BEST ASSET PROTECTION: DOMESTIC ASSET PROTECTION TRUSTS (DAPT’s)

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Alaska was the first US jurisdiction to enact laws allowing protection for self-settled trusts (in 1997) and was shortly followed by Delaware, Nevada, South Dakota and a few others. These trusts are known as Domestic Asset Protection Trusts (DAPTs). Usually, a DAPT must comply with the following requirements:

The trust must be irrevocable and spendthrift;

At least one resident trustee must be appointed;

Some administration of the trust must be conducted in respective state;

The settlor cannot act as a trustee.

Trusts are generally governed by the laws of the jurisdiction that is designated by the settlor as the governing jurisdiction. There are two exceptions to the general rule, which may create conflicts of law: (i) states will not recognize laws of sister states that violate their own public policy, and (ii) if the trust owns real property, such property will be governed by the law of jurisdiction that is the property’s situs. Additionally, the Full Faith and Credit clause of the Constitution provides that each state must give full faith and credit to the laws of every other state. This means that if a court from another state refuses to recognize the protection of a DAPT and enters a judgment for the creditor, the creditor may be able to enforce the judgment against the trustee of the DAPT, even if that trustee was located in the DAPT jurisdiction. The efficacy of a DAPT may also be challenged under the Supremacy clause of the U.S. Constitution, under the applicable fraudulent transfer statute, or because the settlor retained some prohibited control over the trust.

These trusts should always be supervised by a lawyer for business who is proficient in estate planning law in order to ensure the best asset protection available to the particular estate in question.

BEST ASSET PROTECTION and POWER OF ATTORNEY

Generally speaking, if a principal is still living and capable of managing their own affairs their relatives cannot change the POA. However, if the person becomes incapacitated a General POA is extinguished and the relatives can petition for a guardianship of the person. If there is a Durable POA in effect it remains in effect even after the principal becomes incapacitated but the relatives can petition for a guardianship of the person. If granted, the POA will be extinguished. Moreover, if the principal is deceased the POA is extinguished and the next of kin must probate the estate by petitioning the court.

Presented by: BEST ASSET PROTECTION SERVICES GROUP at WFB Legal Consulting, Inc.: Lawyer For Business

Please be advised that the information in this blog is for general public informational use only and does not establish an-attorney-client relationship.

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WRITTEN CONTRACTS ALWAYS PROVIDE THE BEST ASSET PROTECTION

Most people understand that in the world of asset protection planning and estate protection planning, the contracts which encompass the plans in question are always in writing.  Everything you do to protect your business and personal estates involves the preparation of a contract, as does most of what you do with contractors, suppliers and even at times employees, during the course of running your business.  I thought it might be important to point out some initial prerequisites with regard to the requirements surrounding a written contract, the necessity of which, will directly affect the validity of a transaction, and thus the contract itself.  The following contracts must always be in writing:

  • Contracts involving the sale of real estate or an interest in real estate.
  • Leases of real estate lasting longer than one year.
  • A promise to pay someone else’s debt.
  • Contracts that will take more than one year to perform.
  • Contracts for the sale of goods consisting of tangible personal property, worth at least $500 or more.

However, In order to protect yourself from transactions which occur during the course of your business, I recommend that every contract you enter into on behalf of your business be in writing, in order to cement the terms of the contract in a form that is less susceptible to dispute. In this way, you are left with an assurance of what you bargained for and are less likely to expose your assets to loss should a “contrived” dispute arise.

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WFB Legal Consulting, Inc.–Lawyer for Business

BEST ASSET PROTECTION: NO MORE PARTNERSHIPS–Please!

The limited liability company combines the limited liability advantage of a Corporation with the protection of your ownership interest.  Yet, there are essential reasons we should prefer a Limited Liability CO. (LLC) to either the Limited Partnership or even the Corporation:

– As with an S corporation, you can avoid double taxation with a Limited Liability Company.  And, the Limited Liability Company can avoid the C-Corporation’s corporate income tax, should you so choose.  Income from the Limited Liability Company can be singly taxed to its members, as with a partnership.  You may also avoid state corporate franchise tax by using an LLC.

– Importantly, you incur no personal liability with a limited liability company.  As with a corporation, LLC managers and members are personally protected from the creditors of the LLC, even when the members actually manage the company

-In contrast, general partners of a Limited Partnership are personally liable for partnership debts.  Moreover, the limited partners of a Limited Partnership cannot participate in managing the partnership without incurring personal liability for partnership debts.

