The following is the first in a series of short animated films on Asset Protection, wealth and business concepts. It’s light hearted, but addresses many serious issues and misconceptions in a way we hope is easily digestible and fun to watch.
Monday, November 22, 2010
Friday, November 19, 2010
PROFIT RETENTION STRATEGIES FOR MEDICAL PRACTICES
IT’S NOT JUST WHAT YOU MAKE; IT’S ALSO WHAT YOU KEEP.
With the economic impact of the new healthcare laws and the President’s final 2011 budget uncertain, practice owners and managers would be well served to focus their attention at this time on profit retention strategies. The thousands of doctors we serve are facing challenges including:
■Current Depressed Economic Conditions
■Decreasing Compensation and Insurance Reimbursement Rates
■Increasingly Hostile Litigation System that Targets YOUR wealth
■Stalled or Negative Investment Momentum
■Increasing Overhead and Liability Insurance Costs
■Increasing burdens of Income and Estate Taxes; the estimated “death tax” will be 55% of everything over $1MM in 2011 as of the time of publication
A properly constructed profit retention plan is generally easy to implement and is one of the only ways owners can take more dollars home without earning extra dollars.
Some ideas to help you keep a larger portion of every dollar you make:
Increasing Business Tax Structure efficiency. You walk around turning off lights to save money but is your business tax structure maximized to pay as little as legally possible? One of my Associates, attorney Trisha Lotzer, of Lotzer Law Group in Scottsdale, Arizona examines this issue below. Trisha’s practice, like mine, includes a heavy emphasis on working with medical practices and their owners and she has successfully negotiated over $200 million dollars in transactions including successful medical and dental practice formations, affiliations, purchases and sales.
With the economic impact of the new healthcare laws and the President’s final 2011 budget uncertain, practice owners and managers would be well served to focus their attention at this time on profit retention strategies. The thousands of doctors we serve are facing challenges including:
■Current Depressed Economic Conditions
■Decreasing Compensation and Insurance Reimbursement Rates
■Increasingly Hostile Litigation System that Targets YOUR wealth
■Stalled or Negative Investment Momentum
■Increasing Overhead and Liability Insurance Costs
■Increasing burdens of Income and Estate Taxes; the estimated “death tax” will be 55% of everything over $1MM in 2011 as of the time of publication
A properly constructed profit retention plan is generally easy to implement and is one of the only ways owners can take more dollars home without earning extra dollars.
Some ideas to help you keep a larger portion of every dollar you make:
Increasing Business Tax Structure efficiency. You walk around turning off lights to save money but is your business tax structure maximized to pay as little as legally possible? One of my Associates, attorney Trisha Lotzer, of Lotzer Law Group in Scottsdale, Arizona examines this issue below. Trisha’s practice, like mine, includes a heavy emphasis on working with medical practices and their owners and she has successfully negotiated over $200 million dollars in transactions including successful medical and dental practice formations, affiliations, purchases and sales.
Guest Author, Attorney Trisha LotzerThe purpose of profit preservation is to preserve or even increase a practice’s profitability regardless of changes in healthcare policy or expiring tax cuts. Profit preservation plans should be tailored in the context of governmental policies, business operations and customized to maximize the profit preservation potential consistent with personal and professional goals, such as estate and transition or succession planning. Important strategies that owners should consider at this time include changing from an S-corporation or C-corporation status, energy studies, cost segregation studies, insurance and investment audits.
Currently, your practice’s tax status is either working for or against you in terms of profit preservation. With this fact in mind, how do you know which is the right election for your practice and how do you make sure that you are not passing up any dollars that you rightfully earn?
Most healthcare practices and small businesses are organized as S-corporations, or as LLCs with an S-election. This election is generally advantageous for tax purposes because it allows practice owners to avoid the “double taxation” that necessarily accompanies C-corp status and allows owners to benefit from earnings that “pass through” to their individual returns. Whether you are a C-Corp or an S-Corp, it is especially important to consider the negative consequences of a C-Corp, such as double taxation, and reassess your corporate tax status.
Following are two (simplified) examples and clarify what is meant by “double taxation” and “pass through” income. Let’s compare an S-Corp and a C-Corp that each earn $1,000,000 of taxable income after qualifying deductions and expenses:
The C-corporation that earns $1,000,000 is taxed at the highest corporate tax rate of 35%. That leaves $650,000 after taxes are paid. If you, the practice owner, take that $650,000 as a dividend that dividend will be taxed at 20% (the anticipated dividend tax rate). The result of the tax on the dividend results in another $130,000 in taxes, for a grand total of $480,000 in taxes and you, the practice owner, nets $520,000.
With the S-Corp. that earns $1,000,000 the practice owner would net $600,000 and pay just $400,000 in taxes. This is because the $1,000,000 “passes through” to the owner’s individual tax return. And, even in the highest bracket, the most the owner would be taxed is 40% because there would be no “double tax” on a dividend.
(Note from Ike: This is one of many formulas that competent tax counsel must advise you on. Other common formulas often include the physician taking a commercially reasonable salary, let’s say $250K, and taking the balance as dividends from the corporation they own. This moves a larger portion of practice income to the capital gains rate, using the hypothetical numbers above, 20% for capital gains vs. 40% as personal income.)
This merely represents the most basic “double tax” scenario. There are other taxes, including state taxes and self-employment taxes, and other factors that must be considered and weighed for your particular practice scenario. Tax policy must also be taken into consideration when electing tax status as a strategy for profit preservation.
For example, in 2011, some S-Corp practice owners may find themselves pushed into higher personal tax brackets. Based on current reports from congress and the White House, the President’s proposed budget will likely include a tax cut for middle-class taxpayers and the previously enacted tax cuts on upper-income taxpayers would be allowed to expire. If that occurs, individuals currently taxed at 33% would be taxed at 36% and those taxed now at 35% would be taxed at 39.6%. Therefore, we can reasonably anticipate that a number of practice owners will have a higher income tax for certain individuals and for that reason it is reasonable to consider a change to C-Corp status.
While there are a few exceptions, there is a rule that states that if you lose your S-election you can’t re-elect S-Corp. status for five years. For this reason, current S-Corp owners and those contemplating a change from S-Corp to C-Corp status should be especially cautious. Change to or from a C-Corp should be considered by ever practice owner but it should only be executed with the guidance of qualified tax and wealth preservation specialists.
Trisha’s examination of this issue above is a great start, here are some other profit retention strategies I encourage my clients to examine:
Cost Segregation Studies. These studies allow meaningful tax deductions now when you need them most as opposed to spread over 30 years at about 3% per year the way they are typically taken. Most commercial property, even leased, qualifies for the study and the deductions and we can even arrange for a free feasibility study for commercial property with an aggregate value of at least $1MM, an easily attainable entry level. As a bonus, you can even re-capture lost depreciation for as much as the last 20 years!
Energy Studies. Again, owners of commercial properties are seeing energy tax credits of up to $1.80 per square foot when the study is completed and simple low cost changes are made. Would that kind of recurring savings be valuable enough to you to, for instance, change the kinds of light bulbs you use and add a skylight? In most cases it is.
The financial “Audit”. Give your insurance and investment planning a physical and make sure it is working as hard for you as you did to earn it. We have seen that at the worst, some clients lost as much as 60% of their investment portfolios due to the market and their investment allocations while others were down only a fraction of what the market lost and are relatively free of anxiety. Why the huge disparity in results between advisors? What we see is that it is relatively easy to make money in good times by using a simple allocation table that at first glance seems well diversified between different types of investments such as technology, energy and etc. What those plans, such as the cookie cutter ones we see from certain commercial brokerage firms are typically lacking in is a good down-market strategy that values principal protection as highly as it does growth. There are ways to get all or most of the market growth available with guaranteed rates of return or principal guarantees. These types of strategies, when properly allocated, are part of the backbone of what saved the second, more fortunate group of investors described above. These clients are not only whole or close to it, but are now poised and financially equipped to take advantage of emerging opportunities.
Similarly, we find that many practice owners are paying more than necessary for various types of insurance coverage they have in place while they are at the same time lacking in many types of coverage I now describe as essential or are underinsured in areas like their disability insurance. To put it simply, the cost of life insurance, as just one example is now cheaper for the consumer than it was a few years ago. This means that any policy that is more than a few years old should be audited to see if it can be converted or replaced at a lower cost. How dramatic can the changes be? In one case, a doctor’s children will receive 500% more from one of her life policies because of some simple changes we made and issues we spotted without her paying any increase in premium.
Again, as the economy and income and profit slow, never taking a step back, or at least taking as few as possible, becomes more important than ever before. Remember, a portfolio that is down 50% will need to DOUBLE to get back to where it was. How long did it take you to double your money the last time? Do you have that kind of time left? If you don’t like the way you answered those questions for yourself, perhaps it’s time to take a good look at how you are structured and what kind of stop-loss measures you have in place. In many cases it is not too late to make some positive changes and “buy and wait” is not the right answer for every investor or every investment.
Increasing your personal tax efficiency. We deal with high net worth clients every day and are continually surprised by the amount of money that they leave on the table for the government by not maximizing their legal options. For most physicians “just” an IRA or 401K is not adequate tax planning. Even if the money you save is “long term” or retirement money that cannot be used now, you still get to keep it. Many of the most sophisticated programs provide multiple benefits like estate planning and Asset Protection.
A few examples of planning to consider include section 79, post retirement medical reimbursement, defined benefit programs and captive insurance plans. Don’t know where to start? Don’t worry, we can help direct you to experts to show you which plans apply to your unique situation and which have features like guarantee of principle, low market risk, tax deductibility and Asset Protection.
Examining your current practice tax status and the other measures suggested above are all highly effective profit preservation strategies. Each strategy should be examined with caution and undertaken only after a careful analysis of the overall economic factors of the practice and the long term effects or plans of the practice and its owner.
Most strategies can be implemented rather quickly and effectively at any time during the fiscal year. Some mid-year changes may require additional income tax reporting work by shareholders and advisors. However, in many cases this small amount of paperwork can yield great rewards and is a powerful way to preserve practice profits in uncertain times. As always contact us for more info or to discuss these issues and how they apply to your practice.
RELATED ARTICLE: BUSINESS SURVIVAL PLAN
http://www.proassetprotection.com/2009/10/2010-business-survival-plan/
ABOUT OUR GUEST CONTRIBUTOR:
Lotzer Law Group, P.C. – Phoenix, AZ: http://lotzerlaw.com/
Attorney Trisha Lotzer Specializes in business law for corporations, small businesses, medical groups and medical and dental practices. She has successfully negotiated over $200 million dollars in transactions including over $95 million dollars of successful medical and dental practice formations, affiliations, purchases and sales. She can be reached at 866-570-4449 or at: Trisha@LotzerLaw.Com
CIRCULAR 230 NOTICE: To comply with U.S. Treasury Department and IRS regulations, we are required to advise you that, unless expressly stated otherwise, any U.S. federal tax advice contained in this article is not intended or written to be used, and cannot be used, by any person for the purpose of (1) avoiding penalties under the U.S. Internal Revenue Code or (2) promoting, marketing, or recommending to another party any transaction or matter addressed in this article.
Thursday, October 7, 2010
Managing Investments held in an offshore Asset Protection Trust
Managing Investments held in an offshore Asset Protection Trust
As much as you may be told otherwise, using the massive deterrence and level of protection available in offshore Asset Protection systems can very complicated. This complication requires a team of experienced and knowledgeable professionals working to make sure that you are doing things safely, legally and effectively. That team typically includes an Asset Protection attorney, trustee, offshore bank, a great CPA, and an investment advisor. As a team they watch over your family and assets. Financial Advisor Richard Arnold is one such experienced professional. We asked him to share some important basics below. -Ike
By Richard L. Arnold
Physicians, business owners, real estate developers and others are increasingly concerned with protecting their assets/net worth in these difficult economic, political and litigious times. Those who have prepared in advance for potential lawsuits or negative economic events have considered establishing Asset Protection Trusts. These Trusts can have their assets held by a foreign bank, and managed by a financial advisor in the U.S. An Investment Policy Statement is prepared that defines the return objectives, risk tolerance and time horizon of the trust.
Here are a few answers to FAQ’s related to managing your investments in an offshore Asset Protection Trust:
• The foreign bank is the custodian for the investments in the Asset Protection Trust, therefore it is important to choose a bank that is financially solid as the investments will be in excess of insurance on deposits. Financial information on the banks can usually be obtained and evaluated.
