The Ohio Trust & Estate Blog

Gary Vawter called me the other day with a question I get quite a bit:  “What do you most often recommend to your planning clients who come in asking out asset protection?”

What I first tell them is not to do it in a vacuum.  To be useful, asset protection planning should only be done in context with the rest of your estate planning.  Next, I tell them their first line of defense is liability insurance.  Ohio has a $5 million ceiling on umbrella policies and, if you can afford it, there’s no reason not to have such a policy.  But really, most people don’t need or want complicated off-shore trusts or entities and, after they discover the amount of control that is usually lost in order to maximize the protection, most people give up – which is usually the right decision.

However, this afternoon I found this post at Acrimony.com.  While not a major departure from I usually tell my clients, this list on common asset protection techniques is more complete and has some good suggestions for asset protection planning for the ‘rest of us.’

Do Something TODAY. Every day that passes makes transfer, tools and actions you take to protect yourself stronger and harder to argue with. Trying to protect yourself after you have a liability event is rarely effective and usually illegal;

Liability Insurance is your first line of defense, buy every dollar you can afford,  including umbrella policies, assume it won’t work and have a back up plan;

Use corporate entities like LLCs as liability firewalls. Always divide and segregate your personal & business assets (and liabilities) as much as possible. “Sole Proprietor” is almost always the worst choice;

Don’t assume that a corporate entity on its own is complete protection. Remember that single member or “closely held” entities are subject to “piercing of the corporate veil”. If you own it, run it, control it, it can be argued that it is still YOU;

Get professional legal & accounting help to organize your assets and make sure you maintain the legal formalities of these entities like tax returns, meeting minutes and separate bank accounts or they won’t help at all;

Get your vehicles out of the name of your business. Many people do this for the deduction. If you or your spouse injures someone with your car you have created a “bridge” to your business and all it owns. Take a vehicle allowance instead;

Click here for the rest of the list.

Thanks to Mr. Ike Devji for a great post.  Thanks also to Gregg Herman-Giddens of the North Caroline Estate Planning Blog for first posting to this.

Don’t let a lack of political will (or ability!) fool you…  According to this story at The Hill.com, “Senate leaders are working on an estate tax deal to make it easier to move a bipartisan jobs bill.”  These days I’ve taken to pronouncing “bipartisan” the same as “unicorn” but the proposed quid pro quo seems reasonable:

The deal discussed by Senate Majority Leader Harry Reid (D-Nev.) and Senate Minority Leader Mitch McConnell (R-Ky.) involves moving an estate tax bill through the Senate that would prevent a huge hike in the tax from taking effect in 2011, staffers and lobbyists say.

For Reid, it could provide crucial Republican votes for the jobs bill in a Senate where Democrats now have only 59 votes. Republicans would get a vote on legislation to stop the estate tax from returning to a historically high level.

Exact details of the compromise are unknown as are the details of the jobs bill itself but this is the first significant movement I’ve heard of this month.  Basically, we’d see the return on 2009 rates and exemptions made retroactivley effective to January 1, 2010.

An interesting quote from the article:

What many Republicans would really like is a vote on a proposal by Senate Minority Whip Jon Kyl (R-Ariz) and Sen. Blanche Lincoln (D-Ark.) that was offered during last year’s budget debate. Their legislation would cap the estate tax at 35 percent on estates worth more than $5 million.

That’s interesting because if that’s really what the R’s wanted just a few months ago, and the D’s were proposing the same $5 million exemption with rates at or near 45% (with a portable exemption) then why couldn’t we get this done?  We were so close!  To think we could have avoided the present insecurity and confusion if these damned partisans could have just walked a few steps towards each other.  We were so close.

Thanks to Greg of the North Carolina Estate Planning Blog for pointing this story out this morning.

Greg Herman-Giddens of the North Carolina Estate Planning Blog posted the below notice on his site and I thought it advisable to post the same here.  Thanks Greg.

As of January 1, 2010, there is no more federal estate tax. The estate tax has been replaced with a complex modified carryover basis regime. In 2011, the estate tax is scheduled to return, with a $1,000,000 exemption and 55% rate. Due to these changing laws, it is imperative that everyone with an estate of $1 million or more do proper planning to ensure that income and estate taxes will be minimized. Be aware that the face value of life insurance is included in calculating one’s estate, so even many young couples have estates in excess of $1 million. Do not let your family pay tax unnecessarily. Consult an estate planning specialist today.

Its worth noting that most people who watch this sort of thing think congress will retroactively reinstate the estate tax sometime in 2010 at 2009 rates and exemptions which would affect the estate of anyone who dies on or after January 1, 2010.  US v Cartson says its constitutional for them to do so, in my opinion, but we’ll see…  Its been over a decade since that opinion and we’ve got a different court and a different society.