The 13 Secrets of the Rich or Informed™
Business, Estate, & Asset Protection Plans Entity, Trusts, Insurance, Pensions, Exemptions
By Richard Rydstrom, Esq., LL.M. Taxation ©1989-2010 || firstname.lastname@example.org California Attorney | National Speaker & Author
Foreword: After working on numerous high profile or celebrity files as a celebrity business manager, certain themes of success repeat in wealth building and protection; especially for clients who can afford the best. This article started as an internal cheat- sheet to assist the author in his understanding of such clients, and over the years has grown into this article. As a lesson of such experience and knowledge, this article is now an annual summary and update of the 13 most commonly used devices in estate, business and asset protection planning (basic asset and risk protection). When discussing these planning matters the following devices and alternatives should be discussed with your attorney, wealth building and protection team. This list is a non-exhaustive list and only given as a tool to afford easier discussions with your professional team. Your first step in the right direction is to put together a team, which should include an estate, business and asset protection attorney, CPA, insurance agent (re life, disability, buy-sell, long term care, business interruption or income replacement, etc.), CFP (Certified Financial Planner), money manager or investment advisor and a brokerage. This article is not intended as legal, tax, accounting, financial, money management or insurance advice, and as such you may not rely upon same for that purpose. It is recommended that you hire an attorney experienced in this area to plan your business, estate and protection matters.
13 Most Common Business and Estate Protection Planning Tools or Devices!
1. Revocable Living Trust (or Living Trust). The public knows this device as a Living Trust. The Living Trust is most often used to avoid Probate, its costs and delays. In tax circles it is called the Section 671 Trust or disregarded tax entity trust. It is generally a tax-neutral device. However, you may use this trust to invoke maximum estate tax exclusions for the husband and wife. In larger estates, it is often advisable to put certain assets in various other devices (e.g. LLC, Children's Trusts, Life Insurance Trust, C or S Corporations, Private Retirement Trust, Pensions, etc.) for asset and risk protection, as well as for tax reduction reasons. Interests assigned into certain other devices may be assigned to the Living Trust.
Contrary to myth, generally it is not intended as an asset protection safeguard, at least during life (while it is revocable). Assets held in your living trust are not protected from the reach of creditors. (Ca. Prob. Code, Sections 18200, 15304 (a), 15304 (b)). However, you can achieve some measure of property "characterization" protection (as separate, community, etc.) if the husband and wife maintain separate living trusts with property agreements.