• Generally, foreign banks can buy any U.S. individual stock, ETF or mutual fund. They can also buy foreign stocks, bonds and mutual funds, but contrary to typical wealth management in the U.S., money managers are normally not used due to the volume of transactions. If the trust is using a U.S. Advisor, purchase recommendations are sent by the Advisor to the Trustee, who then instructs the bank to make the purchase.
• The custodian bank charges transaction fees to buy and sell securities, which are about 1.8% for both a purchase and a sale. If the bank is managing the assets, additional fees run about 1.1% to 1.3% depending on the size of the account. This fee can be avoided by using a U.S. Advisor whose fees generally range from 70 to 90 basis points depending on the size of the trust. Be sure to choose an advisor who is experienced with offshore trusts.
• IRS rules require the preparation of various forms and there have been recent changes to the reporting requirements. Consult a knowledgeable tax specialist to be sure you are complying. The tax requirements are not onerous, but of course must be complied with. We work with tax advisors who have experience in reporting offshore investments.
We operate as a multi-family “family office”, managing approximately $1B in assets. Please call me if you are interested in discussing our services further, or contact Ike Devji.
Richard L. Arnold, Advisor and Operations Manager
CB&T Wealth Management and The Corundum Group
1 South Nevada Ave., Suite 200
Colorado Springs, CO 80903
Direct (719) 228-1083 Cell (719) 330-1226
Rick.Arnold@centralbancorp.com www.centralbancorp.com
As much as you may be told otherwise, using the massive deterrence and level of protection available in offshore Asset Protection systems can very complicated. This complication requires a team of experienced and knowledgeable professionals working to make sure that you are doing things safely, legally and effectively. That team typically includes an Asset Protection attorney, trustee, offshore bank, a great CPA, and an investment advisor. As a team they watch over your family and assets. Financial Advisor Richard Arnold is one such experienced professional. We asked him to share some important basics below. -Ike
By Richard L. Arnold
Physicians, business owners, real estate developers and others are increasingly concerned with protecting their assets/net worth in these difficult economic, political and litigious times. Those who have prepared in advance for potential lawsuits or negative economic events have considered establishing Asset Protection Trusts. These Trusts can have their assets held by a foreign bank, and managed by a financial advisor in the U.S. An Investment Policy Statement is prepared that defines the return objectives, risk tolerance and time horizon of the trust.
Here are a few answers to FAQ’s related to managing your investments in an offshore Asset Protection Trust:
• The foreign bank is the custodian for the investments in the Asset Protection Trust, therefore it is important to choose a bank that is financially solid as the investments will be in excess of insurance on deposits. Financial information on the banks can usually be obtained and evaluated.
• Generally, foreign banks can buy any U.S. individual stock, ETF or mutual fund. They can also buy foreign stocks, bonds and mutual funds, but contrary to typical wealth management in the U.S., money managers are normally not used due to the volume of transactions. If the trust is using a U.S. Advisor, purchase recommendations are sent by the Advisor to the Trustee, who then instructs the bank to make the purchase.
• The custodian bank charges transaction fees to buy and sell securities, which are about 1.8% for both a purchase and a sale. If the bank is managing the assets, additional fees run about 1.1% to 1.3% depending on the size of the account. This fee can be avoided by using a U.S. Advisor whose fees generally range from 70 to 90 basis points depending on the size of the trust. Be sure to choose an advisor who is experienced with offshore trusts.
• IRS rules require the preparation of various forms and there have been recent changes to the reporting requirements. Consult a knowledgeable tax specialist to be sure you are complying. The tax requirements are not onerous, but of course must be complied with. We work with tax advisors who have experience in reporting offshore investments.
We operate as a multi-family “family office”, managing approximately $1B in assets. Please call me if you are interested in discussing our services further, or contact Ike Devji.
Richard L. Arnold, Advisor and Operations Manager
CB&T Wealth Management and The Corundum Group
1 South Nevada Ave., Suite 200
Colorado Springs, CO 80903
Direct (719) 228-1083 Cell (719) 330-1226
Rick.Arnold@centralbancorp.com www.centralbancorp.com
Friday, September 24, 2010
2011 Business Plan - Survival and Positive Momentum
© Ike Z. Devji, J.D.
The first version of this went to my clients in December of 2007. I hope your advisors shared similar insights with you.
As we move into the fourth quarter of 2010 we look back at the lessons learned and forward to new opportunities. Below are some critical points we have seen illustrated many times by those we work with, some of the most successful and intelligent people in their various professions and businesses. Despite the phenomenal track record many of them have in terms of making money safely, predictably and responsibly for many years, no one was left untouched by the recent crisis. Here are some of the “lessons” of the last 3 years we feel it is most important to reflect on and examine for yourself as we tackle 2011.
As always, contact me for more specific information on any of these issues.
We have seen that those who have weathered this storm most effectively and with a minimum amount of trauma shared several characteristics:
- They and their advisors were aware of potential exposures and were proactive in addressing them;
- They are able to make their personal, family overhead commitments from existing resources for an extended period of time, even without additional cash flow;
- They were willing and able to adjust their lifestyles and expenditures to current economic conditions;
- They lived very well, but well within their means, as opposed to at the limits of their means; - They had assets that allowed them to meet existing business financing burdens and other fixed costs in a form that they were able to liquidate at minimal delay and expense;
- They had top counsel in place on tax, business and estate issues, and that counsel used a variety of strategies that not only served the primary goals but also protected those assets for the family. Some examples are the use of Insurance and Annuity Products and ILITS and Split Dollar agreements that preserve certain assets for the family by statute;
- They had great credit and relationships with banks that allowed them to agree on terms that were best for all parties involved, and had these relationships with several institutions;
- They had long term assets that were able to be made liquid with minimal penalty and delay, despite that liquidation not being part of the original plan, i.e. long term investments with an escape or liquidity plan built in;
The right financial advice matters now more than ever.
Realize that your niche, as you have defined it, may come to an end and know when to direct your assets and energy to those new opportunities. As examples, some of our clients who were major players in single family housing are now in the “economy” apartment market segment and are doing well. Doctors are expanding their practices and adding high value cash services like medically supervised weight loss to practices that were focused solely in other areas. Others have created booming new businesses like debt and credit repair that directly reflect the current economy.
Don’t take your market position for granted.
Energy Studies.
The first version of this went to my clients in December of 2007. I hope your advisors shared similar insights with you.
As we move into the fourth quarter of 2010 we look back at the lessons learned and forward to new opportunities. Below are some critical points we have seen illustrated many times by those we work with, some of the most successful and intelligent people in their various professions and businesses. Despite the phenomenal track record many of them have in terms of making money safely, predictably and responsibly for many years, no one was left untouched by the recent crisis. Here are some of the “lessons” of the last 3 years we feel it is most important to reflect on and examine for yourself as we tackle 2011.
As always, contact me for more specific information on any of these issues.
We have seen that those who have weathered this storm most effectively and with a minimum amount of trauma shared several characteristics:
- They and their advisors were aware of potential exposures and were proactive in addressing them;
- They are able to make their personal, family overhead commitments from existing resources for an extended period of time, even without additional cash flow;
- They were willing and able to adjust their lifestyles and expenditures to current economic conditions;
- They lived very well, but well within their means, as opposed to at the limits of their means; - They had assets that allowed them to meet existing business financing burdens and other fixed costs in a form that they were able to liquidate at minimal delay and expense;
- They had top counsel in place on tax, business and estate issues, and that counsel used a variety of strategies that not only served the primary goals but also protected those assets for the family. Some examples are the use of Insurance and Annuity Products and ILITS and Split Dollar agreements that preserve certain assets for the family by statute;
- They had great credit and relationships with banks that allowed them to agree on terms that were best for all parties involved, and had these relationships with several institutions;
- They had long term assets that were able to be made liquid with minimal penalty and delay, despite that liquidation not being part of the original plan, i.e. long term investments with an escape or liquidity plan built in;
The right financial advice matters now more than ever.
We have seen that at the worst, some clients lost as much as 60% of their investment portfolios due to the market and their investment allocations while others were down only a fraction of what the market lost and are relatively free of anxiety. Why the huge disparity in results between advisors?
What we see is that it is relatively easy to make money in good times by using a simple allocation table that at first glance seems well diversified between different types of investments such as technology, energy and etc. What those plans, such as the ones we see from big commercial brokerage firms or “wire-houses” are typically lacking in is a good down-market strategy that values principal protection as highly as it does growth. There are ways to get all or most of the market growth available with guaranteed rates of return or principal guarantees. These types of strategies, when properly allocated are the backbone of what saved the second, more fortunate group of investors described above. These clients are not only whole or close to it, but are now poised and financially equipped to take advantage of emerging opportunities.
Again, as the economy and income and profit slow, never taking a step back, or at least taking as few as possible, becomes more important than ever before. Remember, a portfolio that is down 50% will need to DOUBLE to get back to where it was.
Again, as the economy and income and profit slow, never taking a step back, or at least taking as few as possible, becomes more important than ever before. Remember, a portfolio that is down 50% will need to DOUBLE to get back to where it was.
How long did it take you to double your money the last time? Do you have that kind of time left? If you don’t like the way you answered those questions for yourself, perhaps it’s time to take a good look at how you are structured and what kind of stop-loss measures you have in place. In many cases it is not too late to make some positive changes and “buy and wait” is not the right answer for every investor or every investment.
NOW is always the best time to act on preventative legal planning.
This year we saw many successful people who always meant to complete essential planning like Asset Protection and advanced Estate Planning precluded from doing so either wholly or completely. In some cases their unexpected legal exposures made the planning ineffective or illegal, in others their financial positions in terms of debt, credit and cash flow changed so rapidly they were locked out.
We understand that doing this kind of planning takes time, energy, and resources that are already scarce for the dynamic individuals we work with, and that it seems to lack the kind of time sensitivity that other matters, like responding to a lawsuit, would justify. The real truth however is that every day that passes without these issues being properly addressed jeopardizes your net worth and your family’s security, the thing that many of you are working so hard to create.
We have countless stories from the last 6 months alone of fortunes lost because of the way easily protectable assets were held and exposed to creditors, families thrown into crisis when the bread winner passes away in an accident without adequate estate planning and life insurance or is disabled without disability coverage in place, and unexpected liabilities taking away dreams.
We equate this lack of attention to these issues to driving to work every day on a busy freeway without auto insurance or operating without a malpractice policy in place. These are odds that most cannot afford to bet on. Take the time and make the investment in YOURSELF and the years you have put into your current level of success and address these issues now. Preserving what you already have when money is harder to make is a good first step.
No program lasts forever, when the door is open seize the opportunity. Many of the most productive and sophisticated wealth preservation techniques such as Accounts Receivable Financing to leverage and protect future income and Premium Financing for large estate planning cases have disappeared or slowed to a crawl as the banking and insurance industries continue to be devastated. Even clients with nine-figure net worth levels are having trouble obtaining the kind of low cost financing that was available for them to help leverage their wealth and avoid estate taxes even 6 months ago. Add to that increasingly stringent underwriting by insurance companies and you have the worst possible storm for the affluent. We are now in the unfortunate position of having to tell many of those we counseled on these issues a year ago and who skeptically heard us say that there was a time pressure involved that the programs are not available or that they are no longer qualified under more stringent underwriting guidelines. Of course, they can still pay for the planning, but at the full cost and by paying the premiums directly in cash at a time when cash flow is king as opposed to 6 months ago when they could have had it for as little as interest only at less than 6% fixed rate loans. What does this mean? In one case it meant a client with an eight figure estate tax exposure looking at a premium of over $250K per year as opposed to less than $50K. It’s just math.
We like leveraging wealth and using credit, but you must have a disaster plan. Those in the real-estate business are the most obvious example of what a lack of credit and financing can do, but all types of industries have been crippled by current economic conditions. We have many of the most successful real estate professionals in the country as clients and have felt and shared their pain. What has been less obvious is the impact on other businesses like shipping, dining, small businesses that rely on services and discretionary income, banking, appraisal services, elective medical procedures, health and beauty businesses, the list is infinite.
No business is recession proof.
NOW is always the best time to act on preventative legal planning.
This year we saw many successful people who always meant to complete essential planning like Asset Protection and advanced Estate Planning precluded from doing so either wholly or completely. In some cases their unexpected legal exposures made the planning ineffective or illegal, in others their financial positions in terms of debt, credit and cash flow changed so rapidly they were locked out.
