1. PROTECTING YOUR ASSETS Sophisticated next steps to ensure the success of your estate plan

2. DISCLAIMER CIRCULAR 230 NOTICE: To ensure compliance withrequirements imposed by the IRS, please be advised that any tax advice contained in this communication (including any attachments) was not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any transaction or matter addressed herein. 3. Over the Compound Wall Asset protection is a collection of structures that protect assets from attackAsset Protection is putting a portion of your net worth behind some obstacles. The more obstacles, the greater the protection.Asset Protection is planning for future liabilities 4. WHY YOU NEED ASSET PROTECTION Creditor Protection Safeguard against law suits for malpractice in high riskprofessions Protection from law suits from personal injury Tenants in a rental property Car accidents As an alternative to prenuptial agreements 5. Asset Protection VehiclesStrategies to EmployFamily Limited Partnerships/LLCsBeyond the essential protection plans which include:Credit Shelter TrustsWillsHealth Care ProxyDurable Power of AttorneyLiving TrustsLiving Will and Conservator DesignationGRATs and QPRTHIPAA Medical records releaseThe sophisticated estate plan will include various combinations of these vehicles.Life Insurance Trusts 6. FAMILY LIMITED PARTNERSHIPSGeneral Partner 0-1% Has Control Has liabilityLimited Partner 80% No Liability No ControlLimited Partner 10% No Liability No ControlLimited Partner 10% No Liability No Control 7. FAMILY LIMITED PARTNERSHIPSCorporation as GP 0-1% Has Liability Has ControlYou as Primary LP 80% No Liability No ControlYou can be shareholder You can be director You can be an officer Personal Assets ProtectedSuccessor as LP 10% No Liability No ControlSuccessor as LP 10% No Liability No Control 8. Asset protection withFAMILY LIMITED LIABILITY COMPANY 9. FAMILY L.L.C. Manager 0-1% Has Liability Has controlMember 80% No liability No controlMember 10% No liability No ControlMember 10% No Liability No Control 10. How it Can Work Limited Partners have noliability for entity debts General Partner hasliability, but only subject to corporate assets Creditors of LimitedPartner can get Charging Order Charging Order noattractive to creditors 11. IMPROVE FLP AND LLC PROTECTION Suggested Steps to take Choose an asset protection state for formation Non-asset protection purpose = true business purpose for formation Non-spousal Partners Non-family Partners True Capitalization Non-asset Protection Purpose FORMALITIES No Fraudulent Conveyances 12. ADVANTAGES AND DISADVANTAGES Advantages Can begin to transferownership without control Can transfer assets likely toappreciate and minimize estate tax Can get discounts tominimize gift taxDisadvantages IRS reporting obligations Costs Attorneysfees, appraisals, upkeep Complexity Ownership transfer isirrevocable 13. Irrevocable and RevocableTRUST STRUCTURES 14. Qualified Personal Residence Trust(QPRT) More tax planning than asset protection Intentionally Defective Grantor Trust(IDIT) & Grantor Retained Annuity Trust (GRAT) Low Asset Value / Lower Interest Rates Caveat: Zeroed Out GRATs Irrevocable Life Insurance Trust (ILIT) Protects Death Benefit from CreditorsIRREVOCABLE TRUSTS Lifetime Credit Shelter Trust (LCST) 15. children for their LIFETIMES in order to provide enhanced protection The trust should include spendthrift provisions Decedents half (B-C) Irrevocable at 1st Death & protected Most living trusts distributed assets to heirs upon the heir attaining certain ages (e.g. half at age 30, remaining half at age 40)LIVING TRUSTS Create trusts for surviving spouse and 16. protecting heirs from potential divorcing spouses or judgment creditors It is also inefficient for the purpose of protecting assets from estate taxation for future generations Consider loans to beneficiaries (rather than outright distributions) when trust assets applied for further investment or to purchase an asset with financial value We prefer lifetime trusts, which enable GST exemptionLIVING TRUSTS CONT This is inefficient for the purpose of 17. GRAT GRAT makes a gift toQPRT QPRT requires gifting ofchildren which must be paid back