 

WFB LEGAL CONSULTING, Inc.

A BEST ASSET PROTECTION Services Group

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BEST ASSET PROTECTION BUSINESS TIPS FOR BUSINESS OWNERS

The very best in asset protection always incorporates employee awareness for small business owners. All too often, business owners make all or a combination of the following three critical mistakes:

1. They fail to form a business entity which feasibly can create protection from lawsuits filed by employees, suppliers and customers;

2. They fail to carry the appropriate amount of commercial insurance necessary for the operation of the business; and

3. They fail to distinguish between the proper organization of the business and the smooth running of the business as it regards employer obligations and employee rights under the law.

I urge business owners to form a structured formal business entity capable of inside and outside protection– by that I mean protection from internal lawsuits as well as from external lawsuits. Contact G.A.I.T.E.way Business Solutions at www.gaiteway.net, in order to obtain the proper commercial insurance, health insurance and the full gamut of legal and coaching business expertise, in order to ensure the smooth operation of your business and the protection of its valuable assets. Finally, I would urge that every business owner create a twofold the level of protection through the utilization of a irrevocable living trust. With this great tool, you can provide a vehicle for the smooth transition of your assets after you pass, as well as an additional layer of protection for your business during your lifetime.

Remember, lawyers for business owners everywhere recommend employer-employee awareness; entity creation; and insurance insulation for the BEST ASSET PROTECTION available.

BEST ASSET PROTECTION and the NEW ESTATE PLANNING GUIDELINES

Below is a brief recap of relevant estate planning guidelines. Please see an Estate Planning attorney at WFBLC, Inc. for a plan tailored to your particular business and family needs. Highlights of a bill Congress passed Tuesday aimed at averting wide tax increases and budget cuts scheduled to take effect with the New Year. The measure would raise taxes by about $600 billion over 10 years compared with tax policies that were due to expire at midnight Monday. It would also delay for two months across-the-board cuts to the budgets of the Pentagon and numerous domestic agencies. Highlights: —Income tax rates: Extends decade-old tax cuts on incomes up to $400,000 for individuals, $450,000 for couples. Earnings above those amounts would be taxed at a rate of 39.6 percent, up from the current 35 percent. Extends Clinton-era caps on itemized deductions and the phase-out of the personal exemption for individuals making more than $250,000 and couples earning more than $300,000. —Estate tax: Estates would be taxed at a top rate of 40 percent, with the first $5 million in value exempted for individual estates and $10 million for family estates. In 2012, such estates were subject to a top rate of 35 percent. —Capital gains, dividends: Taxes on capital gains and dividend income exceeding $400,000 for individuals and $450,000 for families would increase from 15 percent to 20 percent. —Alternative minimum tax: Permanently addresses the alternative minimum tax and indexes it for inflation to prevent nearly 30 million middle- and upper-middle-income taxpayers from being hit with higher tax bills averaging almost $3,000. The tax was originally designed to ensure that the wealthy did not avoid owing taxes by using loopholes. —Other tax changes: Extends for five years Obama-sought expansions of the child tax credit, the earned income tax credit, and an up-to-$2,500 tax credit for college tuition. Also extends for one year accelerated “bonus” depreciation of business investments in new property and equipment, a tax credit for research and development costs and a tax credit for renewable energy such as wind-generated electricity. —Unemployment benefits: Extends jobless benefits for the long-term unemployed for one year. —Cuts in Medicare reimbursements to doctors: Blocks a 27 percent cut in Medicare payments to doctors for one year. The cut is the product of an obsolete 1997 budget formula. —Social Security payroll tax cut: Allows a 2-percentage-point cut in the payroll tax first enacted two years ago to lapse, which restores the payroll tax to 6.2 percent. —Across-the-board cuts: Delays for two months $109 billion worth of across-the-board spending cuts set to start striking the Pentagon and domestic agencies this week. Cost of $24 billion is divided between spending cuts and new revenues from rule changes on converting traditional individual retirement accounts into Roth IRAs.

BEST ASSET PROTECTION SERVICES GROUP: WFB Legal Consulting, Inc. *Please be advised that this communication is for general public informational use only and does not establish an attorney-client relationship. For more information, please contact WFB Legal Consulting, Inc.—a BEST ASSET PROTECTION Services Group at (949) 413-6535.