We understand that doing this kind of planning takes time, energy, and resources that are already scarce for the dynamic individuals we work with, and that it seems to lack the kind of time sensitivity that other matters, like responding to a lawsuit, would justify. The real truth however is that every day that passes without these issues being properly addressed jeopardizes your net worth and your family’s security, the thing that many of you are working so hard to create.
We have countless stories from the last 6 months alone of fortunes lost because of the way easily protectable assets were held and exposed to creditors, families thrown into crisis when the bread winner passes away in an accident without adequate estate planning and life insurance or is disabled without disability coverage in place, and unexpected liabilities taking away dreams.
We equate this lack of attention to these issues to driving to work every day on a busy freeway without auto insurance or operating without a malpractice policy in place. These are odds that most cannot afford to bet on. Take the time and make the investment in YOURSELF and the years you have put into your current level of success and address these issues now. Preserving what you already have when money is harder to make is a good first step.
No program lasts forever, when the door is open seize the opportunity. Many of the most productive and sophisticated wealth preservation techniques such as Accounts Receivable Financing to leverage and protect future income and Premium Financing for large estate planning cases have disappeared or slowed to a crawl as the banking and insurance industries continue to be devastated. Even clients with nine-figure net worth levels are having trouble obtaining the kind of low cost financing that was available for them to help leverage their wealth and avoid estate taxes even 6 months ago. Add to that increasingly stringent underwriting by insurance companies and you have the worst possible storm for the affluent. We are now in the unfortunate position of having to tell many of those we counseled on these issues a year ago and who skeptically heard us say that there was a time pressure involved that the programs are not available or that they are no longer qualified under more stringent underwriting guidelines. Of course, they can still pay for the planning, but at the full cost and by paying the premiums directly in cash at a time when cash flow is king as opposed to 6 months ago when they could have had it for as little as interest only at less than 6% fixed rate loans. What does this mean? In one case it meant a client with an eight figure estate tax exposure looking at a premium of over $250K per year as opposed to less than $50K. It’s just math.
We like leveraging wealth and using credit, but you must have a disaster plan. Those in the real-estate business are the most obvious example of what a lack of credit and financing can do, but all types of industries have been crippled by current economic conditions. We have many of the most successful real estate professionals in the country as clients and have felt and shared their pain. What has been less obvious is the impact on other businesses like shipping, dining, small businesses that rely on services and discretionary income, banking, appraisal services, elective medical procedures, health and beauty businesses, the list is infinite.
No business is recession proof.
Diversify and properly insulate your income streams if possible and be ready to be flexible and spot ways to identify new opportunities for your business and your skill set.
Realize that your niche, as you have defined it, may come to an end and know when to direct your assets and energy to those new opportunities. As examples, some of our clients who were major players in single family housing are now in the “economy” apartment market segment and are doing well. Doctors are expanding their practices and adding high value cash services like medically supervised weight loss to practices that were focused solely in other areas. Others have created booming new businesses like debt and credit repair that directly reflect the current economy.
Don’t take your market position for granted.
In a down economy discount solution, product and service providers emerge in every market. These competitors will be selling price first and many consumers won’t see the differences until they have been poorly served and you have lost the business. Some steps to fight this:
- Make sure that your network and professional relationships are as strong and developed now as they were before you reached your current level of success;
- Look for ways to distinguish yourself and your business and maintain the highest standards of professionalism and service;
- Look for every way to add value and collaborate with other top services providers you work with so that you are a natural and logical part of every project or client they are involved with. Become part of a best of class team of teams that delivers the highest value to the consumer. This is true of everything from medical services to commercial contracting;
- Continue to be the best, or at least great at what you do. “Good enough” should not be part of your vocabulary.
Guard your credit like gold.
- Make sure that your network and professional relationships are as strong and developed now as they were before you reached your current level of success;
- Look for ways to distinguish yourself and your business and maintain the highest standards of professionalism and service;
- Look for every way to add value and collaborate with other top services providers you work with so that you are a natural and logical part of every project or client they are involved with. Become part of a best of class team of teams that delivers the highest value to the consumer. This is true of everything from medical services to commercial contracting;
- Continue to be the best, or at least great at what you do. “Good enough” should not be part of your vocabulary.
Guard your credit like gold.
Good credit has always been important on both personal and business fronts, but it is now more important that ever. As credit markets have tightened even the wealthy are having trouble obtaining credit for every day issues like home and auto purchase or leasing. Banks are scared and have pulled in the reigns on lending to all but those who have sterling credit, “good” is no longer good enough. They are also using late payments of any kind to move to the default interest rates permissible under various types on loan and consumer credit agreements as a way to generate fees and increase revenue internally. On a personal level this could mean that your VISA at 8.9% jumps to 29.99% APR if your spouse sends in the check late.
On a business level it is much worse. If your course of business has been to pay certain credit lines down late to a friendly creditor, it could now put you into default or cause an acceleration. We are also hearing that clients who have used revolving credit lines for years as part of their business model either for capitalization or to pay recurring expenses are suddenly finding that their credit lines have been terminated or drastically reduced as is permissible in the fine print of most such agreements. This is despite the fact that the client has had no change in income or credit. Banks are simply deciding that they have too much exposure and are proactively limiting your ability to draw that money out.
Solution? If you have a credit line that you know you are going to need or cannot risk losing – draw the money out now and look at the interest cost like an insurance premium; you may not want to pay it but if you need the “insurance” of having that money available it will not be available at any cost, certainly not in any short term scenario.
There are services out there that we have referred friends and clients to with great results. For an investment of a few hundred dollars many negative or inaccurate items can be removed in a short period of time increasing your credit score by dozens of points.
Check your business and personal credit reports and see if they are accurate.
We are also seeing that banks that are in financial trouble and which need to reduce their outstanding debt balances are playing dirty tricks like re-appraising property they financed over 18 months ago to “current market value” at ridiculously low valuations then going back to the borrower and saying they need more collateral or they will call they note as the “fine print” entitled them to do. How bad can this be? In one case the bank re-appraised my client’s multi-million dollar commercial property at about 50% of current fair market value and wanted an additional seven figures in collateral. Fortunately, this client had sterling credit and good professional relationships that allowed him to re-finance at a lower rate with a more solvent and ethical bank.
Keep more of every dollar you earn.
On a business level it is much worse. If your course of business has been to pay certain credit lines down late to a friendly creditor, it could now put you into default or cause an acceleration. We are also hearing that clients who have used revolving credit lines for years as part of their business model either for capitalization or to pay recurring expenses are suddenly finding that their credit lines have been terminated or drastically reduced as is permissible in the fine print of most such agreements. This is despite the fact that the client has had no change in income or credit. Banks are simply deciding that they have too much exposure and are proactively limiting your ability to draw that money out.
Solution? If you have a credit line that you know you are going to need or cannot risk losing – draw the money out now and look at the interest cost like an insurance premium; you may not want to pay it but if you need the “insurance” of having that money available it will not be available at any cost, certainly not in any short term scenario.
There are services out there that we have referred friends and clients to with great results. For an investment of a few hundred dollars many negative or inaccurate items can be removed in a short period of time increasing your credit score by dozens of points.
Check your business and personal credit reports and see if they are accurate.
We are also seeing that banks that are in financial trouble and which need to reduce their outstanding debt balances are playing dirty tricks like re-appraising property they financed over 18 months ago to “current market value” at ridiculously low valuations then going back to the borrower and saying they need more collateral or they will call they note as the “fine print” entitled them to do. How bad can this be? In one case the bank re-appraised my client’s multi-million dollar commercial property at about 50% of current fair market value and wanted an additional seven figures in collateral. Fortunately, this client had sterling credit and good professional relationships that allowed him to re-finance at a lower rate with a more solvent and ethical bank.
Keep more of every dollar you earn.
There are many things each of us could do to maximize our retained earnings. Again, now that money is harder to make, another way to increase revenue is to devote a small amount of resources to increasing efficiency.
These are just a few of the most obvious ways we see clients successfully achieving this goal:
These are just a few of the most obvious ways we see clients successfully achieving this goal:
Cost segregation Studies
These studies allow huge tax deductions now when you need them most as opposed to spread over 30 years at about 3% per year the way they are typically taken. Most commercial property, even leased, qualifies for the study and the deductions and we can even arrange for a free feasibility study for commercial property with an aggregate value of at least $1MM, an easily attainable entry level. As a bonus, you can ever re-capture lost depreciation for as much as the last 20 years!
Energy Studies.
Again, owners of commercial properties are seeing energy tax credits of up to $1.80 per square foot when the study is completed and simple low cost changes are made. Would that kind of recurring savings be valuable enough to you to change the kinds of light bulbs you use and add a skylight? In most cases it is.
Increasing Business Tax Structure efficiency
Increasing Business Tax Structure efficiency
You walk around turning off lights, but is your business tax structure maximized? One of my Associates, Mr. Tom Maguire of Hebets and Maguire, as just one example, routinely saves both public and private corporation clients a significant amount of money on a re-occurring basis by refining and perfecting the choice of corporate formation, stock ownership options and identifying the most efficient business succession and executive compensation models. This goes far beyond the CPA taking the right deductions.
Increasing personal tax efficiency
Increasing personal tax efficiency
We deal with high net worth clients every day and are continually surprised by the amount of money that they leave on the table for the government by not maximizing their legal options. For most, a 401K is not adequate tax planning. Even if the money you save is “long term” or retirement money that cannot be used now, you still get to keep it. Many of the most sophisticated programs provide multiple benefits and may also serve or support goals like estate planning and Asset Protection.
One glaring example is the use of special life insurance policies with high cash values that grow tax free, allow withdrawals tax free, and which offer statutory protection against creditors in many states. As an example, in Arizona that creditor protected amount is “unlimited” after 24 months in a plan. Other examples of planning to consider includes section 79, post retirement medical reimbursement, 412i defined benefit programs.
One glaring example is the use of special life insurance policies with high cash values that grow tax free, allow withdrawals tax free, and which offer statutory protection against creditors in many states. As an example, in Arizona that creditor protected amount is “unlimited” after 24 months in a plan. Other examples of planning to consider includes section 79, post retirement medical reimbursement, 412i defined benefit programs.
Don’t know where to start? Don’t worry, we can help show you which plans apply to your unique situation and which are guarantee of principle, no market risk, tax deductible and Asset Protected programs.
Monday, August 30, 2010
Doctors Asset Protection 101 - Featured on Wills, Trsust & Estates Blog
The Wills, Trusts and Estates Prof blog of Professor Gerry W. Beyer recently featured my article "Asset Protection 101 For Physicians".
Professor Beyer, a Governor Preston E. Smith Regents Professor of Law at Texas Tech Univ. School of Law, has a great, informative blog that draws upon a variety of sources in related fields and it is an honor to have been included.
The link to the post, summary and downloadable PDF are below.
http://lawprofessors.typepad.com/trusts_estates_prof/2010/08/asset-protection-for-doctors.html
Professor Beyer, a Governor Preston E. Smith Regents Professor of Law at Texas Tech Univ. School of Law, has a great, informative blog that draws upon a variety of sources in related fields and it is an honor to have been included.
The link to the post, summary and downloadable PDF are below.
http://lawprofessors.typepad.com/trusts_estates_prof/2010/08/asset-protection-for-doctors.html
Wednesday, August 11, 2010
NEVADA TRUST FOR ASSET PROTECTION? BETTER MAKE SURE YOUR TRUST COMPANY STILL EXISTS
Even within the specialized Asset Protection legal community professional opinions vary on the use and effectiveness of Nevada and other states' Domestic Asset Protection Trusts (DAPT's). One thing all agree on however, is that for such a strategy to hold up to even the weakest attacks the formalities of the state's trust laws must be met to the letter.
Since many Nevada DAPT's have been created by attorneys in other practice areas who dabble in Asset Protection or by promoters with no on-going guidance or client contact available (often not even attorneys) I think it is inevitable that a large number of people who have purchased Nevada trusts are going to wake up one day, need to "use" their trust and find that the trust company appointed and required by the state laws of Nevada no longer exists or that they have moved. In this case the trust, lacking proper legal formalities under Nevada Law, would offer little or no protection at all.
The full article on the Nevada trust business and those leaving, including the oldest trust company in the state, is here:
Nevada’s Oldest Trust Company Calls it Quits After 107 Years in Business
I suspect that we will see many planners and clients caught unaware by theses changes. Even worse, we will also hear tales of trust companies collecting fees and continuing to manage trusts even with their legal status revoked.
