Abbreviated Table of Contents
Chapter 1: Purpose & Methods
Chapter 2: Fraudulent Transfers
Chapter 3: Strategic Planning
Chapter 4: Domestic Trusts
Chapter 5: International Asset Protection Trusts (IAPTs)
Chapter 6: International Life Insurance and Annuities
Chapter 7: Titling of Assets & Family Law
Chapter 8: Corporations
Chapter 9: Family Limited Partnerships (FLPs)
Chapter 10: Family Limited Liability Companies (LLCs)
Chapter 11: Insurance
Chapter 12: Techniques & Examples
Expanded Table of Contents
Chapter 1: Purpose & Methods
I. The Need for Asset Protection
§1:01 General Points
§1:02 The Dream of Wealth
§1:03 Planning Perspectives
§1:04 Reasons for Protecting Assets
§1:05 Goals of Asset Protection
§1:06 Who Needs Asset Protection?
§1:07 Liability of the Professional Advisor
II. The Lawsuit Crisis
§1:10 We Live in a Litigious Society
§1:11 Effect of a Lost Lawsuit
§1:12 Solutions to the Lawsuit Crisis
III. Methods of Asset Protection
A. General Points
§1:20 The Basic Plan
§1:21 Various Techniques
§1:22 Hiding Assets
§1:23 Tax Planning
§1:24 Avoid Questionable Technique
§1:25 International Investments
B. Specific Methods
§1:30 Data Gathering and Analysis
§1:31 Insurance
§1:32 Psychological Protection
§1:33 Technical Protection
IV. Forms
1-1 Estate Planning Worksheet
Chapter 2: Fraudulent Transfers
I. General Points
A. Risks in Asset Protection Practice
§2:01 Dangers From Clients
§2:02 Dangers From Creditors
B. Relevant Laws
§2:10 Common Law
§2:11 Uniform Fraudulent Conveyance Act
§2:12 Bankruptcy Code
§2:13 Uniform Fraudulent Transfers Act
C. Types of Fraud: Actual and Constructive
1. General Points
§2:20 Statutory Basis
§2:21 Solvency and the Client’s Intentions
2. Actual Fraud
a. General Points
§2:30 Actual Fraud Is Difficult to Prove
§2:31 Actual Intent
b. Badges of Fraud
§2:40 General Points
§2:41 Badge 1: Transfer to an Insider
§2:42 Badge 2: The Debtor Retained Possession
§2:43 Badge 3: The Transfer Was Concealed
§2:44 Badge 4: Creditors Were in Hot Pursuit
§2:45 Badge 5: Transfer Was of All the Debtor’s Assets
§2:46 Badge 6. The Debtor Absconded
§2:47 Badge 7: The Debtor Concealed Assets
§2:48 Badge 8: The Consideration Was Not Equivalent to the Value
§2:49 Badge 9: The Debtor Was Insolvent or Became Insolvent
§2:50 Badge 10: The Transfer Occurred Near in Time to a Substantial Debt
§2:51 Badge 11: The Debtor Transferred to a Lienor Who Transferred to an Insider
3. Constructive Fraud
§2:60 Constructive Fraud
§2:61 Reasonably Equivalent Consideration
§2:62 Insolvency
§2:63 Unreasonably Small Capital
§2:64 Transfers by Persons About to Incur Debts
D. Statutes of Limitations
§2:70 Bankruptcy Code
§2:71 UFTA
§2:72
§2:73 When Statute Commences
E. Avoidable Preferences in Bankruptcy
§2:80 General Points
§2:81 Avoidable Preferences
§2:82 Exceptions
F. Proper Reasons to Transfer Assets
§2:90 General Points
§2:91 Income Tax Planning
§2:92 Business Planning
§2:93 Family and Estate Planning
§2:94 Divorce and Pre-Divorce Planning
G. Classification of Creditors
§2:100 The Classification Affects the Burden of Proof
§2:101 Present Creditors
§2:102 Future Foreseeable Creditors
§2:103 Future Creditors
II. Consequences of Fraudulent Transfers
A. Civil Liability
§2:110 UFTA Remedies
§2:111 State Remedies
B. Denial of Bankruptcy Discharge
§2:120 Dismissal of Bankruptcy Proceeding
§2:121 Three Types of Cases
C. Criminal Penalties
1. Federal Law
§2:130 Concealment of Assets
§2:131 Federal Money Laundering Control Act
§2:132 Liability for Professional Advisors
2. State Law
§2:140 Removing, Conveying, or Concealing Property
§2:141 Property Subject to a Judgment
§2:142 Liability for Professional Advisors
III. Protecting Yourself
A.
