218 North 14th Ave, P.O. Box 317, Sturgeon Bay, WI 54235

920.743.9117

Sturgeon Bay Asset Protection

Monday, December 21, 2015

Charitable IRA Rollover is now permanent

On December 18, 2015 legislation was signed into law by the President that makes the IRA rollover permanent and retroactive to December 31, 2014. Gifts transferred directly from a donor's IRA to charity at any point during 2015 will qualify as a rollover gift.  This law is also permanent, meaning future gifts will also be treated in the same way.

To recap, below is how the IRA charitable rollover works:

1. Donor must be at least 70 ½
2. Gift must come from an IRA (not a TSA or 401(k))
3. Gift must be a direct transfer from the IRA to a qualified charity
4. $100,000 aggregate limit for all 2015 direct IRA transfers to charity
5. Gifts will be exempt of federal income taxes and satisfy minimum distribution requirements
6. Transfer must take place by December 31, 2015 for qualifying 2015 IRA charitable rollover gifts

Bob


Monday, August 11, 2014

Inherited IRA'S are Not Creditor Protected

Over the last few years there have been a number of changes about how the IRS treats inherited IRAs and the necessary provisions if you name a trust as the IRA beneficiary. On June 12th of this year the United States Supreme Court unanimously ruled in  Clark v. Rameker  that inherited IRAs are not afforded the same protections from creditors as regular IRAs.

 I am asking all clients to review the beneficiary designation for their IRAs.

Planning Tip:
First, if you are married your spouse should be the primary beneficiary. This gives the greatest flexibility to “stretch out” the distributions from the IRA, have creditor protection, and get maximum tax deferral.

Second, if you are single the question of who to name as beneficiary is a bit more complicated. The answer depends upon the size of the IRA. If the size of each beneficiary’s IRA share is too small to make use of stretching out distributions over their life expectancy, then you should name them directly, but no creditor protection. If asset protection is a concern, then you would name a trust that you create for their benefit (Castle Trust). 

Third, In the past the Revocable Trust was named as the beneficiary to take advantage of all of the planning built into the Trust. Experience and a change in IRS rules has eliminated this opportunity. The beneficiary form needs to be updated.

Read more: http://www.rossestateplanning.com
See my Article entitled the Six Biggest Beneficiary Designation Mistakes.


Tuesday, August 5, 2014

Multiple Member LLCs Protect Family Assets

  • LLC statutory charging order provisions offer unique asset protections to family businesses.
  • Statutory conversions of corporations to LLCs can prevent the loss of family businesses to creditors or divorcing spouses of family members.
There are instances where the single-member LLC is appropriate, and these instances may include the following:

1. The Business Owner, such as a Contractor or the Owner of any Business. When a person wants to protect assets owned outside the LLC from lawsuits occurring inside the LLC.

2. The Landlord. When a person who owns rental property wants to protect his or her individually owned investments outside the rental property from lawsuits resulting from an accident on the rental property, which can be owned by an LLC.

3. The Owner of S-Corp Shares. When the client owns S-Corp stock and wants the stock owned by an LLC (for asset protection not provided by the corporation) the LLC must be a single-member LLC deemed to be a disregarded entity. If the S-Corp stock is transferred into a multi-member LLC, the S-Corp will lose its S Election.

4. The Lonely Client. When the client has no other person or entity to name as the second member of the LLC.

Individuals who want to ensure the availability of a key set of LLC statutory business asset protections called “charging order protections” should think about who holds the LLC membership rights and have a clear Operating Agreement. To explain:

1.     Most U.S. LLC acts contain provisions that provide, in effect, that if a member of a multi-member LLC (a “member-debtor-in-default”) incurs an unsatisfied judgment arising outside the LLC’s business, the judgment creditor may obtain a “charging order” against the LLC.  A charging order requires, to the extent of the judgment, that the LLC must distribute to the creditor any LLC profits it would otherwise distribute to the member-debtor-in-default.

