SATURDAY, NOVEMBER 20, 2010 A WEBINAR BY: ALAN S. GASSMAN, J.D., LL.M. [email protected]...

SATURDAY, NOVEMBER 20, 2010

A WEBINAR BY:ALAN S. GASSMAN, J.D., [email protected]

CORNFLAKES AND AVOIDING MISTAKES

Copyright © 2010 Gassman, Bates & Associates, P.A.

mailto:[email protected]

TABLE OF CONTENTS/CHECKLIST

Page 2 Copyright © 2010 Gassman, Bates & Associates, P.A.

Completed To Be Done ?

1. Failure to have and maintain a proper planning structure.

2. Failure to periodically review and adjust asset ownership and titling.

3. Failure to have appropriate ownership/beneficiary designations for life insurance, retirement accounts, IRA’s and annuity contracts.

4. Failure to have enough life insurance.

5. Failure to focus on asset protection planning.

6. Failure to revisit the plan every 2 to 4 years, when there are significant changes.

7. Failure to protect the spouse and the next generation by the use of protective trusts.

8. Failure to do estate tax planning.


Protective trust system.How a married couple can best own assets.A limited partnership/gift trust system.

Copyright © 2010 Gassman, Bates & Associates, P.A. Page 3

During bothspouses'lifetimes:

Upon firstdeathin2009:

Duringsurvivingspouse'sremaininglifetime:

Upon (Passes Estate secondTax Free) death:

Afterdeathsofbothspouses:

Benefits children and grandchildren. Benefits children. Not estate taxable in their estates. Taxable in their estates.

Family(By-Pass)

Generation Skipping Trust(Not taxed in surviving spouse's estate)

QTIP Non-GST Trust

(Marital Deduction Trust that is not generation

skipping)

Generation Skipping TrustsFor Children

Children's Trusts (or

distributions)

First DyingSpouse's Revocable Trust

Remaining Assets$3,500,000*

Life Insurance Trust(Irrevocable and Owns Life

Insurance on First Dying Spouse)

Held for Surviving Spouse & Children

May be Generation Skipping to be held as Separate Trusts

for Children

Surviving spouse can have the right to

redirect how assets are distributed on

second death.


Surviving Spouse's Revocable Trust(Will include assets owned jointly on first death)

$3,500,000* Remaining Assets

Generation Skipping Trusts For Children

(will merge with first dying spouse's Generation Skipping Trusts shown on left)


distributions)

SurvivingSpouse's Revocable Trust

PROTECTIVE TRUST LOGISTICAL CHART WITH LIFE INSURANCE

•Assumes first spouse dies in 2011 and that the surviving spouse dies in a later year when the estate tax exemption is still $5,000,000.

•The Unified Credit Exemption is $5,000,000 in 2011 and 2012, and is scheduled to go back to $1,000,000 in 2013.

•Many expect that the estate tax exemption will be locked in at $3,500,000 when Congress and the new President finally act on this.

Copyright © 2010 Gassman, Bates & Associates, P.A.Page 4

$5,000,000

Determining How To Best Allocate Assets As Between A Married CouplePart I

SEE NEXT PAGE FOR SECOND TIER PLANNING

A COMMON SOLUTION - to use a limited partnership or similar mechanisms and have no assets directly in the "high risk" spouse's trust, half to two-thirds of the assets held as tenants by the entireties, and half to two-thirds of assets directly in the "low risk" spouse's trust.

General Rules:-Typically want each trust funded with at least $3,500,000 worth of assets on death for estate tax planning.

-May be funded from ½ of tenancy by entireties assets via disclaimer and probate or by life insurance/pension/IRA assets.


Determining How To Best Allocate Assets As Between A Married CouplePart IISubsidiary Entity Techniques:

Limited partnerships can be used to facilitate discounts, for estate tax purposes, and forcharging order protection.Limited partnerships and LLCs can also be used to provide "firewall protection" from activitiesor properties owned.

A COMMON SOLUTION - to use a limited partnership or similar mechanisms and have no assets directly in the "high risk" spouse's trust, half to two-thirds of the assets held as tenants by the entireties, and half to two-thirds of assets directly in the "low risk" spouse's trust.



