Scroll Down to view Past Articles

IS ASSET PROTECTION REALLY THAT IMPORTANT?

A Safeway tractor-trailer was legally parked on the side of U.S. Highway 101 near an intersection.  A driver in a pick-up truck attempting to cross over and enter 101 collided with a motorcyclists.  The motorcyclists filed suit against Safeway, the driver of the Safeway truck, the driver of the pick-up truck and the State of California.  The California Court of Appeals affirmed a jury verdict awarding substantial damages to the plaintiffs, apportioning 35% of the fault to Safeway.  (Lawson et al. v. Safeway, Inc. et al.)

On January 24, 2011 the U.S. Supreme Court expanded Title VII’s anti-retaliation provision to cover, in some circumstances, claims brought by third parties.  (Thompson v. North American Stainless, LP)

And, on March 1, 2011, the U. S. Supreme Court held that “if a supervisor performs an act motivated by antimilitary animus that is intended by the supervisor to cause an adverse employment act, and if that act is a proximate cause of the ultimate employment action, then the employer is liable under USERRA.”  (Staub v. Proctor Hospital)

Yes, comprehensive asset protection planning should be utilized by every business owner!

PROPER ADVANCE PLANNING MAY ELIMINATE FUTURE COSTLY PROBLEMS

Rule No. One – plan carefully before you execute any estate planning documents.  On February 23, 2011, the Massachusetts Court of Appeals held that after a plaintiff executed an irrevocable trust he could not later seek to revoke it on the grounds of a mistake in the document.  The fact that the plaintiff may not have known all of the terms of the trust he executed does not qualify as a mistake.  (MacLeod v. McManus)

Rule No. Two – misunderstanding of current state and federal estate tax laws can cause a myriad of problems.  Many individuals assume that if their estate is under $5 million they no longer need to plan.  However, the law is scheduled to revert back to only $1 million in 2013.  Furthermore, many states have their own estate and/or inheritance tax laws and have decoupled from the federal estate tax and allow for an exemption of $1 million or less.

Rule No. Three – Listening to advisors who recommend just “giving it all away” is not advisable.   While this may seem like a simple and cheap solution, there are numerous pitfalls with such planning, such as: loss of control, no protection for heirs in the event of future divorce, litigation, bankruptcy or incompetency.   

Advanced planning, utilizing properly drafted estate preservation/asset protection documents can eliminate the foregoing problems and many others.

Now is the time to properly plan your estate.  The need to comprehensive and protective estate planning/asset protection is now, before it is too late. 
                                                                                                                            

QUALIFIED PROFESSIONALS ARE REQUIRED IF VIABLE ASSET PROTECTION IS TO BE OBTAINED

Courts are gradually expanding their ability to obtain jurisdiction and to access the assets of "associated" entities and individuals.  For example, recent judicial decisions have expanded the liability exposure in various areas, such as:

• The Minnesota Court of Appeals recently ruled that a nonresident parent company may be subject to a lawsuit in Minnesota for damages claims against its insolvent Minnesota subsidiary company on the grounds that the subsidiary was nothing more that an alter ego of the parent company.  (JL Schweiters Construction, Inc. v. Goldbridge Construction, Inc.)
•  The New York State Tax Appeals Tribunal held that out-of-state corporations that had passive ownership of a partnership conducting business in the state had nexus for purpose of New York corporation franchise taxes.  Although the corporations did not conduct business in New York in their own capacity, their ownership interest in the partnership was sufficient to establish nexus.  (Shell Gas Gathering Corp. #2 and Shell Gas Pipline Corp. #2)
• The Ninth U.S. Circuit Court of Appeals ordered several law firms acting for defendants in the Liquid Crystal Display civil class action to turn over documents produced in that litigation to a grand jury charged with reviewing the defendants' behavior for potential criminal liability.  This confirms that there are serious risks associated with bringing foreign-originating evidence into the U.S., even for what is believed to be a limited purpose.

WHY EVERYONE NEEDS THEIR OWN PROPER ASSET PROTECTION/ESTATE PLAN

Many individuals are being led to believe that with the new $5,000,000 Federal exemption from death taxes, they no longer need comprehensive estate planning/asset protection structures.  Unfortunately, nothing could be further from the truth.  For example:

1. Many states still have separate estate and/or inheritance taxes.
2. Probate is still a privacy-invading, time-consuming and costly procedure.  But, the orderly process of settling an estate without extra cost and publicity can be accomplished with a properly established estate planning/asset protection structure..
3. Disputes are increasing, and very costly, between family members.
4. If you fail to properly plan, the state will do it for you under its rules.
5. Current or future children and/or grandchildren may have special needs which must be carefully provided for in advance to avoid their loss of governmental benefits.
6. Long-term tax deferral on retirement assets can be avoided.
7. Assets designated for children and/or grandchildren can be protected against loss resulting from divorce, lawsuits, premature death, and/or mismangement.
8. Incapacitation without proper comprehensive documents can result in serious and costly asset management problems.
9. Charitable donations can be accomplished without delay by avoiding probate.
10. Under certain circumstances, assets can be viably protected against lawsuits.
11. Numerous other issues can be resilved before costly problems arise.

