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The protection of assets and their transfer to future generations are among the most important goals an individual can have during his or her lifetime. The objective of our Wealth Planning practice is to provide the very best advice and legal work regarding the management and transfer of property.
Our attorneys use their extensive experience to lead high-net-worth individuals to the right solutions for themselves and their businesses. We assist high net worth individuals to reduce their exposure to tax during their lives and for future generations. We provide legal and tax advice with the required sensitivity and a personal approach to clients who are just starting out and to others who are worth more than major public companies.
Our expertise and experience allows us to solve complex scenarios for our clients. Planning for the efficient transfer of wealth among generations requires a broad vision and an in-depth knowledge of both income and estate tax law, often from a global perspective as cross-border wealth transfers and international activities become more prevalent. We become familiar with a client’s family business and investment holdings in order to identify opportunities for the family to reduce both estate and income taxes as we work with the family to formulate a plan to transfer the family’s wealth to succeeding generations. From income to value added tax, from import duties to regulatory fund issues, from real estate, environmental issues to car taxes, from pension issues to tax audits, from litigation to insurance policies, from divorce to oil trading, from renewable energy to private aircraft and yachts, from retail business to good purpose foundations, from family business governance and family office issues to employment tax levies. Our team has dealt with it.
Our firm is dedicated to helping clients make educated, informed decisions about their assets and will work with you and your team of financial advisors and CPAs to implement a highly sophisticated and effective estate plan that allows for the maximum transfer of assets to your loved ones.
FREQUENTLY ASKED QUESTIONS:
What are Family Limited Partnerships?
Understanding how, why and when a Family Limited Partnership (“FLP”) will work for you as an Asset Protection vehicle is critical. The FLP is one of the most important asset protection tools in use today. Effectively drafted and funded it can act as a significant hurdle to a creditor seeking to attach your wealth. However, it is also one of the most misunderstood vehicles as well. A quick search on the net will reveal much confusing and often conflicting information. The FLP is also often mistakenly referred to as the Family Trust or Family Limited Trust. All Limited Partnerships are governed under the statutes of the state in which they were created. While these State laws are for the most part similar, there are some important differences when it comes to creditor protection. The FLP is a popular and common business and estate-planning tool, and over the past 20 years has become a mainstay of Asset Protection as well.
A typical family limited partnership will consist of general partnership units being wholly owned by a parent or an entity wholly owned by a parent. Likewise, the parent or parents will also own a majority of the limited partnership interest, either individually or through wholly owned entities. As time progresses, additional family members can be added to the roster of limited partners and gain some tax advantages for the parents in the process, all while the creators of the FLP maintain total control and limited liability.
What is a Limited Liability Company?
Today the LLC has become the standard for almost every form of small business, both active and passive. They are now used in virtually every state and are favored by accountants and attorneys alike for both their tax benefits and corporate protection features.
From a tax standpoint, the LLC is very easy to manage. It utilizes a “check the box” election and may be taxed in one of 3 ways at the option of the members:
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As a partnership (Just like the FLP)
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As a corporation, or
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As a disregarded entity (used when the LLC has only one member)
When it comes to Asset Protection LLC’s are extremely useful. The LLC is seen as the very best way to insulate otherwise risky assets, before mixing them with other safe assets inside the FLP. For example, if you own an office building or rental property, the LLC is ideal to hold this asset. In turn the LLC may be owned 100% by the FLP. In that case it is considered a disregarded entity and does not even require a separate tax return.
The LLC is also useful for other high-risk assets such as boats, airplanes, and partnership assets like a lake house or cabin, as well as business ventures you or your family might undertake. In all of these cases, the LLC acts as a legal shield in the event the asset, or business itself is the source of liability. At the same time, it protects and shields the assets themselves from other liability as a result of the LLC being owned by the FLP.
What is a Qualified Personal Residence Trust?
Making a gift of a personal residence to a qualified personal residence trust (QPRT) is a straightforward strategy for removing the value of a home from an individual’s taxable estate. A QPRT is an appealing estate planning device because it combines significant estate and gift tax savings with minimal lifestyle changes, while avoiding fears that too much is being given away. Under the Treasury Regulations each person is permitted to create QPRTs, one for a principal residence, and one for an occasional residence. A QPRT may serve a useful purpose when the grantor wishes to transfer his or her personal residence to family members (usually children) at some time in the future, and to reduce the overall transfer tax cost--that is, estate and gift tax cost-- of the transfer.
The individual would retain the right to live in the home for a specific length of time, such as 10 years. During that period, the grantor would not pay rent, but would be responsible for all of the expenses of the home, including real estate taxes, maintenance fees, and the cost of ordinary repairs. Thus, during the initial 10-year period, the individual would not notice any change in his day-to-day living patterns. At the end of the 10-year term, assuming the individual is still alive, the home would pass to his children free of estate tax. The grantor may remain in the home, if he agrees to pay rent to the children at the going rate for such rentals.
However, if the grantor dies before the trust has terminated, the residence will be included in his or her taxable estate, and estate tax will be paid on it, because the grantor retained the use of the property for a period that did not end before his or her death. That is, the purpose of the trust will have been defeated, but in most cases the grantor is no worse off than they would have been had they not established a QPRT.
What is an Irrevocable Life Insurance Trust?
The Irrevocable Life Insurance Trust (ILIT) provides an accessible means of avoiding estate taxes on life insurance proceeds. Estate tax is a tax on the transfer of property at your death. Life insurance proceeds are among the types of property that are subject to estate tax. Estate taxation of life insurance proceeds centers around ownership of the policy and payment of the proceeds. If the proceeds of a policy are paid to the insured person's estate, then they will be fully subject to tax on the insured person's death. However, if you have a life insurance policy covering you and you do not own it, then the proceeds of the policy will not be subject to estate tax. The ILIT is typically a trust for the benefit of the spouse and/or children. Once placed in an ILIT, you do not have the power to change or cancel the life insurance policy.
If you own a life insurance policy that is not in an ILIT, upon death, your estate will be fully subject to tax if (1) the proceeds of the policy are payable directly or indirectly to your estate, or (2) if you, while alive, held any ownership in the property, such as the right to charge a beneficiary, surrender or cancel the policy or borrow against the policy.
If you leave life insurance proceeds to someone other than a spouse, such as a child, relative, or friend, the proceeds will be taxed as being part of your estate. On the other hand, if you leave life insurance proceeds to a spouse, the proceeds will not be subject to your estate at your death, but the surviving spouse's estate may be taxed.
If you already have a life insurance policy, ownership of the policy can be assigned (transferred) to a newly created ILIT. This is done by signing an irrevocable assignment form available from the insurance company or from the agent. Proper completion of the form will indicate that the ILIT will be the new owner and the beneficiary.
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