As always, we are watching the development and defensibility of the DAPT in various jurisdictions and hope to use it when and if it ever becomes a viable alternative to to the proven results of International Asset Protection Trusts. We don't feel the case law and the courts are there yet, especially given the current social and political climate that is so hostile to wealth and business owners.
Ike Devji
Since many Nevada DAPT's have been created by attorneys in other practice areas who dabble in Asset Protection or by promoters with no on-going guidance or client contact available (often not even attorneys) I think it is inevitable that a large number of people who have purchased Nevada trusts are going to wake up one day, need to "use" their trust and find that the trust company appointed and required by the state laws of Nevada no longer exists or that they have moved. In this case the trust, lacking proper legal formalities under Nevada Law, would offer little or no protection at all.
The full article on the Nevada trust business and those leaving, including the oldest trust company in the state, is here:
Nevada’s Oldest Trust Company Calls it Quits After 107 Years in Business
I suspect that we will see many planners and clients caught unaware by theses changes. Even worse, we will also hear tales of trust companies collecting fees and continuing to manage trusts even with their legal status revoked.
As always, we are watching the development and defensibility of the DAPT in various jurisdictions and hope to use it when and if it ever becomes a viable alternative to to the proven results of International Asset Protection Trusts. We don't feel the case law and the courts are there yet, especially given the current social and political climate that is so hostile to wealth and business owners.
Ike Devji
Tuesday, August 10, 2010
Tougher Tax Law For Overseas Assets
August 10, 2010
Tougher Tax Law For Overseas Assets
(Dow Jones) A new U.S. law that is part of a crackdown on tax havens means that wealthy clients will be hit with stricter filing requirements next tax season.
New rules will result in duplicate reporting for some taxpayers and steep penalties for those who fail to comply. The law makes it more difficult to hide assets overseas, partly by taxing foreign banks that don't share information about U.S. account holders.
READ MORE:
Tougher Tax Law For Overseas Assets
The link above illustrates the need for proper tax counsel and full reporting when dealing with any offshore assets.
Tougher Tax Law For Overseas Assets
(Dow Jones) A new U.S. law that is part of a crackdown on tax havens means that wealthy clients will be hit with stricter filing requirements next tax season.
New rules will result in duplicate reporting for some taxpayers and steep penalties for those who fail to comply. The law makes it more difficult to hide assets overseas, partly by taxing foreign banks that don't share information about U.S. account holders.
READ MORE:
Tougher Tax Law For Overseas Assets
The link above illustrates the need for proper tax counsel and full reporting when dealing with any offshore assets.
Monday, August 9, 2010
FRAUD - 10 WARNING SIGNS ABOUT YOUR 401K
The U.S. Labor Department publishes
10 signs that your 401(k) retirement account may be subject to fraud:
1) Your quarterly 401(k) statement is consistently late or comes at irregular intervals.
2) Your account balance appears to be inaccurate.
3) Your employer failed to transmit your contribution to the plan on a timely basis.
4) A significant drop in account balance appears that cannot be explained by normal market ups and downs.
5) Your 401(k) statement shows that your contribution from your paycheck was not made.
6) Investments listed on your statement are not what you authorized.
7) Former employees are having trouble getting their benefits paid on time or in the correct amounts.
8) Unusual transactions show up.
9) Frequent and unexplained changes take place in investment managers or consultants.
10) Your employer has recently experienced severe financial difficulty.
1) Your quarterly 401(k) statement is consistently late or comes at irregular intervals.
2) Your account balance appears to be inaccurate.
3) Your employer failed to transmit your contribution to the plan on a timely basis.
4) A significant drop in account balance appears that cannot be explained by normal market ups and downs.
5) Your 401(k) statement shows that your contribution from your paycheck was not made.
6) Investments listed on your statement are not what you authorized.
7) Former employees are having trouble getting their benefits paid on time or in the correct amounts.
8) Unusual transactions show up.
9) Frequent and unexplained changes take place in investment managers or consultants.
10) Your employer has recently experienced severe financial difficulty.
This was excerpted from a a larger article by Jim Gallagher in St. Louis today - recommended reading if you or your clients have a closely managed retirement account of any kind.
Friday, July 30, 2010
Life Settlements: A Risky And Wild Investment
As investors seek options that are resistant to the instability of the Real Estate and Securities markets many new options (and old ones) are being touted by promoters. Some are safe, others entail serious risks. This article is a great summary of issues to think about in Life Settlements.
Ike
(Dow Jones) Life settlements are not wildly popular investments. But they are wild investments. And to that end, federal regulators and lawmakers are fast at work trying to tame these slippery products, which promise a much higher return over more traditional conservative offerings.
A life settlement is a transaction in which an individual with a life insurance policy sells that policy to another person, who then assumes responsibility for paying the premiums.
For a great overview of the RISKS involved in these policies see the entire article:
http://www.fa-mag.com/fa-news/5882-life-settlements-a-risky-and-wild-investment.html
Ike
(Dow Jones) Life settlements are not wildly popular investments. But they are wild investments. And to that end, federal regulators and lawmakers are fast at work trying to tame these slippery products, which promise a much higher return over more traditional conservative offerings.
A life settlement is a transaction in which an individual with a life insurance policy sells that policy to another person, who then assumes responsibility for paying the premiums.
For a great overview of the RISKS involved in these policies see the entire article:
http://www.fa-mag.com/fa-news/5882-life-settlements-a-risky-and-wild-investment.html
Tuesday, July 20, 2010
Arizona Real Estate Looks Grim for 2-5 Years - Which Means So Do A Lot of Things
I attended the SYEP (Scottsdale Young Estate Planners) Meeting this afternoon. A local realtor shared some info that is supported by what I've seen from many other sources including my clients in the Real Estate business and in related businesses from fine dining to dry-cleaning:
-The next 2-5 years in local RE market will be ruled by short sales;
-FEDs are pushing banks to allow and work with more short sales;
-Lending is happening but mostly under the $400K (jumbo loan) limit;
-50% of AZ homes are underwater;
-Less than 5% of loan mods are working;
-The Tax Credit only worked primarily on homes under $400K;
-Inventory is slowly being absorbed and fewer homes are hitting the sale market (rentals?);
-All income levels are in trouble, but big homes in Paradise Valley are suffering the most - some are at 50% discount;
-Don’t plan on making money on "flipping". The local properties are all being bought up by syndicates that are making close deals and keeping individual players out of the market - they will outbid you on the courthouse steps.
Personally, I'm concerned about what's coming next year, when all the 5 year A.R.M.s written in the 2006 buying frenzy all mature and can't be re-financed, and will trigger a second massive wave of foreclosures and walk-always in the Phoenix metro area.
Those affected include builders, developers, and all others who make their living off the sales, maintenance and furnishing of new homes, from AC service to the pool guy.
I'd guess the consignment furniture business will be big along with mini storage and residential rentals for those out of their homes. It will be great time to be in debtor-creditor law, bankruptcy, debt settlement and credit repair.
Those in businesses that are logically related need to take a good long look at their assets, expenses, liabilities and legal and financial planning ASAP while they still have legal, cost effective options available. It will be too late when you really feel the pinch.
Those that are prepared will be in a great spot to take advantage of a buyers market and emerging opportunities and cash, AS ALWAYS, will be king. For more thoughts on getting ready for the flood - see what I sent my clients in Dec 07, and every year since, here: 2010 Business Survival Plan - http://arfinance.blogspot.com/2009/10/2010-business-survival-plan.html
Ike
-The next 2-5 years in local RE market will be ruled by short sales;
-FEDs are pushing banks to allow and work with more short sales;
-Lending is happening but mostly under the $400K (jumbo loan) limit;
-50% of AZ homes are underwater;
-Less than 5% of loan mods are working;
-The Tax Credit only worked primarily on homes under $400K;
-Inventory is slowly being absorbed and fewer homes are hitting the sale market (rentals?);
-All income levels are in trouble, but big homes in Paradise Valley are suffering the most - some are at 50% discount;
-Don’t plan on making money on "flipping". The local properties are all being bought up by syndicates that are making close deals and keeping individual players out of the market - they will outbid you on the courthouse steps.
Personally, I'm concerned about what's coming next year, when all the 5 year A.R.M.s written in the 2006 buying frenzy all mature and can't be re-financed, and will trigger a second massive wave of foreclosures and walk-always in the Phoenix metro area.
Those affected include builders, developers, and all others who make their living off the sales, maintenance and furnishing of new homes, from AC service to the pool guy.
I'd guess the consignment furniture business will be big along with mini storage and residential rentals for those out of their homes. It will be great time to be in debtor-creditor law, bankruptcy, debt settlement and credit repair.
Those in businesses that are logically related need to take a good long look at their assets, expenses, liabilities and legal and financial planning ASAP while they still have legal, cost effective options available. It will be too late when you really feel the pinch.
Those that are prepared will be in a great spot to take advantage of a buyers market and emerging opportunities and cash, AS ALWAYS, will be king. For more thoughts on getting ready for the flood - see what I sent my clients in Dec 07, and every year since, here: 2010 Business Survival Plan - http://arfinance.blogspot.com/2009/10/2010-business-survival-plan.html
Ike
Friday, July 16, 2010
ASSET PROTECTION F.A.Q.s - WHAT YOU SHOULD KNOW
What is Asset Protection?
Assert Protection is a proactive, holistic system of legal and financial tools and strategies that preserve wealth and assets in all forms from loss, waste or spoilage. It also accurately analogized as NET WORTH INSURANCE.
Is it Legal?
Absolutely, if done at the right time by a professional and in a tax neutral way. Asset Protection planning in and of itself, if done at the right time, is a valid legal purpose on its own. Many of the tools and strategies used in Asset Protection also have legitimate business purposes for other reasons like tax efficiency, investment management consolidation, wealth transfer, and estate tax avoidance to name just a few.
Am I wealthy enough to do Asset Protection?
Probably, there are good strategies available at nearly every income and net worth level. The number one mistake made by lawyers, CPAs and Financial Advisors when advising clients if they need Asset Protection is telling them they are “not rich enough” to worry about it. That is terrible advice. While most of our clients are seven to nine figures in net worth, we also have a large group that is on their way to accumulating significant wealth. What all these clients have in common is that they have worked hard to accumulate what they have, regardless of the total dollar value. If the loss of all or most of your current assets would pose a significant threat to your family, business and way of life, you should probably examine the options available to you.
Will it get me in trouble with the IRS?
Not if it’s done the right way. The tools and strategies we use to protect thousands of clients are tax neutral and require full compliance and tax reporting. We never want to see your planning jeopardized because it put you harm’s way with the IRS. None of plans involve “secrecy” or “hiding” assets. Those amateur plans often assume that you will commit perjury and are based on the “hope” that you can hide something and that the courts won’t find it or ask about it. Hope is not a plan.
I already have a Revocable Living Trust (RLT), isn’t that Asset Protection?
No, if that’s the case you have great estate planning, an important and necessary part of any good system. However, an RLT provides absolutely ZERO protection against judgments, lawsuits and a hostile world. The first word is “revocable” so the courts will simply order that you revoke the trust and hand over the house, investments and other assets it holds. An RLT is Death Planning, as opposed to Asset Protection which is Life Planning.
Can I wait to do it until I really need it?
No. The number one flaw in most Asset Protection plans is TIMING. Most people wait until they have an exposure to take simple steps that could have protected a lifetime of effort. Trying to gift, move or hide assets after you have an exposure is fraud. In fact there is a specific name for it, Fraudulent Conveyance. Transfers you make under this harsh light can be set aside completely and create a hostile situation with the courts. The best time to act is always now, and every day that passes makes the planning you do a little stronger. Just like with insurance, you can’t insure yourself against an event or loss that has already occurred, only against future exposures.
What can be protected?
Almost everything, a partial list of the assets that can be protected would include:
- Investments like cash stocks, bonds and etc.
- Residences
- Investment Real Estate
- Interests in Businesses
- Valuable personal property like Art, Jewelry, Collections
- Business Equipment
- Future Income
- Cash Value of Life Insurance Policies
Do I lose control of my assets?
No, most our tools allow direct control by the client or someone the client wants in control, until and unless it is more efficient or safer for the client to delegate management to a fiduciary like a trustee. You will decide when and if that happens.
Are your Asset Protection tools International (offshore) or Domestic?
We use a system that incorporates both kinds of tools, but primarily domestic ones. What specific tools we prescribe to any individual client depend on a variety of factors including the nature of the assets they have, their value and the threats the clients faces. Every plan, like every client, is unique.
Can my lawyer do this?