§2:150 General Points
§2:151 Prohibition Against Assisting in Fraudulent Conduct
§2:152 Declining or Terminating Representation
§2:153 Confidentiality of Information
§2:154 Truthfulness in Statements to Others
§2:155 Conflict of Interest
B. Spotting and Avoiding Fraudulent Transfers
§2:160 Frequently Asked Questions About Fraudulent Transfers
§2:161 Checklist to Avoid Intentional Fraudulent Transfers
§2:162 Checklist to Avoid Constructive Fraudulent Transfers
C. The Attorney-Client Relationship
§2:170 General Points
§2:171 Conflicts
§2:172 Be an Advisor, Not a Participant
§2:173 Duty to Discuss Asset Protection
§2:174 Money-Laundering and Trust Accounts
§2:175 Explain Trade-Offs
§2:176 Include an Anti-Abuse Clause
§2:177 Obtain a Financial Affidavit
§2:178 The Attorney-Client Privilege: Retainers and Billing
§2:179 Transfer Assets and Record Documentation Timely
IV. Forms
2-1 Spousal Conflicts Disclosure Letter
2-2 Anti-Abuse Clause
2-3 Financial Affidavit
V. CD Material
cd2-1 The Uniform Fraudulent Transfer Act
Chapter 3: Strategic Planning
I. General Points
A. The Need for Strategy
§3:01 Become a Grand Master
§3:02 Estate Planning Is Not Enough
§3:03 A Corporation Is Not Enough
§3:04 A Family Partnership Is Not Enough
B. Key Legal Doctrines
§3:10 Inside/Outside Protection
§3:11 The Risk of the Alter Ego Doctrine
§3:12 S Corporations and QSSTs
II. The Visual Planning Technique
§3:20 Green, Yellow, and Red Areas
§3:21 The Initial Entities
§3:22 Two Entity Risk Minimization
§3:23 Three Entity Risk Minimization
III. Liability — Absorbing Tools
§3:30 Shields
§3:31 Accumulation Theory
§3:32 Screens
IV. Funding
§3:40 Consider Different Funding Techniques
§3:41 Funding by Real Estate Deed
§3:42 Funding by Real Estate Trust Deed ("Equity Stripping")
Chapter 4: Domestic Trusts
I. General Points
§4:01 The History of Trusts
§4:02 Misconceptions About Trusts
§4:03 The Patriarch’s Use of a Trust
§4:04 How Trusts Work
§4:05 Drafting Choices
II. Key Clauses to Consider
A. Liability of the Trust Participants
§4:20 General Points
§4:21 Liability of a Trustee
§4:22 Liability of a Protector
§4:23 Liability of a Settlor
§4:24 Liability of a Beneficiary
B. Revocable or Irrevocable Trusts
§4:30 Revocable Trust
§4:31 Irrevocable Trust
C. Self-Settled or Non-Self-Settled Trusts and Creditors
§4:40 Self-Settled Trusts
§4:41 Non-Self-Settled Trusts and Creditors
§4:42 Non-Self-Settled Trusts With Beneficiary as Trustee
§4:43 Crummey and 5 and 5 Powers
D. Trustee’s Discretion
1. Differing Standards for Judging Trustee’s Discretion
§4:50 The UTC Standard
§4:51 States Vary
2. Discretionary Trusts (No Property Rights)
§4:60 Discretionary Trusts Provide Asset Protection
§4:61 Discretionary Trust vs. a Spendthrift Trust
§4:62 Discretionary Trust vs. Mandatory Trust
§4:63 Trustee Must Have Total Discretion
§4:64 Second Guessing Trustee’s Discretion
§4:65 Special Category Claims
§4:66 Protection of Assets vs. Control of Assets
§4:67 Trustee’s Payment of Settlor’s Support Obligation
E. Mandatory Trusts
§4:70 Mandatory Trusts Do Not Protect Assets
F. The Shape Shifter (Shifting Trust Provision)
§4:80 A Shifting Trust Provides Ease of Understanding Plus Asset Protection
§4:81 How a Shifting Trust Works
§4:82 The Shift Language
§4:83 Shifting Trusts Are Safe From Attachment by Creditors
§4:84 Protection for Trust Interests in Bankruptcy
§4:85 Protection When Interest Is Retained
§4:86 Suspension of Distributions on Specific Conditions
G. Disclaimers
§4:90 Disclaimer Can Keep Property From Creditors
§4:91 Disclaimers Can Avoid Taxes
H. Support Trusts
§4:100 Support Trusts Provide Education and Support
§4:101 Defining Education and Support to Eliminate Excess
I. Spendthrift Provision
§4:110 Spendthrift Provisions Protect the Beneficiary’s Interests
§4:111 Not Available With Self-Settled Trust
§4:112 Protecting Income
§4:113 Protecting Principal
§4:114 Additional Protection
§4:115 Protecting Payments
§4:116 Beneficiary As Trustee
§4:117 Marital Trusts
§4:118 Special Category Claims (Exception Creditors)
J. Dynastic Trusts and the Generation Skipping Transfer Tax (GSTT) Exemption
§4:120 The GST Tax
§4:121 Advantages of Dynasty Trusts
§4:122 Leveraging the GSTT
§4:123 Choosing the Situs
K. A Trust Protector
§4:130 A Protector Is Your Watchdog
§4:131 Choosing the Protector
L. Letter of Wishes
§4:140 General Points
§4:141 Beneficiaries Right to See the Letter
M. Beneficiary Controlled Trusts (BCTs)
§4:150 The Trust Your Child Wants
§4:151 Managing Trustee and Distribution Trustee
§4:152 Definitions
§4:153 Authority of the Two Trustees
§4:154 Asset Protection and Tax Powers
§4:155 Control of Trust
N. Powers of Appointment
1. General Points
§4:160 Powers of Appointment Provide Flexibility
§4:161 Types of Powers of Appointment
2. Retained Powers
§4:170 Retained General Power
§4:171 Retained Special Power
3. Conveyed Powers
§4:180 Conveyed General Power
§4:181 Conveyed Special or Limited Power
O. Existing Obligations
§4:190 Do Not Improve a Creditor’s Position
§4:191 Bankruptcy of Settlor
P. Intentionally Defective Grantor Trust (IDGT)
§4:200 General Points
§4:201 How an IDGT Transaction Is Structured
§4:202 How an IDGT Transaction Works
§4:203 Benefits of an IDGT
§4:204 An IDGT Cannot Be Self-Settled
§4:205 Considerations Before Using the IDGT
§4:206 Powers That Will Make a Grantor Trust but Avoid Estate Tax
§4:207 Treatment of an Installment Note During Life
§4:208 Treatment of an Installment Note on Death
§4:209 Payment of Taxes
§4:210 Formula to Avoid Loss of Tax Benefits
§4:211 Generation Skipping Transfer Tax (GSTT)
Q. Power to Change Trust’s Situs
§4:220 Change of Trust Situs
§4:221 Modification Can Cause a Grandfathered (Exempt) Trust to be Subject to GSTT
R. Power to Create Additional Trusts
§4:230 Multiple Trusts Are Allowed
S. Limiting Trustee Investment and Diversification Duties
§4:240 General Points
§4:241 The Duty to Diversify
§4:242 Granting Powers May Not Modify the Duty to Diversify
§4:243 Modifying the Duty to Diversify
III. Structuring Techniques
A. Upstream Planning
§4:250 The Structure
§4:251 The Advantage of Non-Self-Settled Trusts
§4:252 Teach Clients to Look Upstream
§4:253 Plan With the Clients’ Parents
B. Upstream Planning PLUS LLC
§4:260 The Structure
§4:261 Using an LLC
C. Pre-Inheritance Trust
§4:270 The Structure
§4:271 Using a Trust Plus an LLC
§4:272 Parents’ Business Planning
D.
