EPC Diablo Valley Home - ASSET PROTECTION PLANNING &...
Transcript of EPC Diablo Valley Home - ASSET PROTECTION PLANNING &...
Jeffrey M. Verdon, Esq. Managing Partner
Jeffrey M. Verdon Law Group, LLP Newport Beach, CA
EPC Diablo Valley – September 21, 2016
ASSET PROTECTION PLANNING & STRATEGIES FOR LAWYERS
ACCOUNTANTS, FINANCIAL PLANNING AND INVESTMENT PROFESSIONALS
Presented by
95% of world’s lawsuits are filed in the U.S.
It’s Not What You Do, It’s What You Own!
Atty/CPA/Accountant Malpractice Liability – Goes Beyond Insurance Limits
•Liable for your negligent acts and those you supervise.
Successful Professional Practice?
It won’t matter if you lose it all to a malpractice lawsuit
When does your exposure expire?
Lawsuit Exposure & Privacy Test
TWO QUESTIONS FOR YOU….
Questions for You…
1. ARE YOU OR YOUR CLIENTS CONFIDENT THAT THEY WILL NEVER BE SUED?
2. ARE YOU OR YOUR CLIENTS CONFIDENT THAT IF THEY ARE SUED, OUR LEGAL SYSTEM WILL FAIRLY TREAT YOU?
Two Reasons Most Litigants Settle
1. Doubt as to Liability
2. Doubt as to Collectability
Does Asset Protection Work?
Depends on definition of “work.” Achieve an early and favorable settlement.
$58,000,000 Judgment successfully resolved for $7M
$34,000,000 Malpractice suit settled for less than $1M
$5,000,000 Judgment settled for $125,000
$32,000,000 Bank loan dispute settled for $2.5M
$2,000,000 Personal guarantee settled for $250,000
$75,000,000 Personal loan settled for $5M paid over 5 years
Best Asset Protection Plan No One Has Heard of –
The CA Private Retirement Trust –
CCP 704.115
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View video again at http://jmvlaw.com/private-retirement-plan/
• CCP § 704.115(b): fully exempts assets placed in trust to fund retirement
Any asset
Business profits, A/R, Bonds, Stocks, Savings, Gold, Real Estate, Notes and Private Business Interests
• CCP §704.115(d): fully exempts distributions from the PRT
• Non-ERISA Qualified: May set up just for owners
Best Asset Protection Plan No One Has Heard of –
CA Private Retirement Trust
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Asset Protection Trust
A TRUST WILL BE THE CORNERSTONE OF ANY EFFECTIVE ASSET & LIFESTYLE PROTECTION SOLUTION
Trusts Have Been Used Since the Crusades to Protect Assets…
WHY WOULDN’T I WANT TO SET UP MY TRUST IN THE U.S?
UNFORTUNATELY . . .
Retained Controls
Maximum Potential Property Interest – CPC 15304 (b)
Self-Settled Spendthrift Trusts – CPC Section 15304 (a)
OVER THE PAST SEVERAL HUNDRED YEARS LIMITATIONS ON THE PROTECTIVE USE OF TRUSTS FOR SELF-SETTLED TRUSTS (AS BENEFICIARIES) HAVE EVOLVED:
Comparisons
•Domestic Asset Protection Trust
•VS.
•Offshore Asset Protection Trust
Domestic APT Jurisdictions WEST VIRGINIA 2016
MISSISSIPPI 2014 OHIO 2013 VIRGINIA 2012 HAWAII 2010 NEW HAMPSHIRE 2009 TENNESSEE 2007 WYOMING 2007 MISSOURI 2005 SOUTH DAKOTA 2005 OKLAHOMA 2004 UTAH 2003 NEVADA 1999 RHODE ISLAND 1999 DELAWARE 1997 ALASKA 1997
Constitutional Issues:
Full Faith & Credit Clause Conflicts of Laws Contract Clause Supremacy Clause
Wait Until the U.S. Supreme Court Decides
Domestic Asset Protection Trust (Potential Problems)
What’s the Newest Problem?
2005 Bankruptcy Act’s [Sec. 548(e)(1)]
The Ten Year Set Aside Rule
• 548(e)(1) …the [bankruptcy] trustee may avoid any transfer of an interest of the debtor in property that was made on or within 10 years before the date of the filing of the petition, if -
(A) such transfer was made to a self-settled trust or similar device;
(B) such transfer was by the debtor;
(C) the debtor is a beneficiary of such trust or similar device; and
(D) the debtor made such transfer with actual intent to hinder, delay, or defraud any entity to which the debtor was or became, on or after the date that such transfer was made, indebted.
SEE: In re: Mortensen, Debtor, Case No. A09-00565-DMD
In Re Huber, 201 B.R. 685 (Bankr. W.D. WA May 17, 2013).
10-Year Set Aside Rule
WHAT’S THE SOLUTION?
ESTABLISH THE TRUST IN A PLACE WHERE THE LAWS WILL NOT PERMIT A CREDITOR TO REACH TRUST ASSETS UNDER THE GENERAL RULES
- Forum Shopping
- Lack of Comity
Situs Selection Factors
• Legal System:
• Common law trusts date back 1000 years
• Protective Legislation (BIG3)
• Repudiation of Certain Rules
• Statute of Elizabeth (no SOL)
• No self settled trust protection for settlor
• Maximum potential interest rule (creditor can reach entire trust corpus)
• Favorable Fraudulent transfer rules
• Lack of Comity
• Economic Health
• Political /social stability
• Language
• Track Record
IN ORDER TO UNDERSTAND HOW A PROTECTIVE TRUST WORKS….