Probably not. The upper level tools and strategies we use to protect thousands of clients and billions of dollars in assets are unique and special tailored to this purpose. If your planner was aware of these tools and risks, and was informed about your risks and the options available to you, it would already have been done and you would not be reading this. There are many potential planning pitfalls that lawyers who work primarily in other areas are simply not aware of and now matter how smart your counsel is they can’t be an expert at everything. Asset Protection is the sole focus of our legal practice.
How Do I start?
Just call and we will set a mutually convenient time to talk on the phone or in person. We will ask you a series of questions covered by attorney-client privilege that will allow us to get a real idea of the risks you face and what needs to be done to address them. You don’t need to do any “homework” before the call and most of the people we talk to can provide us enough detail to create a good plan. We will create a specific written plan of action and also provide you a very specific fee quote that will allow you to see how a small investment can protect a lifetime of hard work.
Assert Protection is a proactive, holistic system of legal and financial tools and strategies that preserve wealth and assets in all forms from loss, waste or spoilage. It also accurately analogized as NET WORTH INSURANCE.
Is it Legal?
Absolutely, if done at the right time by a professional and in a tax neutral way. Asset Protection planning in and of itself, if done at the right time, is a valid legal purpose on its own. Many of the tools and strategies used in Asset Protection also have legitimate business purposes for other reasons like tax efficiency, investment management consolidation, wealth transfer, and estate tax avoidance to name just a few.
Am I wealthy enough to do Asset Protection?
Probably, there are good strategies available at nearly every income and net worth level. The number one mistake made by lawyers, CPAs and Financial Advisors when advising clients if they need Asset Protection is telling them they are “not rich enough” to worry about it. That is terrible advice. While most of our clients are seven to nine figures in net worth, we also have a large group that is on their way to accumulating significant wealth. What all these clients have in common is that they have worked hard to accumulate what they have, regardless of the total dollar value. If the loss of all or most of your current assets would pose a significant threat to your family, business and way of life, you should probably examine the options available to you.
Will it get me in trouble with the IRS?
Not if it’s done the right way. The tools and strategies we use to protect thousands of clients are tax neutral and require full compliance and tax reporting. We never want to see your planning jeopardized because it put you harm’s way with the IRS. None of plans involve “secrecy” or “hiding” assets. Those amateur plans often assume that you will commit perjury and are based on the “hope” that you can hide something and that the courts won’t find it or ask about it. Hope is not a plan.
I already have a Revocable Living Trust (RLT), isn’t that Asset Protection?
No, if that’s the case you have great estate planning, an important and necessary part of any good system. However, an RLT provides absolutely ZERO protection against judgments, lawsuits and a hostile world. The first word is “revocable” so the courts will simply order that you revoke the trust and hand over the house, investments and other assets it holds. An RLT is Death Planning, as opposed to Asset Protection which is Life Planning.
Can I wait to do it until I really need it?
No. The number one flaw in most Asset Protection plans is TIMING. Most people wait until they have an exposure to take simple steps that could have protected a lifetime of effort. Trying to gift, move or hide assets after you have an exposure is fraud. In fact there is a specific name for it, Fraudulent Conveyance. Transfers you make under this harsh light can be set aside completely and create a hostile situation with the courts. The best time to act is always now, and every day that passes makes the planning you do a little stronger. Just like with insurance, you can’t insure yourself against an event or loss that has already occurred, only against future exposures.
What can be protected?
Almost everything, a partial list of the assets that can be protected would include:
- Investments like cash stocks, bonds and etc.
- Residences
- Investment Real Estate
- Interests in Businesses
- Valuable personal property like Art, Jewelry, Collections
- Business Equipment
- Future Income
- Cash Value of Life Insurance Policies
Do I lose control of my assets?
No, most our tools allow direct control by the client or someone the client wants in control, until and unless it is more efficient or safer for the client to delegate management to a fiduciary like a trustee. You will decide when and if that happens.
Are your Asset Protection tools International (offshore) or Domestic?
We use a system that incorporates both kinds of tools, but primarily domestic ones. What specific tools we prescribe to any individual client depend on a variety of factors including the nature of the assets they have, their value and the threats the clients faces. Every plan, like every client, is unique.
Can my lawyer do this?
Probably not. The upper level tools and strategies we use to protect thousands of clients and billions of dollars in assets are unique and special tailored to this purpose. If your planner was aware of these tools and risks, and was informed about your risks and the options available to you, it would already have been done and you would not be reading this. There are many potential planning pitfalls that lawyers who work primarily in other areas are simply not aware of and now matter how smart your counsel is they can’t be an expert at everything. Asset Protection is the sole focus of our legal practice.
How Do I start?
Just call and we will set a mutually convenient time to talk on the phone or in person. We will ask you a series of questions covered by attorney-client privilege that will allow us to get a real idea of the risks you face and what needs to be done to address them. You don’t need to do any “homework” before the call and most of the people we talk to can provide us enough detail to create a good plan. We will create a specific written plan of action and also provide you a very specific fee quote that will allow you to see how a small investment can protect a lifetime of hard work.
Monday, June 21, 2010
ESTATE PLANNING 101 - Should I have a Trust or Will?
An estate plan is always necessary unless you want your estate to pass through “operation of law” which involves the long, uncertain, public and expensive process at your death with a stranger (the courts) deciding who gets everything you leave behind. This process often leads to heartache, delay and additional stress for those you leave behind, especially if they need the assets to sustain the family or if (all too commonly) family members may fight over what you leave behind.
A Simple Will comes into effect at your death, controls the distribution of your assets (who gets what and when), and names who the Executor of your estate, the person you chose to be in charge and carry out your wishes, will be. A Will is the most basic form of estate planning and still requires the estate and its assets to go through the probate process, meaning that there will be an expense and delay in transferring assets at your death. A will is also public, meaning that a record of exactly what you left and to whom is available. In our view, it’s best suited for those with limited and simple assets, few or no heirs, and those with no minor children, dependents or pets that require specific care and guardianship guidance.
A Revocable Living Trust (RLT) on the other hand includes all the elements of a will, is established and can take title to a certain assets during your lifetime when you (and your spouse) can actively manage and change it. The RLT avoids probate, passes assets privately with little or no public record and typically includes a variety of sophisticated estate tax avoidance measures. (This last issue is especially important given that many seasoned estate planners are preparing their clients for an expected estate tax regime that takes 55% of everything a married couple leaves over $2 Million as of January 1, 2011.) The RLT also names and has specific guidelines for the Trustees of your estate, appoints Guardians for your children and dependents and can retain wealth and “sprinkle” income off the principal to your heirs. It allows a countless variety of sophisticated directives including what you want done if you have some sort of incapacitation condition like an illness or mental issue, typically referred to as “living will” and “health care power of attorney” provisions.
If you don’t have an estate plan, or have had substantial changes to your family structure, wealth, children’s guardians, asset structure or gifting plans it’s time to get experienced help.
The basic estate planning tools noted above are only the tip of the iceberg. These are “death planning” tools, and do not protect assets during your life. A wide variety of Asset Protection, estate planning and family wealth management tools are available more easily and cost effectively than you know, call us to discuss your wishes and concerns!
A Simple Will comes into effect at your death, controls the distribution of your assets (who gets what and when), and names who the Executor of your estate, the person you chose to be in charge and carry out your wishes, will be. A Will is the most basic form of estate planning and still requires the estate and its assets to go through the probate process, meaning that there will be an expense and delay in transferring assets at your death. A will is also public, meaning that a record of exactly what you left and to whom is available. In our view, it’s best suited for those with limited and simple assets, few or no heirs, and those with no minor children, dependents or pets that require specific care and guardianship guidance.
A Revocable Living Trust (RLT) on the other hand includes all the elements of a will, is established and can take title to a certain assets during your lifetime when you (and your spouse) can actively manage and change it. The RLT avoids probate, passes assets privately with little or no public record and typically includes a variety of sophisticated estate tax avoidance measures. (This last issue is especially important given that many seasoned estate planners are preparing their clients for an expected estate tax regime that takes 55% of everything a married couple leaves over $2 Million as of January 1, 2011.) The RLT also names and has specific guidelines for the Trustees of your estate, appoints Guardians for your children and dependents and can retain wealth and “sprinkle” income off the principal to your heirs. It allows a countless variety of sophisticated directives including what you want done if you have some sort of incapacitation condition like an illness or mental issue, typically referred to as “living will” and “health care power of attorney” provisions.
If you don’t have an estate plan, or have had substantial changes to your family structure, wealth, children’s guardians, asset structure or gifting plans it’s time to get experienced help.
The basic estate planning tools noted above are only the tip of the iceberg. These are “death planning” tools, and do not protect assets during your life. A wide variety of Asset Protection, estate planning and family wealth management tools are available more easily and cost effectively than you know, call us to discuss your wishes and concerns!
Friday, June 18, 2010
AUTO INSURANCE AND ASSET PROTECTION - HOW MUCH DO YOU NEED?
The results of an auto accident can be financially, physically and emotionally devastating. To help address this issue proactively, (the way any good Asset Protection strategy works) I asked my friend and Arizona attorney Michael Troncellito to give us some pointers. PART ONE of Michael's guidance deals with specific dollar amounts and types of automobile coverage insurance that are necessary to keep you safe in a sea of drivers of various skill, sobriety and legal capacity.
Yours, Ike
Yours, Ike
GUEST AUTHOR ATTORNEY MICHAEL TRONCELLITO
We all buy insurance because we are required to. Arizona and many other states have financial responsibility laws. Did you buy coverage to protect yourself from others with no or insufficient insurance? Probably not; not many people do. Most roll the dice hoping that the other drivers on the road will be at least as financially responsible as we are. However, the situation is often different than we hoped. We need to protect ourselves from these drivers with different types of insurance coverage.
The three most important types of coverage that I do not see enough accident clients have are:
The three most important types of coverage that I do not see enough accident clients have are:
-Medical Payments Coverage (“Med Pay”);
-Uninsured Motorist Coverage, (“UM”); and
-Under Insured Motorist Coverage (“UIM”).
Med Pay is a type of coverage purchased through your auto policy that will cover medical bills regardless of who is at fault for the accident. You can purchase varying amounts of Med Pay coverage. I recommend at least $5,000.00 worth of coverage to my clients. The premium is reasonable; usually between $85 and $120 per year. If you are not at fault for causing the accident, your premiums for Med Pay coverage will not increase. Use $5,000.00 worth of Med Pay coverage once and it will take the insurance company between 40 and 55 years to recoup that $5,000.00 in payments to you. If you don't have health insurance or have physical/medical conditions that could cause you to sustain greater than average injury you should have even more.
Uninsured Motorist Coverage is, in my professional opinion, an absolute necessity here in Arizona. If someone does not have insurance and causes an accident, you are likely out of luck when it comes to collecting your damages. But, if you have Uninsured Motorist coverage, your medical bills, pain and suffering, and lost income damages suffered as a result of an uninsured driver will be paid. Annual premiums on $100,000.00 per person coverage range from $85 - $185. If you did not cause an accident, your Uninsured Motorist premiums cannot rise simply by virtue of you using this optional and additional coverage.
Under Insured Motorist coverage is just as important as Uninsured Motorist coverage. They both work the same way. The difference is that Under Insured Motorist coverage will kick in and pick up the tab after the other driver’s insurance coverage is exhausted. The premiums are similar to Uninsured Motorist premiums, and the insurance company is prohibited from raising your rates for simply using the additional and optional coverage.
While I am not a fan of insurance companies, I am even less a fan of you not knowing how to protect yourself. If your insurance has not been reviewed lately, you should contact your agent. If your agent hasn’t called you in the last nine (9) months, you should get a new agent. Speak to a professional about these coverage types. If you have no one to speak to, feel free to call me. I can get you in touch with people who may be able to help you.
Our guest author, Michael Troncellito, http://phxinjurylawyer.com/ is an attorney who practices in litigation and personal injury law. He can be reached at mtroncel@cox.net or by calling his firm at 602-548-8595. Coverage limit requirements may be even more onerous for many of our high net worth readers and clients - always use information of this type as a general guide of issues to examine, not legal advice specific to you and your family.
Monday, June 14, 2010
Why Does a creditor protected CASH ALTERNATIVE make sense? Because 60% of AZ banks are vulnerable to FAILURE!
We have been warning advisor partners and clients for some time about the vulnerability of banks across the country and how we feel a little risk spreading is a good idea from both a bank solvency and Asset Protection standpoint.
