneficiary to file a claim to collect. This occurs when a beneficiary doesn’t collect or doesn’t know that they are entitled to collect.

Unjust or not, this phenomenon has raised regulator suspicions and, out of good will or regulator urgings, some companies have started programs to determine if policy holders have passed and whether claims ought to be filed.

Still, it is a difficult enterprise, and one of the reasons insurers let beneficiaries make the claims in the first place, so there is room for error. So, if you want to ensure that you (or your loved ones) receive all that is owed, consider doing some sleuthing yourself. The original article has some advice regarding how to find out about a missed policy.

An even bigger lesson is for policy holders, and estate planners generally. One billion dollars sits in policies that were meant to care for the policy holders’ families, and it is there mostly because it’s unknown.

As a result, the most important part of proper planning, whether elaborate or simple, is making your family aware of what you own, what your plan is, and how it is to work. This especially includes any life insurance you may own.

Reference: The Wall Street Journal (December 31, 2011) “Are You Owed Life Insurance?”

 

 

Falling Medicare Reimbursements...Motivation for Physicians to Plan Now!

Recently I came across an interesting article entitled "Doctors Going Broke".  The article set forth several examples of physicians who are struggling to keep their practices going because of cuts to Medicare.  The examples in the article referenced cardiologists and an oncologists, but it is likely that other examples could be found in any practice where a substantial amount of the patients are Medicare patients. 

One cardiologist who was apparently interviewed for the article stated that he and his partners had to dip into their personal assets to meet payroll obligations.  That cardiologist said that cuts of 35% to 40% in Medicare reimbursements for key cardiovascular services, such as stress tests and echocardiograms, have taken a substantial toll on his practice's revenue.

In addition to cuts in compensation for services, cuts in reimbursements can have dire consequences on a medical practice.  An oncologist referred to in the article owes $1.6 million for medications that were not reimbursed.

The impact of cuts in Medicare will be felt by many Physicians, which could lead to exposure of personal assets.  If assets have not been protected well in advance, the impact could lead to financial devastation.  Proper use of business entities and trusts, including domestic asset protection trusts, can shield assets for future use.

If you are interested in asset protection planning, give us a call at (801) 438-6030 to set up your free consultation or e-mail us at info@hunterestategroup.com.

QTIPs: May Cause Problems Unrelated To Your Ears

There may, in fact, be a free lunch somewhere, but a QTIP is not one.

Blended families are a fairly normal part of modern life, with both divorces and remarriages becoming quite common. That said, this fact of life accounts for a good portion of the family baggage of modern living and a lion’s share of the estate planning problems. Blended families have some extra concerns and extra problems, especially when each spouse hopes to take care of their own children from a previous marriage. A recent Forbes article explores a particularly strange probate case to prove the point.

Word to the wise: Watch out for QTIPs (and not just because your doctor is worried you will hurt your ear). A QTIP is shorthand for “Qualified Terminable Interest Property.” It is a way to hold property for the surviving spouse that qualifies for the unlimited marital deduction without being an outright bequest.

Of course, a spouse can always give his or her assets outright to their surviving spouse without incurring taxation. In the case of an outright bequest the surviving spouse gets to deal with the outright assets as his or her own property (because it is). But what if you ultimately wanted to give the property to your children from a previous marriage, but you wanted to allow your spouse to have it until their own death? That’s the planning strategy that lead to the contested probate court case of In the Matter of The Estate of Sydney Stark, as described by Forbes.

Sydney Stark used the QTIP to leave an apartment to his wife, Sylvia, and then ultimately to his children from a previous marriage. The problem with the QTIP is that the assets in the QTIP have to count as being owned within the surviving spouse’s estate to qualify for the marital deduction. As a result, it becomes more likely that the surviving spouse’s estate may incur the estate tax. Sylvia Stark’s estate did.

In the case of a blended family like this one, with Sylvia leaving her assets to her own child of a previous marriage, this strategy meant Sylvia left an estate tax bill to her own child without the additional assets to pay the IRS. Why? The QTIP assets passed fully to the children of Sydney Stark. Naturally, Sylvia’s own child cried foul.

You can read more about QTIPs and the unfortunate tale of this dystopian Brady Bunch in the original article. In the end, this case provides yet another lesson about matters for careful consideration when planning your estate, especially if you and your spouse have complex and potentially competing interests. 

Reference: Forbes (October 14, 2011) “Blended Family Not Like The Brady Bunch – At Least Not in Probate Court”

 

Estate Planning For Firearms

“Taxes are a heavy component of estate planning, but it is important to be alert for other issues.”

 

Proper estate planning for your assets depends, in large part, on what those assets are. Common assets in an estate include the obvious, such as real estate, collections, cash, brokerage accounts, retirement funds and stock portfolios. However, there can be less obvious assets requiring special attention. A recent article through Forbes points this out with a fairly common example that is all too easily forgotten: the special estate planning problem of guns.

Guns are as natural to own for some as any other asset is. Indeed, to some, their firearms collection is really more akin to an art collection. That noted, under the law, passing down your firearms to your heirs may trigger a different set of laws than passing down your tools set or the painting in your hearth room.