55 YEARS OF ESTABLISHED LAW IS BEING REPEALED

Attendance at the Notre Dame Annual Tax and Estate Planning Institute on October 1st and 2nd revealed that estate preservation will beome much more difficult according to highly reputable tax authorities.  In 2010, anticipated to be made retroactive to January 1, 2010, the "willing buyer willing seller" rule will be negated and valuation discounts for lack of marketability and minority interests for family limited partnerships, limited liability companies, restricted corporate stock, etc. will no longer be available.  For those who have large estates, one CPA-Tax attorney has designed a valuation reduction structure that will work in limited situations but this proceedure will also be negated by the 2010 tax legislation.

ESTATE LITIGATION IS ON THE INCREASE

In 2007 prominent estate planning attorney Roy Adams declared that "estate litigation" in now the number one litigation issue in the United States.  During attendence at the Notre Dame Annual Tax and Estate Planning Institute on October 1st, Professor Jeffrey Pennell corroborated Mr. Adams' remarks and declared that estate litigation is expected to increase even more.  And, much of this increase will be the result of "do-it-yourself" forms purchased off of the interenet which are grossly inadequate for today's world.  For example, ElderLaw Answers (7-8-09) warned individuals to "beware of generic health care proxy forms."

WARNING - ADULT CHILDREN MAY BE REQUIRED TO PAY FOR PARENTS WHO CAN'T AFFORD TO CARE FOR THEMSELVES.

Thirty states currently have filial responsibility laws making adult children responsible for their parents if their parents can't afford to take care of themselves.  Elder Law Answers (5-21-09) speculates that states may begin a more vigorous enforcement of such laws to save on states' Medicaid expenses.

21 states allow a civil court action to obtain financial support or cost recovery, 12 states impose criminal penalties on children who do not support their parents, and 3 states allow both civil and criminal actions.

The passage of the Deficit Reduction Act of 2005 made it even more difficult to qualify for Medicaid.  This means that there may be more elderly individuals in nursing homes who eventually have no ability to pay for their care.  In response, nursing homes may use the filial responsibility laws as a way to recoup their costs for care paid for their indigent residents.

This is another reason why sophisticated asset protection techniques and structures are a viable means of protecting one's wealth.

DAMED IF YOU DO, DAMNED IF YOU DON'T

Employers need to be even more aware of the ramifications of allegations of sexual harassment.  A recent decision by the U.S. Second Circuit Court of Appeals reveals that an employer's failure to investigate can ALSO lead to claims by the accused harasser.

The Plantiff, Sassaman, was discharged after a female coworker accused him of sexual harassment.  In issuing its determination, the Court relied heavily on the employer's failure to properly investigate as evidence that the employer "reushed to judgment" due to gender-based behavioral assumptions.  Sassaman sued under Title VII, and the court's ruling opens the door for potential Title VII claims by accused harassers who believe they were the victim of a pro forma or otherwise inadequate investigation.  (Sassaman v. Gamache, No. 07-2721-cv (2d. Cir. May 22, 2009).

BEWARE OF GENERIC HEALTH CARE PROXY FORMS

While it might seem easy to sign a generic health care proxy form, in truth it is vitally important that you have a document that is specifically tailored to your needs.  Contrary to generic documents, at a very minimum a properly drafted health care proxy form should contain the following:

(1)  The name of the person authorized to act for you as well as an alternate;

(2)  An explanation of the kind of treatment you want if you are terminally ill, in a coma, or have brain damage with no hope of recovery.  Do you want feeding tubes, resuscitation, dialysis, blood transfusions, or other typed of treatment;

(3)  A declaration of whether or not you wish to be kept alive by machines if you are in a persistent vegetative state;

(4)  Whether or not you wish pain medication to be administered and under what circumstances;

(5)  Whether or not you wish to donate any of your organs;

(6)  Where and how you wish your remains to be disposed of and whether or not you wish to be cremated or buried.

NOTE:  If you already have a health care proxy your later sigining of a generic health care proxy form will revoke your more personal health care document.  (ElderLawAnswers, 7-8-09). 

ESTATE PLANNING IS MORE IMPORTANT THAN EVER

With the national economy in chaos, it appears that many individuals have become confused about the continuing need for proper estate planning/asset protection. For example, our firm calculated a probate fee, by itself, of approximately $180,000 for a large estate consisting primarily of real estate in California. This couple both had encountered serious health problems in the past and had children who were irresponsible, yet the husband blindly felt that all of their potential costs and problems would somehow magically disappear.

 ESTATE PLANNING IS NOT AS SIMPLE AS IT MAY APPEAR 

IRS PENALTY FOR LATE FILING OF FORM 5471 ESTATE PLANNING IN UNCERTAIN TIMES

We have been working with one of the top 14 law firms in the U.S. for a number of years now and are fully capable of handling all of your domestic and/or international asset protection & estate preservation needs.  Give us a call TODAY for a FREE 20 minute phone consultation to find out how we can help protect yourself, your heirs and your business from costly estate planning and/or asset protection problems. 