The first link below is to an article that shows how vulnerable some banks in Arizona are, as just one local example of a national crisis. There have been over 80 bank closings across the country since January 1 of this year and a highly placed banking executive has informed us that the FDIC has basically run out of money twice in the last nine months. The second Link describes one of the solutions we are implementing.
THE PROBLEM:
Report: 60 Percent of Arizona Banks Vulnerable to Failure:http://tinyurl.com/2dcgnp9
And one of the SOLUTIONS: Creditor Protected Alternatives To Cash:http://tinyurl.com/lkwqtv
Please take a look at this and share with anyone you feel it would help. As always, call us for help or with questions.
Yours, Ike
The first link below is to an article that shows how vulnerable some banks in Arizona are, as just one local example of a national crisis. There have been over 80 bank closings across the country since January 1 of this year and a highly placed banking executive has informed us that the FDIC has basically run out of money twice in the last nine months. The second Link describes one of the solutions we are implementing.
THE PROBLEM:
Report: 60 Percent of Arizona Banks Vulnerable to Failure:http://tinyurl.com/2dcgnp9
And one of the SOLUTIONS: Creditor Protected Alternatives To Cash:http://tinyurl.com/lkwqtv
Please take a look at this and share with anyone you feel it would help. As always, call us for help or with questions.
Yours, Ike
Tuesday, May 25, 2010
What Happens To My Stuff When I Die?
The Following is a no-nonsense overview of some good basic Estate Planning questions and options by my friend Attorney Jay Young, a partner at the law firm of Marquis & Aurbach in Las Vegas. Call Jay and his team for help or with questions and make addressing this issue a top priority and an essential part of any well thought out financial plan for your family.
Yours, Ike
WHAT HAPPENS TO MY STUFF WHEN I DIE?
I tried for 15 years to get my friend to do some basic Estate Planning. He assured me he didn't need my help, and that he had everything "under control" without spending money on an attorney to do a Will and a Trust. My friend died last month and I am now trying to help his widow through the financial mess he left behind.
Now, my friend was an extremely intelligent man and very capable in many ways. But he did not have things "under control". Now, his widow will have to spend thousands of dollars in attorney fees, put his estate through probate, and lose almost 1/3 of the assets they worked so hard to accumulate. His widow is learning through my friend's mistakes that if you do not have an estate plan, the State will determine who gets your assets, not you.
Following is an overview of the ways one may transfer assets upon his or her death, discussing the risks and rewards of each method. We will also discuss the estate planning tools that are available to you to avoid the risks associated with each transfer method.
What Happens to My Stuff if I Die With or Without a Will?
No matter how many times you tell your spouse that you want "Johnny" to get your Ford Motor stock, your survivors will not decide who gets your assets upon your death unless you complete some basic estate planning. Those who die without a Will or who do not title assets such that they pass to a designee by operation of law or under the terms of a contract (discussed below), allow the State to determine who will receive their assets upon death. Assets that are not titled to provide for transfer at death may only be transferred by court order.
Unfortunately, those court proceedings are expensive. It is estimated that the average cost of these types of court proceedings is $10,000. Compared to the cost of simple estate planning devices, this is a great expense and is very avoidable. Having a Will does not even protect you from having to go to court, however. A Will is nothing more than directions to a judge saying. "Dear Judge: I do not want my assets to pass according to statute. Instead, I want them to pass as follows . . .." In other words, a Will virtually GUARANTEES that your loved one will have to go to court and spend attorney fees. There has to be a better and less expensive way, right? Read on.
How Can I Make Sure my Assets Pass by Operation of Law?
Some forms of ownership of an asset declare legally who will receive the asset upon your demise. Owning property in joint tenancy, as community property with right of survivorship, or designating that assets are held for the benefit of, payable on death to, or to be transferred on death to a designee are recognized in the law as valid ways to transfer ownership of an asset upon your death.
While these methods are fairly easy and cost-effective, people usually get into trouble when they THINK they have made these designations, but have not. My friend "forgot" to title cemetery lots and to designate a beneficiary on a bank account and stocks even though he thought he had everything "under control".
How Can Contracts Help me Pass Assets on my Death?
You can designate by contract that upon your death, certain assets pass to your designee. These contracts include life insurance policies, partnership agreements, shareholder agreements for closely help corporations, trusts, retirement benefits, stocks, etc.
How Can an Estate Plan Help?
A proper estate plan can help to make sure your assets pass to those you intend to receive them. It can ensure that your dependents are cared for both financially and physically (especially for minors). An estate plan can also help reduce taxes and attorney fees and keep your loved ones from having to go to court. The cost of a simple estate plan is a fraction of the average cost of going to probate court.
Many people think that a Trust is only for rich people. They would be wrong.
A Living Trust is a tool that should be utilized by anyone over 18 years old who has children and/or real property. When properly formed and funded, a Trust replaces a Will and will provide for the management and distribution of your assets upon your death without having to go to probate court. During your lifetime, you have complete control over your assets, even though you would place all assets (homes, bank accounts, stocks, etc.) into the Trust (meaning the Trust is the owner of the assets). You will need to designate a successor trustee, whose job it will be to transfer the property in your Trust according to your written desires. A Trust can be changed as often as you like after it is formed. When you die, your successor trustee will simply follow your directions and may transfer your assets without having to go to court or incur those attorney fees.
Of course, there are other estate planning tools that we recommend along with a Trust. Those include a Living Will (directive to doctors whether you desire life support, etc.), a Pour-Over Will, Power of Attorney, and others depending on the scope of your needs and amount of your assets.
How Can I Get Started Protecting my Family?
Call 702.821.2419 for a free consultation with one of Marquis & Aurbach's excellent estate planning attorneys. They can meet with you and explain how to best protect your family (every situation is unique and your estate plan should be designed just for you). Whether you make any changes is up to you, but let them help educate you on whether your family is at risk and how you can avoid that risk. www.marquisaurbach.com
Yours, Ike
WHAT HAPPENS TO MY STUFF WHEN I DIE?
I tried for 15 years to get my friend to do some basic Estate Planning. He assured me he didn't need my help, and that he had everything "under control" without spending money on an attorney to do a Will and a Trust. My friend died last month and I am now trying to help his widow through the financial mess he left behind.
Now, my friend was an extremely intelligent man and very capable in many ways. But he did not have things "under control". Now, his widow will have to spend thousands of dollars in attorney fees, put his estate through probate, and lose almost 1/3 of the assets they worked so hard to accumulate. His widow is learning through my friend's mistakes that if you do not have an estate plan, the State will determine who gets your assets, not you.
Following is an overview of the ways one may transfer assets upon his or her death, discussing the risks and rewards of each method. We will also discuss the estate planning tools that are available to you to avoid the risks associated with each transfer method.
What Happens to My Stuff if I Die With or Without a Will?
No matter how many times you tell your spouse that you want "Johnny" to get your Ford Motor stock, your survivors will not decide who gets your assets upon your death unless you complete some basic estate planning. Those who die without a Will or who do not title assets such that they pass to a designee by operation of law or under the terms of a contract (discussed below), allow the State to determine who will receive their assets upon death. Assets that are not titled to provide for transfer at death may only be transferred by court order.
Unfortunately, those court proceedings are expensive. It is estimated that the average cost of these types of court proceedings is $10,000. Compared to the cost of simple estate planning devices, this is a great expense and is very avoidable. Having a Will does not even protect you from having to go to court, however. A Will is nothing more than directions to a judge saying. "Dear Judge: I do not want my assets to pass according to statute. Instead, I want them to pass as follows . . .." In other words, a Will virtually GUARANTEES that your loved one will have to go to court and spend attorney fees. There has to be a better and less expensive way, right? Read on.
How Can I Make Sure my Assets Pass by Operation of Law?
Some forms of ownership of an asset declare legally who will receive the asset upon your demise. Owning property in joint tenancy, as community property with right of survivorship, or designating that assets are held for the benefit of, payable on death to, or to be transferred on death to a designee are recognized in the law as valid ways to transfer ownership of an asset upon your death.
While these methods are fairly easy and cost-effective, people usually get into trouble when they THINK they have made these designations, but have not. My friend "forgot" to title cemetery lots and to designate a beneficiary on a bank account and stocks even though he thought he had everything "under control".
How Can Contracts Help me Pass Assets on my Death?
You can designate by contract that upon your death, certain assets pass to your designee. These contracts include life insurance policies, partnership agreements, shareholder agreements for closely help corporations, trusts, retirement benefits, stocks, etc.
How Can an Estate Plan Help?
A proper estate plan can help to make sure your assets pass to those you intend to receive them. It can ensure that your dependents are cared for both financially and physically (especially for minors). An estate plan can also help reduce taxes and attorney fees and keep your loved ones from having to go to court. The cost of a simple estate plan is a fraction of the average cost of going to probate court.
Many people think that a Trust is only for rich people. They would be wrong.
A Living Trust is a tool that should be utilized by anyone over 18 years old who has children and/or real property. When properly formed and funded, a Trust replaces a Will and will provide for the management and distribution of your assets upon your death without having to go to probate court. During your lifetime, you have complete control over your assets, even though you would place all assets (homes, bank accounts, stocks, etc.) into the Trust (meaning the Trust is the owner of the assets). You will need to designate a successor trustee, whose job it will be to transfer the property in your Trust according to your written desires. A Trust can be changed as often as you like after it is formed. When you die, your successor trustee will simply follow your directions and may transfer your assets without having to go to court or incur those attorney fees.
Of course, there are other estate planning tools that we recommend along with a Trust. Those include a Living Will (directive to doctors whether you desire life support, etc.), a Pour-Over Will, Power of Attorney, and others depending on the scope of your needs and amount of your assets.
How Can I Get Started Protecting my Family?
Call 702.821.2419 for a free consultation with one of Marquis & Aurbach's excellent estate planning attorneys. They can meet with you and explain how to best protect your family (every situation is unique and your estate plan should be designed just for you). Whether you make any changes is up to you, but let them help educate you on whether your family is at risk and how you can avoid that risk. www.marquisaurbach.com
Wednesday, May 12, 2010
Beyond Prenups - Where Asset Protection meets Domestic Relations Law
We advise all of our clients to address pre-nuptial planning and tell them that combined with what we do, the value and surety that tools like the Asset Protection trust and our other tools provide will give them great additional security and take a great finite "snapshot" of their assets entering the marriage.
It has been our experience that careful planing also reduces or eliminates areas of conflict and dispute and helps control the financial and legal costs of such battles that enrich no one but the lawyers.
The link below is to an article in Private Wealth magazine that exapnds upon this concept.
Beyond Prenups - Where Asset Protection meets Domestic Relations Law
http://www.fa-mag.com/component/content/article/5521.html?issue=144&magazineID=3&Itemid=211#josc601
It has been our experience that careful planing also reduces or eliminates areas of conflict and dispute and helps control the financial and legal costs of such battles that enrich no one but the lawyers.
The link below is to an article in Private Wealth magazine that exapnds upon this concept.
Beyond Prenups - Where Asset Protection meets Domestic Relations Law
http://www.fa-mag.com/component/content/article/5521.html?issue=144&magazineID=3&Itemid=211#josc601
Wednesday, May 5, 2010
Tips To Avoid A Lawsuit - An Expert's View
This article is by my friend and colleague Douglass Lodmell, a nationally recognized Asset Protection expert and founder of one the leading Asset Protection only law firms in the country, Lodmell & Lodmell, which I formerly managed and am now of-counsel with. One of the most basic concepts in the martial arts is "avoid harm" and while we are firm believers in having a great, pro-active defensive plan we also place great value on behavior and thinking that minimizes exposure in the first place - here are some of Doug's tips on that.
Yours, Ike
Perhaps these tips bring to mind the oft-quoted adage, it's not paranoia if they really are out to get you. That's pretty accurate, says Lodmell. There are plenty of greed-blinded, entitlement-minded predators out there who are all too willing to separate you from your hard-earned money. Protect yourself as best you can-but don't let fear and cynicism become your defining characteristics.
Don't flaunt your wealth. Don't practice a lifestyle that advertises you have a lot of disposable income. Even if you don't consider yourself wealthy, if you're driving a top-of-the-line luxury sedan and openly discussing lavish vacations, plenty of other people will assume that you are-and will see you as a juicy target for a lawsuit.
Draw up a pre-nuptial agreement before marrying. It may not be romantic advice, but from a legal standpoint it's definitely wise. Being served for divorce is the most common lawsuit.