Firearms are highly regulated at both the federal and state levels. Consequently, the laws and regulations need to be followed, particularly if the firearms will be crossing state lines. Passing down firearms to heirs can take time and require the approval of several parties, such as the chief law enforcement officer for the respective jurisdictions.

Enter the “gun trust.” This can be a simple and powerful tool to pass down your firearms. Practically speaking, it is a special purpose revocable living trust. At its formation, the owner of the trust is both trustee and beneficiary. At the owner’s death, the trust property (i.e., firearms) is passed down to the lifetime and remainder beneficiaries by the successor trustees. Of course, trust or not, there are some hard and fast rules imposed by the National Firearms Act and all parties have to comply with them (or risk incurring serious fines and possibly even forfeiture of the right to bear arms). 

Your firearms (and other atypical estate assets), may hold a unique status under federal and state laws. Make sure you comply with any law governing their transfer, as part of your estate planning.

Reference: Forbes (September 22, 2011) “Gun Collections Pose Special Estate Problems”

Avoiding Bad Heir Days

Parents need to develop a plan that monitors their prodigal sons and daughters while respecting their independence and giving them room to mature. It's a delicate balance, but parents who employ innovative financial training, carefully chosen trustees and cleverly written trusts can find there's hope for their high-rolling offspring.

Estate planning is about taking care of your family and loved ones. But what if you have concerns about how your loved ones will use those assets? You spent a lifetime earning what you have through hard work and thrift. So why pass it along only to be squandered? Would you hand over the car keys to a teen who hasn’t proven he or she can drive? As any automobile insurance agent can attest, we spend a good deal of energy (and resources) ensuring that doesn’t happen.

I’ve written on this topic before (see this earlier article I reviewed in the New York Times), but The Wall Street Journal recently provided more suggestions worthy of your consideration.

An elaborate but effective way of ensuring the financial literacy of your heirs and the security of your family assets can be the formation of a family investment company. Here’s how it works: You establish the company, put your heirs on the board, and have them hold discussions with your financial advisors. Throughout the process, you can look on and ensure that correct decisions are being made. While you may elect to hold back and observe the progress of your heirs, the process may surprise you and exceed your expectations… or it simply may justify your concerns.

In any event, the family investment company can make for a great learning experience. For some families, that may entail paying for academic financial lessons, as well as providing a time for inter-generational conversations about the family assets. Regardless, to be most beneficial, the process should be started earlier rather than later and provide for ongoing involvement.

The main tool for teaching financial skills and inheritance training usually will be the trust. There are a great many tools at your disposal when you begin a trust and you can tailor them to include incentives or benchmarks to protect the assets and the heirs. Of course, the trust also can be powerful, since it brings the trustees into the mix.

Another suggestion to consider is appointing multiple trustees. For example, you may appoint one trustee to manage the purse-strings and another to oversee the heirs and gauge their progress. Depending on how you arrange the trust, the trustees can become powerful gatekeepers to protect the assets and even motivate the heirs.

As a result, it is often advisable that you consider appointing someone far removed to be in charge of trust finances, with a family friend to interact with the heirs. In many instances, it is not advisable to appoint a family member as trustee, since this may create intra-family strife.

There are many options to consider and these are just a few. What you do will depend on your assets, your heirs, and the specific concerns you hope to address. It is best to discuss your concerns with appropriate legal counsel who understands your situation and can help you determine the best course of action.

Reference: The Wall Street Journal (September 19, 2011) “When You’re Child’s A Spendthrift”

 

Alzheimer's: Be Prepared!

Living with Alzheimer’s disease is very difficult for the individuals affected and their loved ones. But by dedicating some time early on in the diagnosis and fighting for the cause during World Alzheimer’s Month and beyond, a family can know they have done everything to support their loved one to live a full life and protect their legacy.

You may not have known but September is World Alzheimer’s Month. As the month comes to a close, it’s important not to forget about Alzheimer’s. Medical research and advocacy are vital causes to uphold. Nevertheless, it is a disease that you and your loved ones might have to face directly, if you have not already. The reality of Alzheimer’s or dementia striking close to home, then some understanding and prior planning can help you in terms of the extensive economic toll and the unique legal ramifications.

According to a recent Forbes article, Alzheimer’s is as widespread as it is demanding. Consider this: Another American citizen will develop Alzheimer’s every 69 seconds. The symptoms are oftentimes subtle, at least initially. Some estimate that more than 13 million Americans will have the disease by 2050 and run up as much as $1 trillion in costs. Because of the progressive nature of the disease, most of the costs and problems won’t develop until later on. Nevertheless, significant planning must take place at the time of diagnosis, if not anticipated beforehand.

So, what is the scope of this “significant planning”? First, you will need to secure medical care, both for now and for the future. That means fundamental financial planning need to be addressed, to include securing government benefits like Medicare and Social Security Disability Insurance. Second, because of Alzheimer’s progressive cognitive degeneration, estate planning must occur early in the process to secure and protect family assets.  

Fundamentally, it’s important to understand that Alzheimer’s is not the same as other diseases. Through it all, competent counsel will be necessary to properly assess the needs and possibilities, as well as to ensure that everything is in place when needed most.

Reference: Forbes (September 21, 2011) “September Marks World Alzheimer's Month as Advocates Push for Early Diagnosis and Health Care Planning”

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