Dealing With Layoffs, Advanced Planning Can Prevent Costly Lawsuits

Shaving the salaries of some employees may help a company's bottom line, buit it could also invite trouble with state and federal regulators, or lead to lawsuits because the employer failed to plan for the worst.  Very few companies have a solid, carefully-planned system in place for the evaluation of employees.  The need for such a plan is especially important to stave off any disparate impact claims.

Going by seniority can be problematic when workers over the age of 40 are involved, because of the protection afforded under the Age Discrimination in Employment Act.  Also, claims of relaliation are becoming more common-pllace, particularly in wake of two recent Supreme Court decisions expanding the ability of workers to sue for retaliation.  (See, CBOCS West v. Humphries, No. 06-1431, and Gomez-Perez v. Potter, No. 06-1321).

Forcompanies with 100 or more employees, under the federal Worker Adjustment and Retraining Notification Act employers must give employees at least 60 days' prior notice of any pending layoff or face costly statutory damages.  This also applies if companies are sold and some or all of the acquired employees are let go.  (See, LawyersUSA, "It's RIF out there: Dealing with layoffs", by Kimberly Atkins, July 7, 2008).

WHY MANY PROPOSED SOLUTIONS DON'T WORK? DOES YOUR STATE HAVE FRIENDLY TORT LAWS?

As noted by attorney Denis A. Kleinfeld, "What I find amazingly perplexing is that a significant proportion of very successful people who carefully analyze every business proposition - or every restaurant cheque - and spend a small fortune on lawyers, accountants and other professionals for advice (even planning in minute detail their golf or fishing outings) do virtually no planning for what they will do if and when they lose a lawsuit . . . .Human beings are quite capable of all kinds of behaviour that may involve dishonesty, fraud, antisocial behaviour, or malicious actions . . . .As the worl closes in and the exposure to losses increases it is clear that asset protection planning is now as important as it was in the days when building a castle was the best protection plan." (Offshore Investment, 4-08, Issue 185, pages 47-48, "Asset Protection for High Net Worth Clients needed now more than ever.")

The PROBLEM is, as revealed by Trusts & Estates magazine (Sept. 2003):  (a) "Top Law Schools Fail To Train Students in Trusts nd Estates"; (b) "clients want asset protection plans" but the vast majority of lawyers don't consider them because "they don't quite know how", and (c) "lawyers anticipate a rise in litigation as baby boomers being inheriting from their parents - and taking the ensuing will disputes to court."

If one desires a viable, protective asset protection and estate preservation structure, then highly competent and experienced professionals with expertise in these fields are required.

According to the "U.S. Tort Liability Index: 2008 Report," North Dakota ranked the best in terms of tort costs and litigation costs.  On the other side, Florida ranked dead last in cost and litigation risk and Rhode Island ranked the worst in tort laws.

States that have effective tort laws, reasonably low costs and few litigation risks are: Alaska, Mississippi, Ohio, Tennessee and Utah.

States with weak tort laws, high court costs and high litigation risks are: Alabama, Arizona, Arkansas, California, Illinois, Maryland, Massachusetts, New York, Oregon, Pennsylvania, Rhode Island, Washington, West Virginia and Wisconsin.

States which have weak tort laws but currently have low court sosts and few litigation risks, thus leaving such states vulnerable, are:  Hawaii, Iowa, New Mexico, North Carolina, North Dakota and Virginia.

States which have strong tort laws, but moderate to high tort costs and litigation risks are: Colorado, Florida, Georgia, Indiana, Louisiana, Michigan, Missouri, Nevada, New Jersey, South Carolina and Texas.

So, where does your state rank?

April 2008:

GUIDELINES FOR PROPER ESTATE PLANNNING

Estate planning attorney, Barbara H. Cane, while primarily addressing "special-needs heirs", provides the following guidelines: (a) use a revocable living trust as the backbone of the plan;  (b) flexibility is the key to a good plan;  (c) never let the beneficiary receives assets in his or her own name;  (d) plan to prevent "accidental gifts" to the beneficiary;  (e) choose competent trustees; and (f) think hard about how much to provide for each child if there is more than one.  (Financial Planning, December 2007).

Key elements of a proper estate preservation structure should include a properly drafted, comprehensive Living Trust, Pour-over will, Advanced medical directive (durable power of attorney for health care), Living will and General Durable Power of Attorney.

The Mississippi Supreme Court recently held that a daughter who did not have a power of attorney for her mother (who became incapacitated due to an unexpected stroke) was not entitled to her mother's medical records and, thus, to deal with the nursing home on behalf of her invalid mother. (ElderLawAnswers, January 22, 2008).

"Sources say the uncertain fate of the estate tax has to some extent shifted the focus of estate planning from tax avoidance to equally important financial objectives.  Chief among these are providing for the welfare of a survivng spouse, controlling the disposition of assets to be passed to heirs and protecting assets from creditors."  However, when the "language is less than precise, funds intended for heirs can be sent into indefinite limbo" due to the "unwillingness of financial institutions to honor the intent of estate planning documents."  (National Underwriter, "Estate Planning in '08' by Warren S. Hersch, January 14, 2008).