Identify and correct any existing personal or business liabilities. Use well-drafted and thought-out planning before the fact, and make sure you have planned for dispute resolution in the most efficient manner for after the fact. A majority of businesses fail in the first three years, and these often turn from high hopes to high drama as partners fight over the remaining assets. Good planning before there are problems can limit future potential trauma.
Know the employment laws backward, forward and inside out. Few areas are as treacherous as those involving the employment of other people. Disgruntled ex-employees can fairly easily exaggerate or even fabricate incidents that "prove" they were victims of harassment or discrimination. Know how to legally interview, hire, and fire employees, and make sure those working for you know as well.
Don't play favorites with employees. You must treat everyone equally. Think twice before you give an employee a special break or extra time off for any reason. This also applies to being too harsh on one employee and not others. If you don't do the same for everyone, then you could be in for trouble.
Be scrupulously careful about doing anything that might be construed as sexual discrimination. Here are some disturbing statistics: according to Jury Verdict Research, 38 percent of all verdicts between 1996 and 2002 involved claims of sexual discrimination. Equally sobering is the report from Jury Verdict Research that 67 percent of sexual discrimination court cases end with the plaintiff winning. And in 2000, the mean award for sexual discrimination was a hefty $529,373.
Understand vicarious liabilities. Employers can be held accountable for the actions of their employees-sometimes even for actions the employers specifically told the employees not to do. Train them effectively. And if you have children, you have a whole other set of worries. Parents are often held accountable for the actions of their children (e.g., auto accidents).
Increase your automobile insurance coverage to the highest dollar amount. Your medical practice isn't the only place where you're at risk for a lawsuit-our nation's roads are fast becoming a highway to wealth. Make sure you are insured to cover a good chunk of medical expenses should you, your spouse or your children be involved in a lawsuit.
Implement binding Arbitration/Alternative Dispute Resolution agreements with all staff and everyone with whom you do business. The American Arbitration Association estimates that 80 to 90 percent of the disputes it mediates and/or arbitrates are quickly and cost-effectively resolved without litigation. It's just good business sense to legally require that any grievances between you, your patients, clients, or even your vendors be settled out of court in arbitration.
Adequately warn customers about potentially dangerous situations. Personal injury lawsuits are big business. New York City paid $53 million in 2002 for "slip and slide" complaints, which led them to shift the burden for such claims to property owners. Putting up signs like "We use microwave ovens" or "Caution: wet floor" may seem simple, but they can go a long way toward preventing lawsuits.
Treat your clients and customers in an exemplary manner. It may sound naïve or simplistic, but it's true: being nice usually pays off. Most of us simply don't like to sue people who we think are doing a great job. On the other hand, we have no problem suing those who "didn't care about us in the first place." If you needed it, that's one more reason to practice the Golden Rule!
"Yes, we do live in troubled times and our legal system is dysfunctional," says Lodmell. "But instead of bemoaning the lack of justice in our society, we must become a force for change. Any time you get the opportunity, speak up in favor of personal responsibility. Denounce greed. Always do what's right and set a good example for your children. Unlike changes in legislative and judicial reform, changes in public attitudes cannot be mandated. They can be changed only through grassroots efforts at the citizen level. Be the change you would like to see . . . the country you save might be your own."
Yours, Ike
Perhaps these tips bring to mind the oft-quoted adage, it's not paranoia if they really are out to get you. That's pretty accurate, says Lodmell. There are plenty of greed-blinded, entitlement-minded predators out there who are all too willing to separate you from your hard-earned money. Protect yourself as best you can-but don't let fear and cynicism become your defining characteristics.
Don't flaunt your wealth. Don't practice a lifestyle that advertises you have a lot of disposable income. Even if you don't consider yourself wealthy, if you're driving a top-of-the-line luxury sedan and openly discussing lavish vacations, plenty of other people will assume that you are-and will see you as a juicy target for a lawsuit.
Draw up a pre-nuptial agreement before marrying. It may not be romantic advice, but from a legal standpoint it's definitely wise. Being served for divorce is the most common lawsuit.
Identify and correct any existing personal or business liabilities. Use well-drafted and thought-out planning before the fact, and make sure you have planned for dispute resolution in the most efficient manner for after the fact. A majority of businesses fail in the first three years, and these often turn from high hopes to high drama as partners fight over the remaining assets. Good planning before there are problems can limit future potential trauma.
Know the employment laws backward, forward and inside out. Few areas are as treacherous as those involving the employment of other people. Disgruntled ex-employees can fairly easily exaggerate or even fabricate incidents that "prove" they were victims of harassment or discrimination. Know how to legally interview, hire, and fire employees, and make sure those working for you know as well.
Don't play favorites with employees. You must treat everyone equally. Think twice before you give an employee a special break or extra time off for any reason. This also applies to being too harsh on one employee and not others. If you don't do the same for everyone, then you could be in for trouble.
Be scrupulously careful about doing anything that might be construed as sexual discrimination. Here are some disturbing statistics: according to Jury Verdict Research, 38 percent of all verdicts between 1996 and 2002 involved claims of sexual discrimination. Equally sobering is the report from Jury Verdict Research that 67 percent of sexual discrimination court cases end with the plaintiff winning. And in 2000, the mean award for sexual discrimination was a hefty $529,373.
Understand vicarious liabilities. Employers can be held accountable for the actions of their employees-sometimes even for actions the employers specifically told the employees not to do. Train them effectively. And if you have children, you have a whole other set of worries. Parents are often held accountable for the actions of their children (e.g., auto accidents).
Increase your automobile insurance coverage to the highest dollar amount. Your medical practice isn't the only place where you're at risk for a lawsuit-our nation's roads are fast becoming a highway to wealth. Make sure you are insured to cover a good chunk of medical expenses should you, your spouse or your children be involved in a lawsuit.
Implement binding Arbitration/Alternative Dispute Resolution agreements with all staff and everyone with whom you do business. The American Arbitration Association estimates that 80 to 90 percent of the disputes it mediates and/or arbitrates are quickly and cost-effectively resolved without litigation. It's just good business sense to legally require that any grievances between you, your patients, clients, or even your vendors be settled out of court in arbitration.
Adequately warn customers about potentially dangerous situations. Personal injury lawsuits are big business. New York City paid $53 million in 2002 for "slip and slide" complaints, which led them to shift the burden for such claims to property owners. Putting up signs like "We use microwave ovens" or "Caution: wet floor" may seem simple, but they can go a long way toward preventing lawsuits.
Treat your clients and customers in an exemplary manner. It may sound naïve or simplistic, but it's true: being nice usually pays off. Most of us simply don't like to sue people who we think are doing a great job. On the other hand, we have no problem suing those who "didn't care about us in the first place." If you needed it, that's one more reason to practice the Golden Rule!
"Yes, we do live in troubled times and our legal system is dysfunctional," says Lodmell. "But instead of bemoaning the lack of justice in our society, we must become a force for change. Any time you get the opportunity, speak up in favor of personal responsibility. Denounce greed. Always do what's right and set a good example for your children. Unlike changes in legislative and judicial reform, changes in public attitudes cannot be mandated. They can be changed only through grassroots efforts at the citizen level. Be the change you would like to see . . . the country you save might be your own."
Thursday, April 8, 2010
PODCAST - Bay Area Attorney Madan Ahluwalia interviews Arizona Asset Protection Attorney Ike Devji on Asset Protection basics
Recent interview that introduces the Asset Protection topic from a legal perspective - the first in a continuing series on the topic:
http://www.ahluwalia-law.com/wordpress/wp-content/uploads/audio/April_2010/04-03-10_Attorney_Madan_Ahluwalia.mp3
http://www.ahluwalia-law.com/wordpress/wp-content/uploads/audio/April_2010/04-03-10_Attorney_Madan_Ahluwalia.mp3
Tuesday, March 23, 2010
STATES WITH MOST ABUSIVE LAWSUIT SYSTEMS
A TRIO of startling articles are linked below for your information. The first one highlights the erosion of what we have always cautioned as being the "emperors new clothes" tort reform and med-malpractice caps which the penny-wise and pound foolish have always thought would protect them. The second article is on the most abusive lawsuit jurisdictions in the U.S. which include not only what you'd expect (California) but also some southern states; good ol' boys love torts too. Finally, a short piece on illinois and the lawsuit crisis there. All good quick reads.
Yours, Ike
THE LINKS:
Wednesday, March 3, 2010
Warning For Employers: Service Helps Job Applicants Lie to You
Warning For Employers: Service Helps Job Applicants Lie to You
Please read this important warning about a troubling web site brought to my attention by my friend and employment law expert Rachel Weiss. Many of my clients have employees that are in sensitive positions, and whose actions can potentially place those I serve in jeopardy - this service creates huge liability. I'd love to see the owners of the company below SUED when one of their "clients" kills or injures someone or creates some other harm, theft or loss because they got a job based on the false history and credentials they created. This is especially terrifying for medical businesses.
Please read this important warning about a troubling web site brought to my attention by my friend and employment law expert Rachel Weiss. Many of my clients have employees that are in sensitive positions, and whose actions can potentially place those I serve in jeopardy - this service creates huge liability. I'd love to see the owners of the company below SUED when one of their "clients" kills or injures someone or creates some other harm, theft or loss because they got a job based on the false history and credentials they created. This is especially terrifying for medical businesses.
Thanks, Ike
If any of you are involved in any way with your company’s hiring process, you need to be aware of a service called Career Excuse.
Career Excuse essentially provides job applicants with a completely or partially fabricated work history, complete with fake company names and fake references with phone numbers.
Real people will answer your phone calls and confirm whatever the applicant states in his or her resume. Career Excuse has become so popular that they’re not taking new “subscribers” at this time. (Of course, individuals currently filling out applications and submitting resumes may already be signed up).
Visit their website – CareerExcuse.com – for more information. In particular, read the “What If I Get Caught?” page, which assures its clients that lying on a resume is not a crime.
Please do not hesitate to contact me with any questions about this or any other employment or litigation issue. Rachel R. Weiss (602) 256-4448 rweiss@gblaw.com
Tuesday, March 2, 2010
Increased Physician Exposure Under the False Claims Act
Increased Physician Exposure
Under the False Claims Act
This is a guest piece by my friend Matt Weber, an expert health Care Attorney that helps protect doctors through out the Western U.S. with the law firm of Holland & Hart.
The Federal Goverment is cracking down on Medicare (and other provider) billing errors and lumping those with errors in the same boat with criminals and those commiting intentional fraud. Matt has provided some simple steps that will allow your practice to spot and fix these issues in a proactive, time and cost efficient manner, rather than at the point of a gun and at considerable disruption, heartache and expense.
Yours, Ike
By Matthew G. Weber, Esq., Holland & Hart LLP, Denver
The HHS Office of Inspector General reported healthcare fraud, waste and abuse savings and recoveries of nearly $21 billion last year. In addition, Congress enacted the Fraud Enforcement and Recovery Act of 2009 (FERA).
FERA dramatically increases funding for enforcement activity and also amends the False Claims Act (FCA) to create additional risk areas for physicians and medical practice groups. Now more than ever, your practice needs a solid compliance program to avoid costly investigations and penalties.
Physicians immediately can reduce this exposure by enhancing their ability to:
•Promptly return overpayments,
•Correctly bill government contractors such as Medicaid Managed Care Organizations and Medicare Advantage plans, and
•Protect non-employee agents and contractors from retaliation for good faith attempts to stop FCA violations, including whistleblowing activities.
Under FERA, it’s now a FCA violation to improperly retain an overpayment even if the overpayment is not the result of the submission of a fraudulent claim. In addition, a claim that is fraudulent can violate the FCA even if it is never “presented” directly to the government for payment. It’s enough if the claim is submitted to a federal contractor such as a Medicaid or Medicare managed care plan. It’s also enough if an “under arrangements” provider submits a false claim to a hospital that receives DRG Medicare payments.
That means that plans and hospitals will be monitoring billing by their providers like never before. At the same time, anti-retaliation protection has been extended to agents and contractors, so physicians must guard against actions during billing disputes that could be misconstrued as retaliation against those plans and hospitals.
What can you do right now to protect your practice? For starters:
• Implement a system for tracking and promptly returning overpayments,
• Step up monitoring and audits to ensure appropriate claims, and
• Revise your anti-retaliation policy to protect agents and contractors, and train your staff so they don’t inadvertently create the basis for such a claim during a billing dispute.
For more information or a personal review, please contact Matt Weber in Holland & Hart’s Denver office at 303-395-8565, mweber@hollandhart.com or through his LinkedIn profile: http://www.linkedin.com/in/matthewweber
Under the False Claims Act
This is a guest piece by my friend Matt Weber, an expert health Care Attorney that helps protect doctors through out the Western U.S. with the law firm of Holland & Hart.