over a term of years.the primary residence Methods the grantor cancontinue to live in the home Recently targeted byPresident Obama for potential reform or limitations on zero out policy Consider multiple GRATs as QPRTs and GRATs are a hedgeprotected during Initial Terms1. set up a rental agreementwith trustee 2. If the trustee is thenotspouse, she is able to do with her property whatever she pleases, including allowing the grantor to remain as a tenant 3. Consider dual QPRTs as ahedge 18. Planning withLIFE INSURANCE 19. LIFE INSURANCE Under state law beneficiarys interest in policy is protected againstpolicy owners creditors If the owner of policy insures life of another, owner is protectedfrom creditors of the insured If owner of the policy insures life of spouse for owners ownbenefit, owner is protected from own creditors Policy owners interest in case surrender value is protected fromclaims of owners own creditors 20. Life Insurance Trusts Greatest protectionafforded by owning life insurance in an Irrevocable Life Insurance Trust (ILIT) ILIT protects value fromcreditors of insured and trust beneficiaries ILIT also excludes taxationin insureds estate Distributions pass tochildren in trust for lifetime 21. ACCESS TO ILIT CASH VALUE ILIT may be drafted to provide that discretionary distributions oftrust assets to spouse and/or descendants Allows ready access to cash surrender value If no spouse, trust may be established in jurisdiction (i.e.Alaska, Nevada, Delaware) which allows discretionary distributions to the grantor When trust is funded it can be set up in same jurisdiction to avoidstate income tax 22. KEY FEATURES Proper trust planning avoids rule against perpetuities allows fordynasty planning Allows for discretionary distributions to trust maker/grantor withoutassets being included in taxable estate 23. WILL LOCAL LAW APPLY? Home of the trustee is the home of the trust In general, law of a jurisdiction where administration takes placecontrols. For example, if a Delaware institution is trustee then the trust falls under Delaware law. Trust should include specific intent that the trust be subject to lawof the asset protected jurisdiction that will serve as situs for the trust Some assets must be deposited in that state/tax jurisdiction At least one trustee must be based in that state/jurisdiction 24. REQUIREMENTS FOR CREDITOR PROTECTION Transfer into trust cannot be Trust maker/grantor cannota fraudulent conveyance** Transfer cannot render the trust maker/grantor insolvent Transfer cannot be intended to remove assets from the reach of a specifically known or anticipated creditor There are various statutes of limitations to commence a suit claiming fraudulent conveyance including child supportretain power to revoke the trust Trust maker/grantor cannot retain entitlement to income or principal form the trust; rather trust maker may be eligible for discretionary distributions in sole and absolute discretion of a trustee other than the trust maker **each state is different in its definition of fraud including time and amount of transfer 25. POTENTIAL LIMITATIONS Full faith credit attacks May be shielded by limitingtrustees only to persons or entities residing in state where trust created and who do not have minimum contact in trust makers domicile state Supremacy clausearguments May apply in bankruptcycontext; however, bankruptcy laws use state laws to determine interests of trust makers and beneficiaries Conflict of laws Claim that laws of the trustmakers state of domicile govern the rights of the trust makers creditors However, the trust may (andshould) specify which states law governs the instrument Restatement of trusts sanctionschoice of law clause in trust No existing case law 26. OFFSHORE ASSETS US Trustee (You)Foreign Trust CompanyAsset Protection trust 99% LP of FLP ownership (holds overseas$)You, Corp, LLC 1% GP of FLPFLP hold US $ Separates Ownership (Trust) Form control (GP) 27. IMPORTANT CONCEPTS Trust protector Dont transfer to foreign trustee without protection Asset protection is only one part of the Estate Planning puzzle Some simple asset techniques can protect a high percentage ofyour assets 28. QUESTIONS? Thank you!