WE MUST FIRST UNDERSTAND HOW
CLAIMANTS NORMALLY REACH TRUST ASSETS
The claimant brings his/her case in a court which has:
JURISDICTION OVER THE TRUSTEE
OR
JURISDICTION OVER TRUST ASSETS
THERE ARE ONLY TWO WAYS...
How Does an Offshore Trust Work?
FIRST: AT THE CRITICAL TIME: …AND WE DEFINE THAT TO BE WHEN SOMEONE IS TRYING TO “GET AT” THE TRUST ASSETS…
FIRST: AT THE CRITICAL TIME:
THERE WILL BE A COMPLETE LACK OF US COURT JURISDICTION OVER THE TRUSTEE & THE TRUST ASSETS
How Does an Offshore Trust Work? (Cont’d)
…CAN’T FORCE THE TRUSTEE TO DO ANYTHING
THE U.S. COURT:
…CAN’T SEIZE TRUST ASSETS
THAT MEANS THERE WILL BE NO POWER IN ANY U.S. COURT TO REACH THE TRUST
How Does an Offshore Trust Work? (Cont’d)
SO WHERE DOES THAT LEAVE THE JUDGMENT CREDITOR?
TRYING TO HAVE THE JUDGMENT ENFORCED IN THE TRUST SITUS JURISDICTION…
HOW WELL IS THAT GOING TO WORK?
REMEMBER “LACK OF COMITY”???
How Does an Offshore Trust Work? (Cont’d)
• WHAT ARE THE IMPLICATIONS OF LACK OF COMITY?
• Commence litigation De Novo • Utilize unfamiliar lawyer
• Most local law firms are conflicted “out” • No “Contingency Fee” • Bond & “Loser Pays” Rules • Basis of Litigation?
• A FRAUDULENT TRANSFER ASSERTION…
How Does an Offshore Trust Work? (Cont’d)
How Does an Offshore Trust Work? (Cont’d)
LET’S COMPARE THE TWO MAJOR FACTORS OF THE FRAUDULENT TRANSFER RULES – U.S. vs. OFFSHORE
1. 4yrs/10yrs vs. ZERO to 2yrs…
2. CIVIL “PREPONDERANCE” STD vs. “BEYOND REASONABLE DOUBT”
WE’VE SEEN HOW THE LAWS OF AN APPROPRIATE OFFSHORE JURISDICTION PROVIDES PROTECTION FOR OUR CLIENTS’ TRUSTS
WE ENHANCE THAT PROTECTION WITH DRAFTING TECHNIQUES
How Does an Offshore Trust Work? (Cont’d)
TYPICAL PROTECTIVE CLAUSES: • Trust Protector
• Flight Clause
• Duress Clause
• Jones Clause
• What about contempt?
• Legal Impossibility: complete defense to contempt
• Unites States v. Grant (2008): No contempt of court for a US person who lawfully establishes a foreign trust and could not
• Branch Banking & Trust Co. v. Hamilton Greens, LLC, 2014 WL 1493086 (S.D. Fla. Mar. 24, 2014)
How Does an Offshore Trust Work? (Cont’d)
“I DON’T WANT TO LOSE CONTROL”...
WHAT CONCERN DO CLIENTS MOST OFTEN EXPRESS?
SO HOW DO WE ADDRESS THAT CONCERN?
• WE USE HOLDING ENTITIES: FOR PROTECTION OF LIQUID ASSETS (CASH
AND PUBLICLY TRADED SECURITIES) • SETTLOR MAY SERVE AS “INVESTMENT
ADVISOR”
“Loss of Control” Concerns
YOU = LLC MANAGER =
DIRECT SIGNATURE CONTROL
OFFSHORE OR US
BANK
YOUR BROKER
Stocks & Bonds
VAULT
INVESTMENTS
YOU FAMILY OTHERS DISCRETIONARY BENEFICIARIES
TRUST = LLC MEMBER 100%
(May Be Co-Manager)
OFFSHORE ASSET
PROTECTION TRUST
ASSETS TYPICALLY
HELD:
LLC MEMBER
INTEREST; S-
CORPORATION
STOCK; OFFSHORE
ACCOUNTS
OFFSHORE TRUST / LLC COMBINATION STRUCTURE
OFFSHORE LIMITED LIABILITY COMPANY
TRUST PROTECTOR
(INDEPENDENT COMPANY)
CONTROL
OVER
TRUSTEE
IMPLEMENTATION
OPERATION
CRISIS US TRUSTEE
FOREIGN
TRUSTEE
THE ASSETS ARE STILL IN THE U.S…..
WHAT HAPPENS?
(INDEPENDENT COMPANY)
© 2009 Jeffrey M. Verdon Law Group, LLP
GREAT! THE ASSETS ARE PROTECTED, BUT MY CLIENT NEEDS THE INCOME AND/OR PRINCIPAL TO LIVE ON…
YOU FAMILY OTHERS DISCRETIONARY BENEFICIARIES
TRUST = LLC MEMBER 100%
(May Be Co-Manager)
OFFSHORE ASSET
PROTECTION TRUST
ASSETS TYPICALLY
HELD:
LLC MEMBER
INTEREST; S-
CORPORATION
STOCK; OFFSHORE
ACCOUNTS
OFFSHORE TRUST – OFFSHORE LLC COMBINATION STRUCTURE
TRUST PROTECTOR
(INDEPENDENT COMPANY)
CONTROL
OVER
TRUSTEE
Client emails or faxes
bills and other
expenses to offshore
trustee for payment =
lifestyle protection
Questions?
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Example:
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