The Federal Goverment is cracking down on Medicare (and other provider) billing errors and lumping those with errors in the same boat with criminals and those commiting intentional fraud. Matt has provided some simple steps that will allow your practice to spot and fix these issues in a proactive, time and cost efficient manner, rather than at the point of a gun and at considerable disruption, heartache and expense.
Yours, Ike
By Matthew G. Weber, Esq., Holland & Hart LLP, Denver
The HHS Office of Inspector General reported healthcare fraud, waste and abuse savings and recoveries of nearly $21 billion last year. In addition, Congress enacted the Fraud Enforcement and Recovery Act of 2009 (FERA).
FERA dramatically increases funding for enforcement activity and also amends the False Claims Act (FCA) to create additional risk areas for physicians and medical practice groups. Now more than ever, your practice needs a solid compliance program to avoid costly investigations and penalties.
Physicians immediately can reduce this exposure by enhancing their ability to:
•Promptly return overpayments,
•Correctly bill government contractors such as Medicaid Managed Care Organizations and Medicare Advantage plans, and
•Protect non-employee agents and contractors from retaliation for good faith attempts to stop FCA violations, including whistleblowing activities.
Under FERA, it’s now a FCA violation to improperly retain an overpayment even if the overpayment is not the result of the submission of a fraudulent claim. In addition, a claim that is fraudulent can violate the FCA even if it is never “presented” directly to the government for payment. It’s enough if the claim is submitted to a federal contractor such as a Medicaid or Medicare managed care plan. It’s also enough if an “under arrangements” provider submits a false claim to a hospital that receives DRG Medicare payments.
That means that plans and hospitals will be monitoring billing by their providers like never before. At the same time, anti-retaliation protection has been extended to agents and contractors, so physicians must guard against actions during billing disputes that could be misconstrued as retaliation against those plans and hospitals.
What can you do right now to protect your practice? For starters:
• Implement a system for tracking and promptly returning overpayments,
• Step up monitoring and audits to ensure appropriate claims, and
• Revise your anti-retaliation policy to protect agents and contractors, and train your staff so they don’t inadvertently create the basis for such a claim during a billing dispute.
For more information or a personal review, please contact Matt Weber in Holland & Hart’s Denver office at 303-395-8565, mweber@hollandhart.com or through his LinkedIn profile: http://www.linkedin.com/in/matthewweber
Thursday, February 25, 2010
Issuing a form 1099-C May Bar a Lender From Pursuing a Deficiency
This article came to me from my friend Attorney Phil Guttilla, a tax and estate attorney that is one of my go-to guys and who is helping people with the tax consequences of being part of entities that are in crisis due to the current market.
Yours, Ike
A recent Arizona Court of Appeals decision held that an Internal Revenue Service Form 1099-C sent by a lender to a delinquent borrower was prima facie evidence that the lender intended to cancel the debt.
In AmTrust Bank v. Fossett, 1 CA-CV 08-0840, the Court stated that this evidence may be rebutted by the lender; however, the lender's intent was a factual issue which barred both parties from obtaining an early decision by summary judgment.
Generally accepted accounting principals and Federal tax law require lenders to report a discharge of indebtedness, which may give rise to taxable income for the borrower.
Under Arizona law, a discharge of debt may occur when a lender agrees not to sue or otherwise renounces its rights against the borrower by a signed writing.
In AmTrust Bank v. Fossett, the borrowers argued that because they reported and paid taxes as a result of the lender's Form 1099-C, the lender was precluded from pursuing a deficiency under Arizona law. The Court recognized that under Federal law, certain conditions mandate that the lender file a Form 1099-C even if it still intends to pursue collection. The Court also noted that if the lender was not required to report under Federal law but did, then that is also a factor to be considered in determining whether the borrowers were still liable for the debt.
The concurring judges noted that other courts have remarked in similar situations that there is no reason why a lender can not include a statement with the Form 1099-C sent to a borrower explaining the reason for issuing the Form 1099-C and a notice of the lender's intent to continue to pursue collection. While not controlling, the comment was instructional and we believe that a lender should include a reservation of rights and explanation letter with each Form 1099-C.
For more information on when a lender must file a Form 1099-C or for more information regarding the suggested form of letter, please contact Attorney Phillip Guttilla, pguttilla@rcalaw.com , (602) 440-4845 or see more about Phil Here:http://www.rcalaw.com/View-user-profile.php?qsln=g&user=96
Yours, Ike
A recent Arizona Court of Appeals decision held that an Internal Revenue Service Form 1099-C sent by a lender to a delinquent borrower was prima facie evidence that the lender intended to cancel the debt.
In AmTrust Bank v. Fossett, 1 CA-CV 08-0840, the Court stated that this evidence may be rebutted by the lender; however, the lender's intent was a factual issue which barred both parties from obtaining an early decision by summary judgment.
Generally accepted accounting principals and Federal tax law require lenders to report a discharge of indebtedness, which may give rise to taxable income for the borrower.
Under Arizona law, a discharge of debt may occur when a lender agrees not to sue or otherwise renounces its rights against the borrower by a signed writing.
In AmTrust Bank v. Fossett, the borrowers argued that because they reported and paid taxes as a result of the lender's Form 1099-C, the lender was precluded from pursuing a deficiency under Arizona law. The Court recognized that under Federal law, certain conditions mandate that the lender file a Form 1099-C even if it still intends to pursue collection. The Court also noted that if the lender was not required to report under Federal law but did, then that is also a factor to be considered in determining whether the borrowers were still liable for the debt.
The concurring judges noted that other courts have remarked in similar situations that there is no reason why a lender can not include a statement with the Form 1099-C sent to a borrower explaining the reason for issuing the Form 1099-C and a notice of the lender's intent to continue to pursue collection. While not controlling, the comment was instructional and we believe that a lender should include a reservation of rights and explanation letter with each Form 1099-C.
For more information on when a lender must file a Form 1099-C or for more information regarding the suggested form of letter, please contact Attorney Phillip Guttilla, pguttilla@rcalaw.com , (602) 440-4845 or see more about Phil Here:http://www.rcalaw.com/View-user-profile.php?qsln=g&user=96
Tuesday, February 9, 2010
9 Tips for Negotiating with Corporate Creditors
This is a great simple outline by my friend Sean Shepherd about negotiating with corporate creditors. As always, get good legal counsel and implement a professional asset protection plan NOW to help protect your family's assets from an infinite universe of personal and professional exposure. - Ike
Guest Column By Sean Shepherd
Negotiating with creditors to effect an out-of-court workout is certainly not an easy task. Facing a loss, creditor managers and banks often adopt an adversarial posture that initially may be difficult to overcome.
The goal is to establish a consensual tone and tenor while acting to protect your own interests. Despite what they may say, credit managers and banks will be acting in their best interest and it is important to realize that their goal is to maximize their recovery. Accordingly, here are some tips that will help during negotiations:
1) Liquidity Analysis - Start by performing a comprehensive liquidity and cash flow analysis that uses current operating characteristics as a base line. The goal is to first determine what the business can afford to pay on a periodic basis.
2) Game Plan - Have a game plan BEFORE approaching the creditor and never agree to pay more than what the cash flow analysis suggests is feasible.
3) Understand the Other Side – This is one of the universal keys to negotiating—i.e., understanding your opposition’s needs and objectives. During negotiations, attempt to uncover the creditor’s needs and their bottom line—that is, the absolute minimum that they will or can accept. Depending on individual circumstances, 50% to 70% percent of the current balance of the credit is generally not unreasonable.
4) Stay Calm - Credit managers and banks may use a variety of tactics to coerce the borrower into a revised arrangement that is ultimately unrealistic. Hence, stay calm and never become intimidated by the person that you're negotiating with, even if they threaten you with lawsuits or other actions. Studies indicate that a calm person thinks more clearly and effectively than one aroused.
5) Timing - Don't lose sight of the fact that most successful negotiations take place over a matter of days or even weeks, with several rounds of offers and counter-offers. Don't become discouraged if the process seems to be taking longer than expected.
6) Alternatives – Try to present a couple of different restructuring/repayment alternatives so that you’re presenting a ―choice‖ to select from. This is, again, a key tactic in successful negotiations. If the company can afford, for example, to settle an account by paying a lump sum (as opposed to a payment plan), you'll have much more negotiating leverage. This is the universal power of cash, and it works in all venues.
7) Opposing Tactics - Remember that the person you're negotiating with is a trained professional when it comes to debt collections. A common tactic is for them to use complex legal terminology (during conversation or in correspondence) in order to confuse or intimidate the counter-party. Attend very carefully to what's being said and make sure that you understand exactly what you're being asked to agree to. If a legal issue arises during negotiations, side-line the topic by simply indicating that you can’t agree or comment until you’ve consulted with the attorney involved in the process.
8) Draft & Execute the Agreement - Once a workout agreement has been reached, make absolutely sure that everything that's been agreed upon is accurately expressed in writing, and that the agreement is fully executed by all parties—i.e., signed and dated.
9) Know the Law - Never lose sight of the fact that anyone attempting to collect a debt outside of court must conform with the Federal Fair Debt Collection Practices Act—understand what this says and what rights it affords the borrower.
Sean Shepherd is the Director of Business Development for VALCOR Consulting. VALCOR provides a full menu of enterprise valuation services and restructuring support to the middle market. Mr. Shepherd can be reached at: sshepherd@valcoronline.com or 602.214.4321
Guest Column By Sean Shepherd
Negotiating with creditors to effect an out-of-court workout is certainly not an easy task. Facing a loss, creditor managers and banks often adopt an adversarial posture that initially may be difficult to overcome.
The goal is to establish a consensual tone and tenor while acting to protect your own interests. Despite what they may say, credit managers and banks will be acting in their best interest and it is important to realize that their goal is to maximize their recovery. Accordingly, here are some tips that will help during negotiations:
1) Liquidity Analysis - Start by performing a comprehensive liquidity and cash flow analysis that uses current operating characteristics as a base line. The goal is to first determine what the business can afford to pay on a periodic basis.
2) Game Plan - Have a game plan BEFORE approaching the creditor and never agree to pay more than what the cash flow analysis suggests is feasible.
3) Understand the Other Side – This is one of the universal keys to negotiating—i.e., understanding your opposition’s needs and objectives. During negotiations, attempt to uncover the creditor’s needs and their bottom line—that is, the absolute minimum that they will or can accept. Depending on individual circumstances, 50% to 70% percent of the current balance of the credit is generally not unreasonable.
4) Stay Calm - Credit managers and banks may use a variety of tactics to coerce the borrower into a revised arrangement that is ultimately unrealistic. Hence, stay calm and never become intimidated by the person that you're negotiating with, even if they threaten you with lawsuits or other actions. Studies indicate that a calm person thinks more clearly and effectively than one aroused.
5) Timing - Don't lose sight of the fact that most successful negotiations take place over a matter of days or even weeks, with several rounds of offers and counter-offers. Don't become discouraged if the process seems to be taking longer than expected.
6) Alternatives – Try to present a couple of different restructuring/repayment alternatives so that you’re presenting a ―choice‖ to select from. This is, again, a key tactic in successful negotiations. If the company can afford, for example, to settle an account by paying a lump sum (as opposed to a payment plan), you'll have much more negotiating leverage. This is the universal power of cash, and it works in all venues.
7) Opposing Tactics - Remember that the person you're negotiating with is a trained professional when it comes to debt collections. A common tactic is for them to use complex legal terminology (during conversation or in correspondence) in order to confuse or intimidate the counter-party. Attend very carefully to what's being said and make sure that you understand exactly what you're being asked to agree to. If a legal issue arises during negotiations, side-line the topic by simply indicating that you can’t agree or comment until you’ve consulted with the attorney involved in the process.
8) Draft & Execute the Agreement - Once a workout agreement has been reached, make absolutely sure that everything that's been agreed upon is accurately expressed in writing, and that the agreement is fully executed by all parties—i.e., signed and dated.
9) Know the Law - Never lose sight of the fact that anyone attempting to collect a debt outside of court must conform with the Federal Fair Debt Collection Practices Act—understand what this says and what rights it affords the borrower.
Sean Shepherd is the Director of Business Development for VALCOR Consulting. VALCOR provides a full menu of enterprise valuation services and restructuring support to the middle market. Mr. Shepherd can be reached at: sshepherd@valcoronline.com or 602.214.4321
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