§4:280 The Structure
§4:281 The
§4:282 Advantages of
§4:283 No Tax on the Transfer
IV. Domestic Asset
Protection Trusts (DAPTs)
A. General Points
§4:290 History of DAPTs
§4:291 Advantages of DAPTs
§4:292 Disadvantages of DAPTs
§4:293 DAPTs Are Untested
B. The Value of DAPTs
§4:300 Comparison of DAPTs to
IAPTs
§4:301 Reliability of DAPTs
C. Conflict of Laws
§4:310 Movables v. Immovables
§4:311 Trust Validity
§4:312 Trust Administration
§4:313 Trust Interpretation and
Construction
§4:314 State Examples (
D. Due Process
§4:320 The Due Process Clause
Shields DAPT Trustees
§4:321 The Personal Jurisdiction
Shield
§4:322 The Trustee as a
Necessary Party
§4:323 Personal Jurisdiction
Over the DAPT Trustee
E. Bankruptcy
§4:330 The Spendthrift Trust Is
Exempt From the Bankruptcy Estate
§4:331 Non-Self-Settled
Spendthrift Trusts
§4:332 Self-Settled Trusts
V. Forms
4-1 Trustee Indemnity Clause
4-2 Provision for Existing Obligation of Settlor
4-3 Revocable Trust
4-4 Irrevocable Trust
4-5 Irrevocable Trust With Right of Revocation for Protector
4-6 Irrevocable Trust With Right of Revocation for Independent Trustee
4-7 Clause Providing Trustee Discretion to Acquire Assets for Beneficiary
4-8 Clause Establishing a Discretionary Trust
4-9 Clause Establishing the Discretionary Standard
4-10 Clause Prohibiting Distributions in Discharge of Settlor’s Support Obligation
4-11 Shifting Trust: Terminates Interest and Creates a Discretionary Interest
4-12 Shifting Trust: Converts From Spendthrift to Discretionary Trust
4-13 Disclaimer Clause
4-14 Disclaimer Clause Into Credit Shelter Trust
4-15 Beneficiary’s Support Is Primary
4-16 Definition of Education for a Support Trust
4-17 Spendthrift Provision #1
4-18 Spendthrift Provision #2
4-19 GSTT Provision
4-20 Protector Provision
4-21 Committee of Protectors Provision
4-22 Beneficiary Controlled Trust: Authority of Distribution Trustee
4-23 Beneficiary Controlled Trust: Removal of Distribution Trustee
4-24 Presently Exercisable Retained General Power of Appointment
4-25 Presently Exercisable Conveyed General Power of Appointment
4-26 IDGT: Grantor Trust Provision
4-27 Authority to Change Jurisdiction
4-28 Authority to Merge or Sever Trusts
4-29 Trustee Power to Invest in Non-Income Producing Property and to Invest Without Diversification
4-30 Exculpation of Trustee for Loss From Retention of Property
4-31 Exculpation of Trustee for Acts or Omissions
Chapter 5: International Asset Protection Trusts (IAPTs)
I. General Points
A. Overview of IAPTs
§5:01 The Need for IAPTs
§5:02 Definitions and Basic Functions of IAPTs
§5:03 International Institutions Are Safe
§5:04 Planning the IAPT
B. Advantages of an IAPT
1. General Advantages
§5:10 Grantor Is in Control
§5:11 IAPT Can Be Self-Settled
§5:12 Privacy
§5:13 Avoidance of "Dollar" Risk
2. Protection From Creditors
§5:20
§5:21 Trustee Can Refuse Duress Request
§5:22 Trial De Novo Required in Jurisdictions That Do Not Extend Comity
§5:23 Foreign Laws Are More Favorable
C. Criticisms of IAPTs
§5:30 Potential Criminal Liability
§5:31 Protection Does Not Always Work
§5:
§5:33 IAPTs Risk Tax Penalties
§5:34 Asset Protection for Trust Settlors Is Not Proper
§5:35 Fees Are Too Large
§5:36 IRS Can Compel Disclosure of IAPT
§5:37 IAPTs Do Not Protect Fraudulent Transfers
D. Risks and Abuses to Avoid
§5:40 Improperly Drafted IAPTs May
Allow
§5:41 Delay Allows a “Lookback”
§5:42 The Foreign Grantor Trust (“FGT”)
§5:43 The International Business Corporation (“IBC”)
§5:44 Credit and Debit Cards
§5:45 The British Accent
E. Trust Officers' Descriptions
§5:46 General Points
§5:47
§5:48 The
§5:49
II. Legal Issues
A. Contempt of Court and Impossibility as a Defense
§5:50 General Points
§5:51
§5:52 Lawrence – Settlor’s Claim of Inability to Repatriate Not Credible
§5:53 Bilzerian – Inability to Comply Was Self-Created
B. Protection of Assets vs. Control of Assets
§5:60 General Points
§5:61
The Estate of Helen Wall and
III. The Client Relationship
A. General Points
1. Evaluating the Client
§5:70 Look for Claims or Judgments
§5:71 Ethical Standards
§5:72 The Money Laundering Control Act
2. The Professional Advisor’s Liability
§5:80 Circumstances With No Liability
§5:81 Circumstances With Liability
§5:82 Most Common Liability
§5:83 Fax or Letter Disclaimer (Circular 230)
B. The First Client Meeting
1. Preparation for the First Meeting
§5:90 Initial Phone Call
§5:91 Planning the First Meeting
§5:92 Documents Client Should Bring
2. Discussion at First Meeting
§5:100 The Client’s Expectations
§5:101 Spousal Conflicts of Interest
§5:102 Client Attitude Toward International Planning
§5:103 Execute a Retainer Agreement
C. After the First Meeting
1. General Points
§5:110 Document Non-Representation
§5:111 Further Steps With the Client
§5:112 Relationship With the Accountant
§5:113 Appointing Investment Advisor
§5:114 IRS Reporting Forms
2. The International Trustee and Bank
§5:120 Selecting a Trustee
§5:121 Working With the Trustee
§5:122 The Agreement With the Trustee
§5:123 Selecting the Bank
§5:124 Setting Up the Bank Account
§5:125 Forms for Trustees and the Bank
§5:126 Replacing the Trustee
IV. Pre-Formation Considerations
A. Selecting the Type of International Trust
1.