INTRODUCING G.A.I.T.E.WAY BUSINESS SOLUTIONS

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Introducing…GAITE-way Business Solutions to the business community! WFB Legal Consulting, Inc. is proud to announce its affiliation with a new brand of professionals—all geared to building your business acumen.

GAITE-way Business Services is a unique group of individuals, who provide startup and existing businesses with the ability to manage, grow and protect both their business and personal assets. The objective of the professionals at GAITE-way Business Services is simple: uniquely organized legal, consulting, tax and insurance services, collectively provided for the convenience and security of the entrepreneurial business owner.

Specialties Management Training, Marketing Strategies, Business Contracts, Asset Protection Strategies, Tax Planning, IRS Audits, Workman’s Comp Insurance, Errors & Omissions Insurance, Employee Benefits, Business Owner Retirement Plans, Operational Tune Ups, Sales Processes • Website

http://www.gaiteway.net

• CALL: (949) 413-6535 Today! • Members: Steve Smith of Growth Source Coaching (Business Coach)

Bill Bernard of WFB Legal Consulting (Business Attorney)

Sharon Masler of Masler & Associates (CPA Services)

Bill Pyott of New York Life (Life and Health Ins. Services)

Jack AuBuchon of Mission Coast Ins. Services (General,Professional and Workers’ Compensation Insurance

WHEN DO YOU CHOOSE AN S-CORP v. LLC–BEST ASSET PROTECTION

WFB Legal Consulting - Business Law Tips and Advice

This short expose briefly focuses on different types of business entities and gives some insight as to which one might be better suited to general goals and situations. You should always consult with a business lawyer who can than better fashion the entity that is right for your particular business.

Professional Corporation Professional corporations, known as PCs, are available options to those in certain occupations. This structure is available to accountants, lawyers, medical professionals, architects, and engineers. Although PCs don’t offer the level of personal liability protection of S corps or LLCs, this structure does protect owners from malpractice claims filed against other associates. PCs must usually be approved by the state agency that licenses the professionals. Remember, PCs will not protect you against malpractice suits, but will eliminate your liability for claims directed at your associates. S Corporation An S Corp is much like an LLC. Net profits in an S corporation are “distributed” to stockholders, who then add these profits to their personal income for tax reporting purposes. S corps are similar to all other corporations, except for this tax issue. Other corporate requirements–holding regular management meetings, for instance–are identical to all other corporations, be they a single stockholder company or Microsoft. You create your corporation in the usual manner, as specified by your state regulations, and subsequently “elect” to be taxed as an individual, thereby creating an S Corp for IRS purposes. Limited Liability Company An LLC functions like a standard corporation in many ways, including personal asset protection, but is much less complex to organize, file, document, and manage. LLCs combine the best features of partnerships and corporations, offering limited liability to owners, while dividing up profits among the partners. Similar to S corporations, you enjoy protection for your personal assets regardless of financial or operating problems that may befall the LLC. In most cases, company creditors cannot seize the assets of the owner/members. Like a classic partnership, LLCs must file an IRS form 1065, which displays the ownership percentages of the members, for taxable income distribution. Liability Protection Warning There are some situations that may jeopardize your personal asset protection offered by corporations or LLCs. Small businesses often endure this problem because the owner(s) are frequently asked to give “personal guarantees” for loans, leases, and other obligations. When you agree to provide a personal guarantee of corporate debt, your assets–homes, autos, bank/investment accounts–are legally at risk. Other actions, such as performing illegal activities or injuring someone else, can also allow a court to remove the personal asset protection offered by corporations and LLCs. The Best Option Professionals can choose to use an S Corp or an LLC, in addition to forming a PC. The malpractice protection offered by a PC is often the most important consideration, particularly for accounting and medical professionals. If you are not a “professional,” and if your company is a one-person entity or a partnership, the LLC is often the best choice to receive the personal asset protection you want without complex corporate necessities. Should you want to attract more stockholders however, but yet plan to keep your company private (no public stock offerings)–an S Corp is often the best choice.

*Please be advised that this communication is for general public informational use only and does not establish an attorney-client relationship. For more information, please contact WFB Legal Consulting, Inc.—A BEST ASSET PROTECTION Services Group at (949) 413-6535.