2.     Furthermore, many state LLC acts expressly provide that these charging order provisions are the exclusive remedy for the above judgment creditors; and even as to LLC acts that are not express, extensive case law and important policy considerations support this exclusivity.  Because of charging order exclusivity, creditors cannot levy on the membership rights of member-debtors-in-default and thus become substituted LLC members.  And because they cannot become substituted members, they cannot force the sale of LLC assets in satisfaction of their judgments.  Although general and limited partnership statutes also provide charging order provisions, corporations do not.  For many individuals, charging order protections are a major reason for holding assets and conducting their businesses in LLCs rather than in corporations.


The policies underlying charging order provisions are twofold.  First, charging order provisions support the critical principle (often referred to as the “pick your partner” principle) that LLC members should not have to accept potentially disruptive creditors as co-members.  Second, these provisions thereby prevent creditors from forcing sales of LLC assets and thus depriving innocent non-debtor members of the going concern value of their LLCs.


Wisconsin defines member to be a person. WI STATS 183.0102(15) Member" means a person who has been admitted to membership in a limited liability company as provided in s. 183.0801 and who has not dissociated from the limited liability company.

Person is defined WI STATS 183.0102 (18). "Person" includes an individual, a partnership, a domestic or foreign limited liability company, a trust, an estate, an association, a corporation or any other legal or commercial entity.


Read more: http://www.rossestateplanning.com

Tuesday, July 22, 2014

The New Wisconsin Trust Code.

The new Wisconsin Trust code has gone into effect on July 1, 2014. It has updated  many of the rules and regulations for Trusts. For example:

Revocable Trusts.  Contrary to prior law, the new Code provides that a trust is revocable by the trustmaker (the person who created the trust) unless the trust instrument provides otherwise.  Not only may a trust be revoked by the Trustmaker, but also by a properly authorized agent, such as a guardian, if a Trustmaker is incapacitated.

Modification and Termination of Irrevocable Trusts.  The Code makes it easier to modify or terminate an irrevocable trust.

Decanting Trust Assets.  Subject to certain restrictions that are designed to protect the interests of beneficiaries, the trustee of an irrevocable trust (the “first trust”) may transfer trust assets to the trustee of another trust (the “second trust”), a procedure commonly referred to as “decanting.”  Trustees or beneficiaries might wish to decant the assets of an irrevocable trust to a second trust to (i) change the state law that governs the trust, (ii) change how and when beneficiaries receive distributions, or (iii) modernize an outdated trust document.

 Directing Parties/Splitting up the Duties.  The Code introduces a new concept to Wisconsin trust law by authorizing a trustmaker or a court to appoint “directing parties” who are granted powers to direct the trustee to make investment or distribution decisions.  This allows a trustmaker to divide the traditional duties of a trustee and assign them to other parties.

Trust Protectors.  The Code introduces another concept to Wisconsin trust law, (which has been around for may years in Irrevocable Trusts) by authorizing the appointment of one or more trust protectors.  A "trust protector" is a person who is granted certain powers over the trust, the trustee, or trust property.  Trust protectors are often used to modify terms of the trust for various reasons such as a change in tax laws or changes in circumstances.

Nonjudicial Settlement Agreements.  The Code permits parties interested in a trust to enter into agreements concerning any matter involving the trust without having to take court action.  Such an agreement, called a nonjudicial settlement agreement, becomes part of the terms of the trust.

Creditors' Claims.  In general, the Code preserves current law related to spendthrift provisions in a trust document and the rights of creditors to make claims against a trustmaker’s or beneficiary’s interest in a trust.  The Code also preserves current law that allows a trustee to limit the claims of a creditor of a trustmaker upon the trustmaker's death by providing or publishing notice to the creditors.  Those looking for Wisconsin to join the ranks of states with strong asset protection trust laws will not be disappointed when using Castle Trusts.  The Code makes clear, however, that a beneficiary's use of real or tangible property owned by a trust does not subject the property to the claims of the beneficiary's creditors. A Major change is that the beneficiary can be a sole Trustee and retain creditor Protection.

Certification of Trust.  A third party may rely upon a certification of trust that sets out certain required information including a statement that the trust has not been revoked, modified, or amended. The certification of trust protects the privacy of the trust instrument because it does not need to contain the private distribution provisions of the trust.

Uneconomic Trust. The WTC increases the value of what qualifies as an uneconomic trust from $50,000 to $100,000 or less as indexed for inflation. 

Read more: http://www.rossestateplanning.com


Tuesday, July 15, 2014

American Taxpayer Relief Act (ATRA) changed estate planning.