Pre-Immigration Trusts
§5:128 Options for Foreign Nationals
§5:129 Drop Off Trust Structure
2. International Asset Protection Trust (IAPT)
§5:130 International Asset Protection Trust Structure
§5:131 Benefits
§5:132 The “Foreign Investor”
3. Integrated Estate Planning Trust (IEPT)
§5:140 Integrated Estate Planning Trust Structure
§5:141 IEPTs Strengthen Asset Protection
§5:142 Entities Underlying the IEPT or the IAPT
§5:143 Protecting Future Assets Inheritance
4. IEPT Plus Generation Skipping Transfer Tax
§5:150 IEPT Plus GSTT Structure
§5:151 The Generation Skipping Transfer Tax (GSTT)
§5:152 The GSTT Exemption
§5:153 The Non-Grantor Trust
Issue
5. The Low Profiler
§5:160 Low Profiler Structure
§5:161 Use Caution With This Type of Planning
§5:162 Administrative Requirements
§5:163 Two Tests Determine Whether a Trust Is Foreign
§5:164 Drafting a Low Profiler
§5:165 Determinations
6. Letter of Wishes
§5:170 General Points
§5:171 The Value of Letters of Wishes
§5:172 Beneficiaries Generally May Not See the Letter
§5:173 Drafting a Letter of Wishes
B. Structuring International Techniques
1. Collapsing Bridge
§5:180 The Collapsing Bridge Structure
§5:181 Protects Interests in a Family Limited Partnership
§5:182 Characteristics of the Collapsing Bridge
§5:183 Advantages of the Collapsing Bridge
2. Withdrawing Bridge
§5:190 The Withdrawing Bridge Structure
§5:191 The Withdrawing Bridge Protects Interest in a Limited Liability Company
§5:192 Characteristics of the Withdrawing Bridge
§5:193 Advantages of the Withdrawing Bridge
3. International Equity Strip
§5:200 The International Equity Strip Structure
§5:201 Use of an Equity Strip
4. The Private Trust Company
§5:210 The Private Trust Company Structure
§5:211 Use of a Private Trust
§5:212 Stock Ownership Methods
§5:213 Costs
§5:214 Control Over Assets
§5:215 Structure and Reporting Requirements
C. Selecting the Jurisdiction
1. General Points
§5:220 Two Jurisdictions to Consider
2. The Jurisdiction’s Characteristics
§5:230 Friendliness Towards Settlors
§5:231 Transferability of Assets
§5:232 Anonymity of Ownership
§5:233 Codified Choice of Law
§5:234 Established Law and Infrequent Changes
§5:235 Alternative Governing Law
§5:236 Repeal of Statute of
§5:237 Tax Cooperation Agreements
3. The Foreign Law
§5:240 General Objectives
§5:241 Fraudulent Conveyance Laws
§5:242 Enforcement of
§5:243 Whose Law Is Applicable?
§5:244 Protection Against Disclosure
V. Important Clauses in IAPTs
A. General Points
B. The Protector
§5:250 Purpose of the Protector
§5:251 Usage Becoming More Widespread
§5:252 Selecting the Protector
§5:253 Powers Granted to a Trust Protector
§5:254 Examples of Statutory References to Protectors
§5:255 Avoid Granting a General Power of Appointment
C. Tax Considerations
1. General Points
§5:260 General Tax Background
§5:261 IAPTs Are Tax Neutral
§5:262 Capital Gains Tax
§5:263 Generation-Skipping Transfer Tax
§5:264 Foreign Country Taxes
2. Estate Tax
§5:270 On the Death of the Settlor
§5:271 On the Death of a Beneficiary
3. Gift Tax
§5:280 Initial Transfers to the IAPT
§5:281 Subsequent Distributions by the IAPT
§5:282 Non Settlor Transfers
4. Income Tax
§5:290 The IAPT Should Be a Trust and Not an Association
§5:291 The IAPT Is a Grantor (Settlor) Trust
§5:292
D. Other Clauses
§5:300 The Flight Clause
§5:301 The Duress Clause
§5:302 Settlor’s Limited Power of Appointment
§5:303 Power to Postpone
§5:304 Power to Create Additional Trusts
§5:305 Power of Exclusion
§5:306 Investment of Trust Funds
§5:307 Investment Advisor
§5:308 Payment of Existing Creditors Provision
§5:309 Estate Planning Provisions
§5:310 Pourback or Dispositive Trusts
§5:311 Separate or Community Property
VI. International Individual
Retirement Accounts (IRAs)
§5:320 General Points
§5:321 The International IRA Technique
VII.