March 15 - 30, 2008:

"CONVENTIONAL" ASSET PROTECTION & ESTATE PRESERVATION PLANS DO NOT WORK 

"A family falsely believing that it has the right documents to secure assets is worse off than the family that knows it needs a plan but just hasn't acted.  Unintentional defects in documents or execution all to frequently occur, resulting in some combination of expensive legal solutions, excess taxes paid, or unprotected access to assets. . . . Financial advisors and estate attorneys, for example, have observed that many problems evolve from  lawyers who practice estate planning as a sideline rather than as a specialty." (Investment Advisor, "Protecting Family Assets", Lewis Schiff, January 2008).

March 1 - 15, 2008:

  IMPROPER REQUESTS/INVASIONS OF PRIVACY

BY FINANCIAL INSTITUTIONS (i.e.,  BANKS AND BROKERAGE FIRMS) 

 The presence of real privacy is a rare commodity in the U.S. today, but some financial institutions would make privacy even more rare with their misguided interpretations of the Patriot Act.  It has bee brought to our attention that some banks and brokerage firms (i.e., financial institutions) have refused to open accounts for irrevocable trusts, limited partnerships and/or limited liability companies (which have their own separate Taxpayer Indentification Number) unless the applicant provides a list which identifies the "beneficial owner of the funds involved."

While this request is valid for such entities which engage in financial transactions outside the United States, such request appears to be improper and contrary to law if the entity engages in financial transactions soley within the U.S.  In this regard, Title 31, Subtitle IV, Chapter 53, Subchapter II of Section 5318A(b)(1)(B)(iii) specifically provides that the Secretary of the Treasury may require (i) the identity and address of the participants in a transaction or relationship, including the identity of the originator of any funds transfer;  (ii) the legal capacity in which participant in any transaction is acting;  (iii) the identity of the beneficial owner of the funds involved in any transaction but only "with respect to a jurisdiction outside of the United States, financial instritution operating outside the United States, class of transaction within, or involving, a jurisdiction outside of the United States, or 1 or more types of accounts" id primary money laundering concern.

February 2008:

Readers should become much more aware of the quality, or lack thereof, of the services provided by their "local" estate planning and/or asset protection practitioner.  Attorney Roy M. Adams, a prominent estate planning attorney, was a speaker on October 12, 2007 at the 33rd Annual Notre Dame Tax and Estate Planning Institute.

According to Mr.Adams, a recent survey conducted by the Internal Revenue Service revealed that "one-third" of the marital deduction provisions contained in Trust and Will agreements do NOT meet IRC requirements and are disallowed by the IRS.  Obviously, such disallowance results in a substantial increase in estate taxes, interest and penalties.

Mr. Adams further revealed that "estate litigation" resulting from disgruntled and/or greedy heirs is now the "number one litigation" issue in the United States.  While we have warned against such potential problems for many years, most individuals tend to ignore these warnings as only applying to the "other guy".  Unfortunately, reliance on a local general practitioner for viable comprehensive estate planning and asset protection documents can be a costly mistake.

Obviously, this means that many practitioners lack the expertise required to best serve their clients and to protect their client's estates from excessive death taxes and litigation.

For asset protection purposes, on a scale of 1 to 10 (10 being the best) an LLC or FLP rates about a 4, a domestic asset protection trust (DAPT) coupled with an LLC rates about a 6, an offshore asset protection trust (OAPT) coupled with an LLC rates about a 9.  HOWEVER, this desired asset protection is only available if: (a) the documents are prepared by a specialists in domestic and international tax law and asset protection strategies (there are only 14 law firms in the entire U.S. which meet this criteria); (b) the documents themselves are comprehensive and not simplistic (as is often the case); (c) the various entities are located in one or more of the most protective (domestic and/or offshore) jurisdictions; and (d) the structures are properly managed and operated at all times.

David Ness, president of the Raymond James Trust Co., decalred that instead of using a local general practitioner or do-it-yourself approach using simplistic documents available on the internet, "most people would be well-advised to seek the help of attorneys who specialize in estate preservation."  "in life, there are two things you should never scrimp on - a parachute and your estate planning documents.  In both cases, you only use them once, and they have to work."  (Business Week online, 7-21-06).

We have been working with one of the top 14 law firms in the U.S. for a number of years now and are fully capable of handling all of your domestic and/or international asset protection & estate preservation needs.  Give us a call TODAY for a FREE 20 minute phone consultation to find out how we can help protect yourself, your heirs and your business from costly estate planning and/or asset protection problems.

September 14 - 30, 2007:

THE LATEST IN LITIGATION

The judge who lost a $54 million lawsuit against a dry cleaner filed an opposition to the defendants' motion for legal fees, arguing that he should not have to pay the $82,907 that the owners of the business incurred in defending themselves against his frivolous lawsuit. (The New York Times, August 11, 2007).

A Washington state jury awarded $4.5 million to the widow of a 61-year-old artist and photography instructor who died after the symptoms from his brain tumor were misdiagnosed as panic attacks. (Lawyers USA, August 13, 2007, page 31).

The D.C. Court of Appeals recently ruled that the president of a corporation can be held personally liable for sexually harassing a subordinate African-American female employee. (Lawyers USA, August 13, 2007, page 21).