There is a new paradigm in estate planning.

The new law increases the estate tax exemption to $5.34 million per person and $10.68 million for a married couple.  Portability of the deceased spouse unused exclusion (DSUE) has been made permanent in theory.

Estate planning is now changed for estates above the $5.34 million threshold,

  • For those estates below the exemption more true planning will be the norm.
  • Applicable exclusion amount should not be used to transfer low basis assets,
    • Taxpayers should consider keeping as much as possible in order to obtain a “step-up” in basis for those assets in order to minimize capital gains taxes
  • Income tax considerations are now more important than estate taxes.
    • Can save more in income taxes by getting a basis step-up at death
  • State of Residence
    • Will give rise to very different types of estate planning because several states (19)  have a death tax.
    • You or your heirs may move to one of those states
  • Updating credit shelter trusts to maximize step-up in basis and provide broad flexibility in tax planning upon death of the first spouse should now be a priority for most married couples.  Widows and widowers who are beneficiaries of a credit shelter trust may need to consider distributing assets out of the trust – assuming the trust allows for this  – or decanting the trust to a more flexible trust if it does not.

    Read more: http://www.rossestateplanning.com


    Tuesday, July 8, 2014

    The Estate Planning World has Flipped

     There is a new paradigm in estate planning.

    Three major changes have profoundly affected the estate planning world.

    1.  The 2012 American Taxpayer Relief Act (ATRA) with its increase in the estate tax exemption to over $5,000,000 as the lead game changer. Estate Taxes have been eliminated for most Americans.

    2.  Wisconsin last December passed the new Uniform Trust Code which took effect on July 1, 2014.

    3.  The US Supreme Court Decision in Clark v. Rameker that inherited IRA's are not creditor protected.

    I will give each of these items further discussion in upcoming articles.

    My Recommendation:  All  trusts and estate plans prepared prior to 2012 should be reviewed

    Read more: http://www.rossestateplanning.com


    Monday, March 10, 2014

    Does A trust Make Sense for Wisconsin?

                         Does a Trust Make Sense in Wisconsin?

    Here are 25 reasons

    1.                  Assets in the trust avoid guardianship on incapacity.  There are many circumstances where powers of attorney cannot do the same thing.

    2.                  A trust imposes a high duty of care on a Trustee and eliminates third party (such as a Bank) liability.  Powers of attorney cannot do the same thing because though they impose a high duty of care on the Agent, they do not eliminate the third party liability and that third party that has the liability must accept the power of attorney.  Many frequently will not allow just any power of attorney form but will insist on their own form to be used.

    3.                  A Trust is easily changed should you desire to do so.

    4.                  A Trust easily moves with you from state to state because it is valid in every state and can require that it be interpreted by the state where it was written.  Wills are designed to be valid and interpreted in the state they are drafted in.  Wills are interpreted by the death state, which may not be the same state in which it was drafted.  Powers of attorney are also state specific.

    5.                  A trust can define disability or incapacity to avoid any court involvement.  A trust can have a private incapacity panel that allows incapacity to be determined by persons of your choice instead of through the courts and without requiring two doctors to sign.  Wills do nothing for someone who is incapacitated.

    6.                  A Trust provides one planning document full of instructions for your care upon your incapacity.  Powers of attorney do not provide those instructions and are frequently not accepted.  Wills cannot work until your death, and thus can’t help you on incapacity.  Powers of attorney terminate upon death. A Trust continues after death to carry out your instructions privately.

    7.              A trust provides control of your assets for your family in case of your disappearance or absence instead of your family perhaps having to wait for several years to have you declared dead to access assets and information.  Without this ability, upon disappearance, it can take years before one can be declared legally dead, leaving the family unable to access assets and accomplish things such as repairing or selling the family home.  Meanwhile, powers of attorney can’t work without evidence that the person is alive. Remember the LINDA E fishing boat that disappeared off of Port Washington in December of 1998.

    8.              Upon your incapacity, a trust avoids the expenses and fees associated with guardianship on all assets owned by your trust.  Guardianship usually costs thousands of dollars and puts a judge, creditors, and everyone but your family in charge of your affairs.