The International Limited Liability Company (ILLC)
A. General Points
§5:330 Use IAPTs With ILLCs
§5:331 Uses of the ILLC
B. Analysis of ILLCs
§5:340 IAPT Downsides
§5:341 Advantages of the ILLC
§5:342 ILLC vs. International Business
Corporation (IBC)
C. ILLC Protection
Techniques
§5:350 Technique 1: Client Owns and Manages an
ILLC
§5:351 Technique 2: Using an ILLC as a
Management Company
§5:352 Technique 3: Unanimous Vote Required
§5:353 Technique 4: International
Trust/International LLC Combination
§5:354 Technique 5: Client as Manager of an ILLC
Owned 100% by an IAPT
§5:355 Technique 6. ILLC Withdrawing Bridge
Technique
VIII. Forms
5-1 Client Worksheet
5-2 Conflict Disclosure Letter and Consent
5-3 Attorney Retainer Agreement
5-4 Statement Regarding the Money Laundering Control Act
5-5 Letter Declining Engagement
5-6 Letter After Client Declines Engagement
5-7 Client Letter Affirming Trust Is Tax Neutral
5-8 Agreement Appointing Investment Advisor
5-9 Letter Recommending a Trustee (With Choices)
5-10 Agreement Retaining the Trustee
5-11 Affidavit of Solvency
5-12 Declaration of Source of Funds
5-13 Attorney Letter of Recommendation to Trust Company
5-14 Attorney Letter of Recommendation to Be Given to Bank
5-15 International Asset Protection Trust
5-16 Letter of Wishes (Formal Letter)
5-17 Letter of Wishes (Informal Letter)
5-18 Aide Memoir to My Attorney (Guidance Considerations Lawyer)
5-19 Clauses for a Collapsing Bridge Trust
5-20 Amendment to Turn Standard FLP into Collapsing Bridge IAPT
5-21 Merger of Trusts
5-22 Excluded Persons Clause
IX. CD Material
CD5-1 IRS Notice 97-34, IRB 1997-25
CD5-2 IRS Form 101 (Suspicious Activity Report)
CD5-3 IRS Form 101-I (Instructions)
CD5-4 IRS Form 105 (Report of International Transportation of Currency)
CD5-5 IRS Form 8300 (Report of Cash Payment over $10,000)
CD5-6 IRS Form 56 (Notice Concerning Fiduciary Relationship)
CD5-7 IRS Form 709 (
CD5-8 IRS Form 709-I (Instructions for Form 709)
CD5-9 IRS Form 926 (Transfers to a Controlled Foreign Corporation)
CD5-10 IRS Form 1040-NR (Income Tax
for Non-Resident Aliens with
CD5-11 IRS Form 1116 (Foreign Tax Credit for Individuals)
CD5-12 IRS Form 1116 (Instructions for Form 1116)
CD5-13 IRS Form 3520 (Transfer to Foreign Trust)
CD5-14 IRS Form 3520-I (Instructions)
CD5-15 IRS Form 3520-A (Foreign Trust Annual Return)
CD5-16 IRS Form 3520-A-I (Instructions)
CD5-17 IRS Form 5471 (Information Return for Foreign Corporation)
CD5-18 IRS Form 5472 (Information Return for Foreign Owned Corporation)
CD5-19 IRS Form 8621 (Information Return for Passive Foreign Investment Company)
CD5-20 IRS Form 8832 (Entity Classification Election)
CD5-21 IRS Form 8833 (Treaty Based Return Position)
CD5-22 IRS Form 8865 (Information Return for Foreign Partnership)
CD5-23 IRS Form 8865-I (Instructions for Form 8865)
CD5-24 IRS Form TD F90-22.1 (Information Return for Foreign Financial Accounts)
CD5-25
CD5-26 Sample Trustee Fee Schedule
(Cook Islands, Nevis, and
CD5-27 Sample Trustee Fee Schedule (
CD5-28
CD5-29 Sample Instructions for Wire Transfers
CD5-30 Preferred Banks & Investment Advisors (Prepared by Global Consultants and Services)
CD5-31 Uniform Limited Liability Company Act
Chapter 6: International Life Insurance and Annuities
I. General Points
§6:01
International Asset Protection Techniques
§6:02
Social Acceptability of Insurance and Annuities
§6:03
Overview of Private Placement Life Insurance (PPLI)
§6:04
The Private Placement Market
II. Non-Resident Alien Tax
Benefits
A. Comparison of U.S.
Citizen and Non-Resident Alien
§6:10
Hypothetical Facts
§6:11
Analysis of the Value of the Investments
§6:12
Taxes
B. Solution for the
U.S. Citizen
§6:20
The PPLI Structure
§6:21
An IBC Can Be an NRA
§6:22
Estate Tax Protection
§6:23
Taxation of
III. International Variable
Universal Life (IVUL) Insurance
A. IVUL Structure
§6:30
Establish a Domestic Irrevocable Life Insurance Trust
§6:31
Purchase an IVUL Policy
§6:32
Characteristics of the IVUL
B. Security
§6:40
General Points
§6:41
Reinsurance
§6:42
Safe Custody Agreements
§6:43
Segregated Account
C. Evaluating an
International Policy for
1. Statutory Definition
of Life Insurance
§6:50
Basic Requirements
§6:51
The Guideline Premium Limitation
§6:52
Cash Value Corridor
§6:53
Computing the Tests
§6:54
The Test Date
2. Other Criteria
§6:60
The Contract Must Be Subject to Insurance Risk
§6:61
Diversification and Segregated Accounts
§6:62
Diversification and Look-Through Rules
§6:63
Control
§6:64
Insurable Interest
§6:65
Policy Is a Modified Endowment Contract
§6:66
§6:67
Pre-Immigration Drop-Off Policy
D. The Installment
§6:70
General Points
§6:71
IVUL Sub-Account Can Consist of 100% of the Stock of an IBC
§6:72
The IBC Can Acquire the Insured’s Assets
§6:73
The IBC Can Pay With an Installment Note
§6:74
Thinly Capitalized IBC
§6:75
Acquisition of Assets for a Promissory Note
IV. Swiss Annuities and Life
Insurance
A. General Points
§6:80
Annuities
§6:81
Life Insurance
B. Beneficiary
Designation
§6:90
Beneficiaries Are All-Important
§6:91
Beware of Fraudulent Conveyances
§6:92
Protection Even Under Duress
§6:93
Ownership Is Transferred at Bankruptcy
C. Swiss Asset
Protection Laws
§6:100 Protection of
Foreigners Who Purchase Swiss Policies
§6:101 Debt Collection
and Bankruptcy Procedures
§6:102 Order to Revoke
Beneficiary Designation
D. Swiss Annuities
§6:110 No Excise Tax
§6:111 Income on Fixed
Annuities