The 8th U.S. Circuit Court of Appeals recently ruled that an employer may be liable for religious discrimination and retaliation where it terminated a Christian employee after he expressed discomfort with and declined to participate in worlplace programs and exercises based on Buddhist and Hindu beliefs.  (Lawyers USA, August 13, 2007, page 21).

The foregoing prove that corporations do not always isolate individuals from costly lawsuits nor are individuals immune from the costs of defending against frivolous litigation.

September 1 - 14, 2007:

HOMESTEAD & ERISA EXEMPTIONS - DO THEY WORK?

Under a decisions issued on August 7, 2007 by the 1st U.S. Circuit Court of Appeals, it is now clear that those who heavily rely on various state and federal homestead and retirement plan (ERISA) exemptions may sometimes be barking up the wrong tree.

Under this holding, those creditors who can successfully utilize the government to seek restitution under the Mandatory Victims Restitution Act ("MVRA") can obtain garnishment and restitution from assets otherwise claimed to be exempt by the debtors under various homestead and ERISA exemption laws and statutes.

Charged with "fraudulent conversion" and "mail fraud" in the amount of "$317,678.16 plus prejudgment and post-judgment interest", the debtor, Phillip Hyde, found that his claims of homestead exemption was to no avail.  The Court ruled that the "MVRA supercedes the homestead exemption" and that the "MVRA's provisions apply '[n]otwithstanding any other Federal law,'" including the 'non-alienation provisions of ERISA".

As we have long claimed, unfortunately not all alledged asset protection strategies work.

August 1 - 20, 2007:

Don’t think to yourself "It can’t happen to me."

"All charges against Dr. Osvaldo Orengo have been dropped said his attorney, Dwight Carpenter, in a press conference held at his office Wednesday, June 20 . . . After the trial was over, the jurors were interviewed and we found that they (the complainant and the witnesses) weren’t credible". The charges against Dr. Orengo consisted of "first degree criminal sexual conduct," "second degree criminal sexual conduct, attempted second degree criminal sexual conduct and assault and battery." As a word of warning to licensed practitioners, Carpenter stated: "I worked on cases from similar claims in Mount Pleasant, there is no doubt in my mind that these ladies learned their traits from those cases and they were (also) ready to sue if Dr. Orengo was convicted." Carpenter said, "they simply jumped on the bandwagon for a piece of the pie."

THINK ABOUT THIS - Dr. Orengo was a highly respected physician, both by his professional associated and his patients, in Clare County, Michigan. Yet, due to these serious, but later unsubstantiated charges, Dr. Orengo suffered a "13-month ordeal" and is now working on "getting his (lost medical) license back." (The Clare Sentinel, June 26, 2007, page 1).

Not only are doctors the targets of the greedy, but small businesses are also the targets of unscrupulous people wanting nothing more than to get a "piece of your pie."

"A customer could sue a grocery store for injuries allegedly caused by slipping on a grape, Massachusetts’ highest court (citing 19 other states) has ruled in adopting the ‘mode of operation’ approach for determining premises liability." (Lawyers USA, May 7, 2007, page 27).

"A $15 million punitive award to an employee who was fired as a result of her panic disorder must be reduced to (a paltry) $2 million, the California Court of Appeals has ruled. The discharged employee was also awarded slightly more than $2 million as a compensatory award." (Lawyers USA, January 29, 2007, page 18).

"When a co-worker of an employee claiming to be sexually harassed tells a manager, and the manager fails to follow-up, the employer is on notice of the harassment and a jury could find it acted negligently, the 7^th Circuit has ruled." (Lawyers USA, April 23, 2007, page 24).

"A Palmyra (Pennsylvania) truck driver who suffer5ed permanent brain injuries when he slipped on an ice-covered, poorly-lighted parking lot where his trailer was parked . . .has settled a negligence lawsuit against Ryder Truck Rental, Inc. and a snow-removal firm (All-Green Turf Management, Inc.) For $7 million." (Courier-Post, March 20, 2007).

"A Miami (Florida) jury awarded $5 million (against the owner and developer) to the mother of a 12-year-old autistic boy who drowned in a lake on the grounds of his apartment complex." (Lawyers USA, March 26, 2007, page 24). 

 July 15 - 31, 2007:

INCAPACITATION IS AN ASSET PROTECTION ISSUE

Despite numerous news articles pertaining to the costly problems of incapacitation, particularly if the individual has failed to purchase long-term care insurance, individuals still erroneously believe that if they become incapacitated they can obtain support from Medicare and/or Medicaid without the loss of their properties.  Nothing could be further from the truth!  Medicaid only covers nursing home care for a maximum of three months, and, Medicare only pays after the individual has, in essence, becoem impoverished.  For example:

Upon the death of her husband, their Testamentary Trust was divided into a Marital share and a Family (decedent's) share.  Recently the Minnesota Appeals Court ruled that the deceased husband's Family trust share was really a "support trust for his wife's benefit and is an available asset for Medicaid eligibility purposes." (The ElderLaw Report, 2/07).

An Iowa Appeals Court recently held "that the state may reopen an estate to make a claim for a Medicaid debt because executors must provide notice of probate by mail to the state Medicaid agency regardless of whether it is a reasonably ascertainable creditor." (The ElderLaw Report, 3/07).