Tenancy by the Entireties – was the right box checked?

Should assets be held under living trusts? Living Trusts do not protect assets from creditors. Sometimes it is best to own the assets jointly as

tenants by the entireties. If trust ownership is needed, is it properly structured?


3. Failure to have appropriate ownership/beneficiary designation for life insurance, retirement accounts, IRA’s and annuity contracts.

Life insurance and annuities are protected from creditors if owned by the “insured person”

Typically life insurance will be owned by the insured and made payable to the revocable trust of the insured. Alternatively, it may be owned by an irrevocable life

insurance trust to avoid estate tax.




BUYING TERM INSURANCEYou can ask an independent agent who writes for many carriers to have you take the physical so that they can get quotes from several

carriers.

You can ask that all results and quotes be confidential and not given to the bureau that all carriers belong to and share information with. Once a carrier turns you down or “rates” you all other carriers know.

This is called an “informal application” and then the carriers can each give informal quotes for term coverage. If you like the quote then you buy it.

You might spread this among 2 or 3 carriers in case one goes under.

Sample term rates for “preferred”, “standard” and “standard smoker” individuals at ages 35, 40, 45, 50 and 55 are as follows:

MALE (AGE 35)

PREFERRED STANDRAD STANDARD SMOKER

10 Year Term $375 $735 $1,685

15 Year Term $515 $915 $2,135

20 Year Term $665 $1,105 $2,885

30 Year Term $1,015 $1,735 $4,705

FEMALE (AGE 35)

10 Year Term $345 $565 $1,345

15 Year Term $415 $805 $1,775

20 Year Term $565 $945 $2,265

30 Year Term $825 $1,375 $3,555 Page

MALE (AGE 40)


10 Year Term $505 $925 $2,405

15 Year Term $655 $1,215 $3,125

20 Year Term $865 $1,505 $4,345

30 Year Term $1,495 $2,465 $7,175

FEMALE (AGE 40)

10 Year Term $435 $785 $2,005

15 Year Term $575 $1,035 $2,485

20 Year Term $745 $1,255 $3,185

30 Year Term $1,135 $1,985 $5,275

BUYING TERM INSURANCE


MALE (AGE 45)


10 Year Term $805 $1,405 $8,935

15 Year Term $1,065 $1,985 $5,275

20 Year Term $1,415 $2,355 $7,195

30 Year Term $2,355 $2,845 $11,625

FEMALE (AGE 45)

10 Year Term $705 $1,095 $3,055

15 Year Term $875 $1,445 $3,815

20 Year Term $1,105 $1,755 $4,895

30 Year Term $1,765 $2,825 $7,555



MALE (AGE 50)


10 Year Term $1,235 $2,145 $6,435

15 Year Term $1,785 $2,805 $7,825

20 Year Term $2,225 $3,425 $10,425

30 Year Term $4,025 $6,245 $13,719

FEMALE (AGE 50)

10 Year Term $1,025 $1,625 $4,295

15 Year Term $1,235 $2,065 $5,725

20 Year Term $1,625 $2,715 $6,865

30 Year Term $2,645 $4,785 $10,109



MALE (AGE 55)


10 Year Term $2,025 $3,315 $8,935

15 Year Term $2,895 $4,655 $12,055

20 Year Term $3,505 $5,955 $14,875

30 Year Term Not Available Not Available Not Available

FEMALE (AGE 55)

10 Year Term $1,495 $2,235 $5,905

15 Year Term $1,835 $2,985 $7,995

20 Year Term $2,465 $3,985 $9,985

30 Year Term Not Available Not Available Not Available




What assets are creditor protected and what are not creditor protected.

Common errors. Revocable trusts do not protect assets from creditors. Creditors of a beneficiary may be able to attach IRAs. Use LLCs to shield from ownership and activity

liabilities? Possible use of family limited partnership planning.