§6:112 Income on
Variable Annuities
Chapter 7: Titling of Assets & Family Law
I. Property Ownership
§7:01 Two Systems of Property Ownership
§7:02 Community Property States
§7:03 Separate Property States
§7:04 Considerations in Changing Property Ownership
§7:05 Bankruptcy
II. Types of Ownership
A. Tenancy in Common
§7:10 General Points
§7:11 Partition in Kind
§7:12 Partition
§7:13 Division of Proceeds
§7:14 Non-Partition Agreements
B. Joint Tenancy
§7:20 General Points
§7:21 Attachment of Jointly Held Assets
§7:22 Tax Treatment of Joint Tenancy
C. Tenancy by the Entirety
§7:30 Similar to Joint Tenancy
§7:31 Not Recognized in All States
III. Community Property and Non-Community Property
A. Community Property States
§7:40 Not All Community Property States Are the Same
§7:41 Separate Property
§7:42 Community Property
§7:43 Liability With Community Property
§7:44 Tax Aspects of Community Property
§7:45 Bankruptcy With Community Property
B. Non-Community Property States
§7:50 Property Is Either Marital or Separate
§7:51 Control Follows Title
IV. Spousal Ownership Issues
A. Implied Trusts
§7:60 Two Types of Implied Trusts
§7:61 How Implied Trusts Arise
§7:62 Avoiding Implied Trusts
§7:63 Recovering Property After an Implied Trust
B. Prenuptial & Postnuptial Arrangements
§7:70 General Points
§7:71 Validity
§7:72 Writing and Recordation
§7:73 Attorney Conflicts of Interest Disclosure
§7:74 Prenuptial Agreements
§7:75 Postnuptial (Transmutation) Agreements
§7:76 Avoid Commingling
§7:77 Living Trusts
C. Divorce
§7:80 Community Property States
§7:81 Separate Property States
§7:82 Taxation
§7:83 Sham Divorce
D. Maintaining Separate Property
§7:90 Commingling and Tracing Property
§7:91 Recordkeeping
V. Family Gifts
§7:100 Share Assets With Family Members
§7:101 Split-Interest Transfers
VI. Forms
7-1 Postnuptial Agreement
Chapter 8: Corporations
I. General Points
§8:01 Corporations Are Separate Entities
§8:02 Incorporating Can Protect Assets
§8:03 Professional Corporations (PC)
§8:04 Shortcomings of Corporations for Asset Protection
§8:05 When a Corporate Structure Is Advisable
§8:06 Preliminary Issues in Establishing a Corporation
§8:07 Corporate Tax Issues
§8:08 Garnishment
II. Forming a Corporation
§8:10 Choosing the State of
§8:11 Registering the Corporation to
Do Business Outside Its State of
§8:12 Naming the Corporation
§8:13 Pre-Incorporation Agreement
§8:14 Capitalization, Stockholders, and Officers
§8:15 Articles and Bylaws
§8:16 Organizational Minutes
§8:17 Out-of-State Corporations
§8:18 Indemnification
§8:19 Banking
§8:20 Buy-Sell Agreements
III. State Statutory Close Corporations
A. General Points
§8:30 Close Corporations Operate Like LLCs
§8:31 General Characteristics
§8:32 Piercing the Veil
§8:33 States That Allow Close Corporations
B. Wyoming’s Close Corporation Law
§8:40 General Points
§8:41 Limited Liability
§8:42 Privacy
§8:43 State Taxes
IV. Piercing the Corporate Veil
A. The Alter Ego Doctrine
§8:50 General Points
§8:51 Typical Use of the Doctrine
§8:52 Federal Law
§8:53 Non-Stockholders May Be Liable
§8:54 Protection Against Piercing
§8:55 Multi-Jurisdictional Corporations
B. Applying the Alter Ego Doctrine
1. Piercing Tests
§8:60 General Points
§8:61 Two Part Test
§8:62 One Part Test
§8:63 Three-Part Test
2. Factors
§8:70 Factors Vary According to Circumstances
§8:71 Inadequate Capitalization
§8:72 Commingling or Diversion of Assets
§8:73 Manipulation of Assets and Liabilities
§8:74 Evasion of Contractual Obligations
§8:75 Holding Out to Creditors
§8:76 Old Business and Successor
§8:77 Disregard of Corporate Formalities
§8:78 Stock Ownership Is Not a Deciding Factor
C. Avoiding the Doctrine
§8:80 Protection Is Not Guaranteed
§8:81 Documentation and Formalities
§8:82 Avoid Commingling
§8:83 Capitalization
§8:84 Employment Agreements
§8:85 Multiple Corporations
§8:86 Keep the Corporate Capacity Clear
D. Piercing in Bankruptcy
§8:90 Piercing by a Bankruptcy Trustee
§8:91 Substantive Consolidation
V. Other Circumstances That Create Liability
§8:100 Individual Personal Guarantees
§8:101 Signature Formats
§8:102 The Reverse Pierce Doctrine
§8:103 Avoiding a Reverse Pierce
§8:104 Nominee Theory
VI. Protecting Corporate Stock and Assets
A. Protecting Stock
§8:110 Stay Beneath the Ability to Liquidate
§8:111 Using a Trust to Keep Ownership Low
§8:112 Using a FLP or LLC to Keep Ownership Low
B. S Corporations
§8:113 Using an S Corporation
C. Protecting Assets
§8:120 General Points
§8:121 Real Estate and Equipment
§8:122 Surplus Cash
§8:123 Inventory & Accounts Receivable
§8:124 Using Multiple Corporations
§8:125 Intellectual Property
VII. Protecting Financial Privacy
§8:130 The Need for Privacy Protection
§8:131 A Separate Entity Provides Some Financial Privacy
§8:132 Incorporating in
§8:133 Nominee Services Keep Identities Anonymous
§8:134 The Corporate Bank Account
§8:135 Information Sharing With the IRS
VIII. Forms
8-1 Employment Agreement
8-2 Hybrid Buy-Sell Agreement
8-3 Consent to Stock Buy-Sell Agreement
8-4 Client Letter Regarding Proper Execution
8-5 Transfer and Assignment of Assets
IX. CD Material
CD8-1 The
CD8-2 The
CD8-3 The
CD8-4
CD8-5
CD8-6
CD8-7
CD8-8
CD8-9 Sample of Bylaws for a Nevada Corporation
CD8-10
CD8-11
CD8-12
CD8-13
CD8-14 Transmittal Letter Re §25102 Notice
Chapter 9: Family Limited Partnerships (FLPs)
I. General Points
§9:01 General Partnerships
§9:02 Limited Partnerships
§9:03 Family Limited Partnerships (FLPs)