A Missouri Appeals Court ordered "a judge to open a probate estate at the request of a state agency holding a Medicaid lien, finding that under state law judges must open an estate upon the request of an interested party, whether or not the estate has any assets." (The ElderLaw Report, 5/07).

A New York Appellate Court ruled "that the spouse of a Medicaid recipient who exercised her (legal) right to refuse to contribute to the cost of her late husband's nursing home care must (still) reimburse the state for benefits paid."  (The ElderLaw Report, 2/07).

The foregoing are typical examples of why it is extremely difficult to protect against the loss of assets when an individual becomes incapacitated and the family elects to apply for Medicaid under the erroneous belief that such assets will be protected against seizure.

March 10 - 17, 2007:

January 2 - 20, 2007:

 KEY FACTS ABOUT LIMITED LIABILITY COMPANIES

The use of Limited Liability Companies ("LLC's"), particularly for asset protection purposes, is becoming widespread throughout the U.S. However, in many instances the LLC has been situated in a state which, in fact, may NOT provide the desired asset protection.

For example, to date only seventeen (17) states have enacted statutes which specifically limit a creditor's remedy solely to a charging order. Thus, in the absence of such a statutory limitation the creditor may subsequently obtain a judicial order for foreclosure and sale of the charged LLC member's interest. Should such an event occur, the LLC member will find himself in a very financially precarious situation. Of these 17 states, five (5) states also impose some form of taxes on LLC's thus making that state a far less desirable location.

In other instances, the client who establishes an LLC may decide that he can ignore the formalities and chooses to operate the LLC somewhat as if it does not exist and as his own personal "piggy bank". The old adage that one "can not have his cake and eat it too" is equally applicable to the operation of an LLC. Should such an event occur, the LLC will be ignored for asset protection purposes and will be treated as nothing more than an "alter ego" or "mere instrumentality of the individual". Thus, the LLC's assets will be available for attachment by a judgment creditor. (See, In re Teknek, LLC, 343 B.R. 850, 863 (Bankr. N.D. Ill. 2006); Travelers Indem. Co. v. Employers Co., Inc., 2006 WL 2457478 (E.D. Mich. 2006)).

Thus, as a "word to the wise", the failure to locate the LLC in the proper state or the election to ignore the statutory and operative requirements can result in more costly legal problems that the LLC was created to avoid.

                                                                                                                           

December 15 - 30, 2006:

BEWARE OF TRUST AND INVESTMENT SCAMS

For over 25 years we have repeatedly warned Americans to avoid those who claimed to have certain trust "expertise" which they could use to assist their clients in eliminating and/or minimizing income taxes and to protect their assets against unwarranted litigation. In addition, most such promoters also claimed to provide investment "expertise" services which their clients could utilize to obtain financial returns far superior to those available in the United States.

According to two Press Releases issued by the U.S. Department of Justice on November 27, 2006, the following individuals have plead guilty to tax and/or investment fraud schemes: Lanny R. White of Orem, Utah; Orem, Utah attorney Todd Cannon; Valencia, California attorneys Martin Arnoldini and Jerrold Boschma; David J. Orr of Salt Lake City, Utah; Sandy, Utah attorney Michael Behunin; R. Scot Stokes of Henderson, Nevada; former IRS Revenue Agent Marissa Hyde of Overland, Kansas; Edward T. Woodger of Sandy, Utah; and Max C. Lloyd, a Midvale, Utah CPA licensed in California. White also admitted that, as part of his role in the conspiracy, he falsely claimed to be a licensed CPA.

From 1993 to 2004, White and his co-conspirators used such business names as Advanta Strategies, World Contractual Services, Rockwell Services, CornerStone West, Ventures Limited, and Whiven Financial to market and sell a "fraudulent trust scheme" to hundreds of clients. Such fraudulent trust and investment schemes were also promoted at "offshore seminars hosted by the Institute of Global Prosperity" of which several individuals have been convicted of felony tax charges. In addition to the unpaid assessed tax liabilities coupled with penalties and interest totalling in the millions of dollars now due the IRS, the so-called "investment" losses of such "clients" are estimated to exceed $21,000,000.

The old adage that "a fool and his money are soon parted" is still true. Remember, if it sounds too good to be true, it is! If you are approached by someone making such claims, please contact our office PRIOR to spending your money on such fraudulent schemes 

                                                                                                                                                                                                                 

 November 15 - 30, 2006:

ANOTHER REASON WHY A CHILD SHOULD BE A RESTRICTED CO-TRUSTEE

An Ohio attorney, Jacintha Balch, prepared a Will and Trust Agreement for each of William Lutz's parents.  Both trusts were revocable until each parent died, at which time they became irrevocable.

After his prent's deaths, William Lutz sued Ms. Balch for legal malpractice on the grounds that she had negligently prepared the Wills and Trust Agreements by failing to minimize estate taxes.  In response, Ms. Balch argued for summary judgment on the grounds that Mr. Lutz did not have standing to sue her.