    9.                  A Trust provides one planning document full of instructions for the care of your loved ones upon your incapacityA power of attorney created for you cannot provide those instructions for your loved ones, and wills cannot work until your death.

    10.                  A Trust provides one planning document full of instructions for the care of your loved ones upon your deathWills do not work until probated.  Probates are more expensive and can take weeks, months, and in some cases years if there are problems in probate.

    11.              A trust provides continuity in the handling of your affairs by efficiently and privately transferring your property to your loved ones after death.  Probate takes more time, expense, is open to the public and isn’t always smooth.

    12.              A trust acts as a receptacle to own or be the beneficiary of assets.  To work as designed it must be funded properly as well, that is assets put into the trust. Wills do not work until probated and to accomplish the same thing, assets must be distributed to the estate.  That can take weeks, months, and in some cases years if there are problems in probate.

    13.              Trusts make the best beneficiary of life insurance policies because if an individual is named, and they are incapacitated or dead, then the proceeds go through either guardianship or probate.  If the estate is named, then the proceeds are subject to the debts of both the decedent and the beneficiary.  Otherwise, life insurance proceeds are not subject to the debts of either.

    14.              A trust allows life insurance to be paid to the trust so it passes according to your distribution and control plan.  Life insurance left directly to beneficiaries can be subject to divorces, lawsuits, and creditors, or it may undo your overall planning due to lack of coordination with your distribution plan. 

    15.              A trust avoids the expenses and fees associated with probate on all assets owned by your trust.  Probate can be expensive and time consuming.  It absolutely provides a forum for disgruntled heirs to bring disputes, often without them paying legal fees on the front end.  Probate benefits your creditors, and requires notice to them.  But the worst thing it does is to put a judge, disgruntled heirs, creditors, alleged creditors, and everyone but your family in charge of your affairs.

    16.              A trust ensures your family’s privacy following your incapacity or death on all assets owned by your trust.  Guardianship and probate are public and anyone can obtain the information in those files.

    17.              A trust can allow a Trust Protector to modify or update the estate plan if there are changes in laws or circumstances that make it necessary or beneficial without spending the money to go to court and without having to depend on a judge’s approval.  Wills cannot be modified  but may be interpreted  by a  judge.

    18.              A trust can allow each spouse to control the disposition of property so that in case of remarriage of the surviving spouse, the children are not accidentally disinherited.  Assets passing by right of survivorship or direct beneficiary designations can create the problem of children being accidentally disinherited. 

    19.              A trust can eliminate disputes between the surviving spouse and children from a prior marriage over the control or distribution of assets.  Wills require probate, which creates a forum to bring disputes.

    20.              A trust allows parents with minor children to choose to have children raised according to their values.  Wills cannot do this if the court is expected to enforce religious values instead of your Trustee enforcing those values.

    21.              A trust can encourage children or grandchildren to get a post-high school education, set educational standards for a post-high school education so beneficiaries don’t become professional students or trust babies.  Wills can do this, but because of probate, not as efficiently as a trust.  Rarely is that issue even considered in will-based planning.  Will-based plans are often not funded so the will does not control distribution of all the assets and often the estate tax planning doesn’t work in a will as completely as it does in a trust.

    22.              A trust can create trusts for your loved ones that are free from the supervision of the probate court.  Wills can allow protective trusts, but require probate, which automatically involves the court and makes it easier for predators and creditors to bring claims against your loved ones.

    23.              A trust can provide asset protection for children, including protection from failed marriages, creditors, addictions or serious health matters.  Wills can allow protective trusts, but require probate, which automatically involves the court and makes it easier for predators and creditors to bring claims against your loved ones.

    24.              A trust can provide for a beneficiary with special needs so they can remain eligible for a public benefit program.  Wills can allow protective trusts, but require probate, which automatically involves the court and makes it easier for governmental agencies to bring claims against your loved ones.

                25.              A trust an provide that upon the death of a beneficiary, assets will not be subject            to estate tax again. This is called a dynasty plan.


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    218 North 14th Ave, P.O. Box 317, Sturgeon Bay, WI 54235
    | Phone: 920-743-9117 | 866-743-9117
    2300 Riverside Drive, Green Bay, WI 54301
    | Phone: 920-743-9117 | 866-743-9117

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