§9:04 Fiduciary Duties With FLPs
§9:05 Choice of Law With FLPs
§9:06 An FLP Interest Is a Security
§9:07 Comparison of FLP to LLC
II. Characteristics of an FLP
A. Advantages of FLPs
§9:10 General Partner Keeps Control
§9:11 Business and Tax Advantages
§9:12 Gift Tax Result
§9:13 Estate Tax Savings
B. The FLP as an Asset Protection Tool
§9:20 FLPs Complement Liability Insurance
§9:21 History of the Charging Order
§9:22 Charging Orders Protect FLP Assets
C. Comparison of Partner or Partnership Creditors
§9:30 General Points
§9:31 Inside Liability (Claims Against the FLP)
§9:32 Outside Liabilities (Claim Against a Partner)
III Structuring and Funding the FLP
A. Forming an FLP
§9:40 The FLP Must Have a Business Purpose
§9:41 Filing the Certificate of Limited Partnership
§9:42 Maintain the FLP’s Separate Status
B. Identifying the Partners
§9:50 Possible Partners
§9:51 General Partners
§9:52 Provide for a Successor General Partner
§9:53 Trusts as Partners
§9:54 Minor’s Interest
C. Drafting for Asset Protection
§9:60 General Points
§9:61 Restriction on Withdrawal or Distribution of Capital
§9:62 Distributions Only at Discretion of General Partners
§9:63 Prohibit Assignee From Becoming a Substituted Partner
§9:64 Have Authority for a Mandatory Capital Contribution
§9:65 Permit the Redemption of Seized Interests
§9:66 Employment Agreement for a General Partner
§9:67 General Partner Interest Held as Separate Property
§9:68 Provide for Several Limited Partners
§9:69 Prohibit Holding General Partner Liable
§9:70 Minimize the Ability to Dissolve or Liquidate
D. Funding the FLP
§9:80 General Points
§9:81 Appropriate and Inappropriate Assets
§9:82 FLP Investment Company Rules
§9:83 Liabilities in Excess of Basis
IV. Effect of a Charging Order
§9:90 The Charging Order Procedure
§9:91 ULPA Provisions Regarding Creditors’ Remedies
§9:92 Taxation of “Charging” Creditor
§9:93 Charging Orders Make It Difficult for Creditors
§9:94 Disadvantages of Charging Orders
§9:95 States That Limit Creditors to Charging Orders
§9:96 Foreclosure: Erosion of Charging Order Protection
V. Transfers and Valuation of FLP Interests
§9:100 General Points
§9:101 Effect of Strangi on Valuation Discounts
§9:102 Two Different Appraisals
§9:103 Liquidated or Going Concern Value
§9:104 Attribution
§9:105 Appraisal and Attorney-Client Privilege
§9:106 Appraisals Protect Against Fraudulent Transfer Claims
§9:107 Valuation Premiums for Voting Control
§9:108 Special IRS Valuation Rules (Chapter 14)
VI. Tax Issues
§9:110 An FLP as a Tax Conduit
§9:111
§9:112 Property Tax Issues
§9:113 The FLP Can Select Its Tax Classification
§9:114 Gift and Estate Tax Aspects
VII. Income Shifting
§9:120 FLPs Can Shift Income Into Lower Tax Brackets
§9:121 Shifting to Minor Children
§9:122 Capital Must Be a Material Income-Producing Factor
VIII. Grantor Retained Annuity Trusts (GRATs) and FLPs
§9:130 Funding a GRAT With an FLP
§9:131 Valuing the Gift
§9:132 The Double Discount
§9:133 Tax Rules
IX. Forms
9-1 Employment Agreement for an FLP
Chapter 10: Family Limited Liability Companies (LLCs)
I. General Points
§10:01 LLCs Are Statutory Alternatives to FLPs
§10:02 Taxation of LLCs
§10:03 Members and Managers
§10:04 Fiduciary Duties
§10:05 Single Person and Multi-Member LLCs
§10:06 Choice of Law With LLCs
§10:07 Bankruptcy
II. Characteristics of an LLC
A. General Points
§10:10 An Individual Can Retain Control
§10:11 LLC Compared to S Corporations
B. LLCs Compared to FLPs
§10:20 General Points (Comparison to FLP)
§10:21 Active Participation
§10:22 Nobody Liable
§10:23 Charging Order
§10:24 Valuation
C. The FLLC as an Asset Protection Tool
§10:30 General Points
§10:31 Drafting Suggestions
§10:32 Similarities to FLPs for Asset Protection
§10:33 Single Person LLCs—Disregarded Entities
§10:34 Single Person LLCs—Valuation Discount
§10:35 Multi-Member LLCs
D. Member Creditor or LLC Creditor
§10:40 Inside Liability (Claims Against the LLC)
§10:41 Outside Liability (Claims Against a Member)
III. Forming, Structuring, and Funding the LLC
A Formation
§10:50 Formation Is Similar to a Corporation
§10:51 International LLCs
§10:52 Selecting the State
§10:53 Articles of Organization
§10:54 Operating Agreement
§10:55 Registered Agent
§10:56 Opening a Bank Account
§10:57 Certificate of Authority for
B. Structure
§10:60 LLC Meetings
§10:61 Rights of Members to Manage
§10:62 Successor Managing Member
§10:63 Dissolution and Disassociation
§10:64 Liquidation
§10:65 Assignment of Interest and No Substituted Members
§10:66 Maintain the LLC as a Separate Entity and Follow Formalities
C. The Members of the LLC
§10:70 General Points
§10:71 Individuals as Managing Members
§10:72 Corporate Managing Member
§10:73 Trust
§10:74 Minor’s Interest
D. Drafting for Asset Protection
§10:80 Include Innocent Members
§10:81 Limit Managing Member Liability
§10:82 Distributions Only at Discretion of General Managing Members
§10:83 Prohibit Members From Dissolving the LLC
§10:84 Prohibit Bankruptcy of a Member From Causing Dissolution
§10:85 Require Unanimous Consent for Assignee to Become a Member
§10:86 Hold LLC Interest as Sole and Separate Property
§10:87 Separate Dangerous Assets
E. Funding the LLC
§10:90 General Points
§10:91 Appropriate and Inappropriate Assets
§10:92 LLC Investment Company Rules
§10:93 Liabilities in Excess of Basis
IV. Effect of a Charging Order
§10:100 The Charging Order Procedure