The trial court agreed with Ms. Balch and, upon appeal, the Ohio Court of Appeals affirmed the lower court, holding that the son did not have the necessary privity to maintain a legal action against the attorney.  According to the court, because the son (William Lutz) was only a potential beneficiary of the trusts until both his parents died, he had no vested interest in the trusts and no attorney-client relationship with the attorney.  Lutz v Balch (Ohio Ct. App. 10th Dis., No. 06AP-247, August 31, 2006).  As we have maintained for many years, a child listed as a Co-Trustee can be of great benefit when unexpected problems occur.  In this case, as a co-trustee the son would have had an attorney-client relationship and would have had legal standing to sue the attorney for malpractice.

While the penalty for failure to timely file IRS forms has been around for many years, effective 2009 the IRS will assess and automatic penalty on any corporation that does not file a form 5471 on a timely basis.  All U.S. citizens who have equity in, or a controlling interest in a Controlled Foreeign Corporation ("CFC") must file Form 5471, a somewhat common situation for U.S. clients of certain offshore asset protection promoters.  The IRS will now assess an automatic penalty of $10,000 for each missed CFC filing, and, separate penalities will apply to each entity for each year that has not been filed.  (See Offshore Press, Inc., Jan. 5, 2009 (www.offshorepress.com))

PITFALLS OF MEDICAID PLANNING

Elderly individuals, and their children, often seek to protect their assets by transferring such assets to their children in an attempt to subsequently qualify for Medicaid benefits.  With rare exceptions, such transfers do not work and can be very costly for the Mediciad applicant.  For example:

A woman who transferred her house to her son before entering a nursing home, thereby incurring a Medicaid penalty period (i.e., disqualification), violated the state's fraudulent conveyance statute and if financially responsible to the nursing home. (ElderLaw Answers, Jan. 5, 2009).

A woman who signed a nursing home admissions agreement as a designated representative (i.e., attorney-in-fact) is not responsible for paying the resident's nursing home bills.  Hoever, the personal representative may still become responsible for the payment of the nursing home resident's bills because she used the power of attorney to dispose of the resident's property and failed to pay all of the sales proceeds to the nursing home. (ElderLaw Answers, Jan. 5, 2009).

For those who believe that the estate tax will be repealed, or the exemptions substantially increased, we are unaware of any pronouncements from the President elect, or the members of both Houses, that such will be the case especially in a time of unprecendented federal deficits.  Remember, an estate tax was enacted in 1797, repealed in 1802; enacted in 1862, repealed in 1890; enacted in 1898, repealed in 1902; enacted in 1916, then reformed in 1930, 1976-1993, 1997, and 2001.

To circumvent the resulting loss of revenue when the Federal Government increased the personal exemption at least 25 states have already enacted tax laws designed to replace the lost estate tax revenues, with more states likely to follow in the near future.

With the current federal exemptions of $2,000,000 per person ($4,000,000 per couple with proper planning), certain individuals feel that there is no serious need for comprehensive estate planning.  However, there are numerous reasons other than taxes for implementing a properly drafted estate plan, such as:  (1) avoidance of the time-consuming, privacy-invading and costly probate procedure;  (2) providing for family members who now have, or who may have in the future, special needs;  (3) protection from future creditors of a surviving spouse, children and grandchildren;  (4) protecting the estate from challenges launched by greedy and/or power-hungry heirs and/or their spouses;  (5) providing for an efficient distribution of assets to family members; and (6) providing for succession involving a family business.

EXPANDED HARASSMENT/DISCRIMINATION LIABILITY EXPOSURE

In a recent case, the New Jersey Appellate Division drew upon new federal decisions to change the legal landscape for employers.  This change is expected to make it easier for plantiffs to avoid pretrial dismissal of their suits, and to present their discrimination and harassment claims to a jury.

In Kwiatkowski v. Merril Lynch the court adopted the "subodinate bias" theory that several federal courts have applied in Title VII cases.  Often described as the "cats paw" or "rubber stamp" theory of liability, the subordinate bias theory holds that an employer may be found liable for a facially nondiscriminatory employment action of the decision-maker may have been influenced - even unknowingly - by a biased subordinate employee.  In such a case, the biased subordinate provides an illegal taint to the decision maker's action by selectively reporting, or even fabricating, information in his communications with her.  Thus, the employer can still be held liable even though the decision maker herself was unbiased, or not even aware that the plaintiff was in a protected class, or had previously complained of discrinimation or harassment. 

Others assume that the current $3.5 million exemption from the federal estate tax will avoid the imposition of death taxes. Unfortunately, in many states such an assumption is incorrect because: (a) many states impose a state inheritance or estate tax which is entirely separate from the federal estate tax; (b) may other states have "de-coupled" from the federal estate tax and now limit their state’s exemption to as little as $675,000; and © finally, no one knows under the current administration’s spend and tax policies whether the federal exemption will remain at $3.5 million or, because of the massive projected yearly deficits, will be decreased to significantly less than $3.5 million.

Finally, proper estate planning/asset protection is always extremely important in order to protect against the loss of assets due to the: (a) unexpected death of a married child; (b) incapacitation of the child or grandchild; (c) irresponsibility of a child; (d) divorce of a child; or (e) the insolvency/creditor’s judgment against a child.