§10:101 ULLCA Provisions Regarding Creditors’ Remedies
§10:102 Taxation of “Charging” Creditor
§10:103 Charging Orders Make It Difficult for Creditors
§10:104 States That Limit Creditors to Charging Orders
§10:105 Creditors May Not Be Limited to a Charging Order
§10:106 Non-Executory Charging Orders, Bankruptcy, and Operating Agreements
§10:107 Single Person LLC
§10:108 Repurchase of Charged or Foreclosed Interest
V. Transfers and Valuation of LLC Interests
§10:110 General Points
§10:111 Two Different Appraisals
§10:112 Liquidated or Going Concern Value
§10:113 Attribution
§10:114 Appraisal and Attorney-Client Privilege
§10:115 Appraisals Protect Against Fraudulent Conveyance Claims
§10:116 Valuation Premiums for Voting Control
§10:117 Special IRS Valuation Rules (Chapter 14)
VI. Tax Issues
§10:120 General Points
§10:121 An LLC as a Tax Conduit
§10:122
§10:123 Gross Receipts Tax or Other Added Taxation
§10:124 Property Tax Issues
§10:125 The LLC Can Select Its Tax Classification
§10:126 Single Member and Husband and Wife LLC
§10:127 Passive Activity Rules for Non-Manager Members
§10:128 Gift and Estate Tax Aspects
§10:129 Self-Employment Tax
VII. Income Shifting
§10:130 LLCs Can Shift Income to Lower Tax Brackets
§10:131 Shifting to Minor Children
VIII. Grantor Retained Annuity Trusts (GRATS) and
FLLCs
§10:140 Funding a GRAT With an FLP
§10:141 Valuing the Gift
§10:142 The Double Discount
§10:143 Tax Rules
IX. CD Material
CD10-1 The Uniform Limited Liability Company Act (ULLCA)
CD10-2 IRS Form 8832 Entity Classification Election
CD10-3
Chapter 11: Insurance
I. Liability Insurance
§11:01 General Points
§11:02 Physician Hold Harmless Clauses
II. Life Insurance
A. General Points
§11:10 Creditors May Obtain Cash Value and Proceeds
§11:11 Proceeds Can Be Estate Tax Free
§11:12 Owning Insurance Through an Insurance Trust
§11:13 Owning Insurance Through an FLP or LLC
B. Avoiding Incidents of Ownership
§11:20 General Points
§11:21 Incident Jointly Held
§11:22 Incidents Possessed in a Fiduciary Capacity
§11:23 Incidents Possessed as Community Property
§11:24 Defective Trusts
C. Tax Planning
§11:30 Defective Trusts
§11:31 Dynastic Insurance Trusts
§11:32 Cash Value Life Insurance
§11:33 Costs of an Income Tax Free Vehicle
D. Planning With Cash Value Life Insurance
§11:40 General Points
§11:41 Independent Trustee
§11:42 Sample Clause Establishing an Independent Trustee
§11:43 Accessing the Cash Value
III. Financed Insurance
§11:50 Financed Insurance Is a Funding Alternative
§11:51 Financed Insurance Case Study Example
IV. Captive Insurance
A. Captive Insurance Companies (CICs) as Asset
Protection Tools
§11:60 General Points
§11:61 Tax Deductions
and Asset Protection
§11:62 No Loss of
Control
B. The Concept of Captive Insurance
§11:70 What Is Captive
Insurance?
§11:71 Alternative Risk
Finance
§11:72 The History of
Captives
§11:73 Typical Benefits
of Captives
§11:74 Advantage of
Captives
C. The Role of Captive Insurance in Estate
Planning
§11:80 General Points
§11:81 Risk Management
Platform
§11:82 Asset Protection
§11:83 Generational
Wealth Transfer
D. Types of Captive Insurance Companies
§11:90 Pure
§11:91 Agency
§11:92
Group/Association
§11:93 Risk Retention
Group
§11:94 Segregated Cell
(Sponsored)
E. Uses of Captive Insurance
§11:100 Typical Risks
Covered
§11:101 Non-Standard
Risks
§11:102 Employee
Benefits
F. Taxation of Captives
§11:110 Is It
Insurance?
§11:111 If It Is
Insurance, How Will It Be Taxed?
G. Forming a Captive
§11:120 Feasibility
Study
§11:121 Domicile
Selection
§11:122 Partner
Selection
§11:123 Application
§11:124 Set Up
H. Operating a Captive
§11:130 Committees
§11:131 Service
Providers
§11:132 Audit and
Compliance
V. Forms
11-1
Confirmation of Separate Property Interest
Chapter 12: Techniques & Examples
I. Protection Techniques
A. General Points
§12:01 Principal Benefits
§12:02 Divorce
§12:03 Protecting the Family Home
B. The Heritage Trust
§12:10 General Points
§12:11 Living Trusts
§12:12 Irrevocable Pre-Inheritance Trusts (PITs)
§12:13 Irrevocable Life Insurance Trusts
§12:14 Privacy Trusts
§12:15 Non-Self Settled Trusts
C. Family Limited Partnerships & Limited Liability
Companies
§12:20 Control
§12:21 Funding
§12:22 Consequences of a Creditor Attack
§12:23 Equity Stripping With FLPs and LLCs
§12:24 Income and Estate Tax Savings
D. International Asset Protection Trusts
§12:30 General Points
§12:31 Collapsing Bridge and Withdrawing Bridge Techniques
§12:32 Equity Strip Shield Technique
E. Private Placement Life Insurance
§12:40 Advantages of Private Placement Insurance
§12:41 Use of Foreign Insurance Companies
II. Protecting a Professional Practice
§12:50 The Typical (and Worst) Structure
§12:51 An Ideal Structure
§12:52 Protecting Real Estate and Equipment
§12:53 Protecting Accounts Receivables
§12:54 Captive Insurance Companies
§12:55 Buy-Sell Agreements
§12:56 Retirement Planning
§12:57 Life Insurance
§12:58 Disability Insurance
III. Protecting Real Estate
§12:60 General Points
§12:61 Transfer to an FLP or LLC
§12:62 Equity Stripping
§12:63 Domestic Asset Protection Trust
§12:64 International Asset Protection Trusts
IV. Case Studies
§12:70 Basic Personal Protection
§12:71 Intermediate Personal Protection
§12:72 Basic Business Protection
§12:73 Protecting Children’s Education, Business Equipment, and Accounts Receivable
§12:74 Protecting a Home
§12:75 Protection During a Lawsuit
Asset Protection Strategies and Forms