ASSET PROTECTION PLANS ARE MORE CRUCIAL THAN EVER

AUTO ACCIDENTS RESULT IN ASTRONOMICAL AWARDS

 A Florida jury just awarded $65 million for "past and future medical expenses, lost earnings ability and pain and suffering" to a 21-year old woman whose car was broadsided by a truck in 2007. The driver of the truck, Robert Bohn, and the trucking company, Bynum Transport, were held 100% responsible for the accident. (LawyersUSA, 3-25-09).

A Will County, Illinois jury awarded $23.75 million to victims of a crash involving three cars and a tractor-trailer. The primary awards were against the semi driver, DeAn Henry, and the trucking company, C. H. Robinson Worldwide. (Herald News, 3-24-09).

A Fresno County, California jury awarded $10.5 million to Maria Blanca Lopez and her family after she was broadsided by a dump truck owned by Disabled American Veterans Charities and driven by J. C. Ramirez. (The Herald News, 2-10-09).

A San Mateo, California woman was awarded $45 million after her car was struck by a Division 1 company truck driven by Roman Pantoja. (The Daily Journal, 3-19-09).

An Antrim County, Michigan man was awarded $1.25 million when he was hit by a truck while bicycling along M-32. (Traverse City Record-Eagle, 3-23-09).

WARNING - FAILURE TO PROPERLY DISCLOSE OFFSHORE ACCOUNTS COULD RESULT IN VERY COSTLY PENALTIES

The I.R.S. is virgorously enforcing the requirement, as indicated by the recent UBS case, that a Foreeign Bamk Account Report (FBAR) be filed annually by all U.S. citizens and residents who have failed to pay tax on foreign income or have paid the income tax but were not aware that they still were required to file this form.  This requirement applies to those whose offshore account totalled $10,000 at any point during the year.  The I.R.S. can impose a penalty of $100,000, or one half the value of the account, whichever is greater, per year.  Similar filing rules also apply to the required annual filing of Treasury Department Form 90-22.1.

For those who have "gambling" characteristics, be advised that those who want to challenge FBAR penalties cannot do so in the U.S. Tax Court.  Instead, they must, pay the tax, penalties and interest up front and then sue in U.S. District Court for a refund.  In addition, FBAR penalties are not dischargeable in bankruptcy.  These little-known but very costly traps were revealed by two recent cases - Williams v. Commissioner, US Tax Court 2008, and, United States v. Simonelli, D. Conn. 2008.

On January 26, 2009 the U.S. Supreme Court ruled that a waiver in a divorce decree is not sufficient to divest a wife of her interest in her ex-husband's pension plan.  A married couple divorced, and the wife signed a decree that waived her rights to the husband's pension plan.  Unfortunately, the husband, who had previously designated his wife as his beneficiary, failed to execute any documents removing her as the beneficiary and the divorce decree did not meet the requirements of a qualified domestic relations order (QDRO).  (Kennedy v. Plan Administrator for DuPont Savings and Investment Plan, No. 07-636)

In the latest of estate challenges by disgruntled heirs, even though she is still alive 78-year-old Patricia English's son, Robert Jaeger, is suing "five of his siblings for interferring with an expected inheritance and is seeking more than $1 million in punitive and compensatory damages."  Mrs. English's only asset is her residence which is valued at only $130,000.  (ElderLaw Answers, January 22, 2009).

WATCH OUT FOR THE LATEST IN LIABILITY EXPOSURE

One of President Obama's first acts after he assumed office was to sign into law the "Lilly Ledbetter" bill.  This law will "make it easier for workers to win lawsuits claiming pay discrimination based on sex, race, religion, national origin, age or disability . . .The bill would relax the statute of limitations, making clear that each new paycheck is a violation of the law if it results 'in whole or in part' from a discriminatory pay decision made in the past."  Critics claim that employers will now be exposed to "decades-old discrimination claims that they have no ability to defend", and, that the "individual responsible for the alleged discrimination is no longer with the company, or perhaps not even living."  (The New York Times, Jan. 28, 2009).

Earlier, Thomas J. Donohue, president and CEO of the Chamber of Commerce, declared that if such a law was passed it would "lead to a flood of new litigation that will hurt businesses."  Donohue "charged that labor unions and trial lawyers are 'expecting quick and frequent payback for their efforts and their investments' in Democratic election campaigns."  (LawyersUSA, No. 11, 2008)

Subsequently, Lenora Chu, CNNMoney.com contributing editor, wrote that under this law, "small companies may be at a disadvantage - few have access to the attorneys and human-resource professionals that will help larger businesses comply with the newly expanded law."  Elizabeth Milito, senior executive counsel of the National Federation of Independent Businesses stated that:  "There's also the potential for one lawsuit that goes south to put a small business out of business."  (CNNMoney.com, Feb. 2, 2009)

Coupled with this new law is last year's expansion of the Americans With Disabilities Act whereby the definition of the term "disability" was greatly expanded.  In support of this expansion, the 9th U.S. Circuit Court of Appeals just ruled that a "Type-2 diabetes patient was entitled to the provisions of the Americans With Disabilities Act."  (The Los Angeles Times, Feb. 13, 2009)