FLORIDA RESIDENTS, LEARNING HOW TO PROTECT YOUR ASSETS IN ONE MINUTE AND FIFTY SECONDS

Creditor Exempt Assets Assets that are Difficult for a Creditor to Obtain

Assets Exposed to Creditors

Homestead-Up to half acre if within city limits.-May be immune from fraudulent transfer statute.

Limited partnership and similar entity interests.

Individual money and brokerage accounts.

IRA-Includes ROTH, Rollover, and Voluntary IRAs, but possibly not inherited IRAs.

Foreign trusts and companies. Joint assets where both spouses owe money.

401(k)-Maximize these!

Foreign bank accounts. One-half of any joint assets not TBE where one spouse owes money.

Permanent Life Insurance -Must be owned by insured.

Note – foreign entities are very rarely recommended and must be reported to IRS -

Personal physical assets, including car, except for $4,000 exemption ($_______ if homestead exemption is claimed in bankruptcy).

Annuity Contracts FURTHER NOTES:Vocabulary:1.EXEMPT ASSET – An asset that a creditor cannot reach by reason of Florida law – protects Florida residents.2.CHARGING ORDER PROTECTION – The creditor of a partner in a limited liability partnership can only receive distributions as and when they would be paid to the partner.3.Foreign bank accounts are difficult for creditors to reach, but upon filing a bankruptcy a debtor can be forced to turn over such accounts and certain offshore trust accounts as well.4.Upon filing a Chapter 7 Bankruptcy an individual debtor may be able to cancel all debts owed and keep exempt assets, subject to certain exemptions.5.Annuities and life insurance policies are not always good investments, and can be subject to sales charges and administrative fees.6.FRAUDULENT TRANSFER - Defined as a transfer made for the purpose of avoiding a creditor. Florida has a 4 year reach back statute on fraudulent transfers. A fraudulent transfer into the homestead may not be set aside unless the debtor is in bankruptcy. It takes 3 creditors of a debtor who has 12 or more creditors to force a bankruptcy.

Wages of Head-of-Household

Wage Accounts

Tenancy by the Entireties (joint where only one spouse is obligated)- Must be properly and specially titled – joint with right of survivorship may not qualify.

529 College Savings Plans


UMBRELLA INSURANCE COVERAGE

Re: UMBRELLA LIABILITY INSURANCE COVERAGE

Dear ________________:

As part of our planning I wanted to reiterate the importance of having an appropriately coordinated and “gap free” liability and casualty insurance program.

I am enclosing a sample letter that some clients use to help assure that they have coverage for common gaps or mistakes made in structuring liability insurance. If you would like assistance in completing this type of letter, please let me know.

The rest of this letter is about umbrella liability insurance coverage. We believe that it is very important to have appropriate limits of liability on automobile and homeowner insurance policies. Typically, the automobile and homeowner policies will be at $500,000 coverage, and then there will be excess coverage under what is called a "personal umbrella policy."

The personal umbrella policy is used in combination with homeowners and auto policies to cover most clients' needs. If it is a true "umbrella" it will provide excess limits above and beyond your primary insurance coverage (such as homeowners, automobile or boat policy), and will also provide coverage for situations excluded or not addressed by underlying coverages. Each individual insurance company will have its own requirement for limits that you must have on your primary policies. You will want to be careful to assure that these policies are coordinated with your umbrella coverage.

Umbrella limits start at $1,000,000 and can go over $10,000,000. Pricing for these policies are based primarily on the number of houses and vehicles to be insured, with each additional $1,000,000 of coverage being less expensive than the preceding. In your situation I would probably have $___________________ of umbrella liability insurance. Also, I would consider placing much of your brokerage account and other assets under a family limited partnership to further insulate you for creditor protection purposes.


Another coverage that is often underutilized by clients is called "uninsured motorist coverage." If you are in an automobile accident caused by someone who does not have enough coverage to pay for your damages, you can pursue your own insurance company to the extent of your "uninsured motorist" coverage. We encourage clients to see what it costs to have $500,000 or more in uninsured motorist coverage to help compensate for catastrophic accidents that can happen.

Some carriers, including citizens and carriers who have assumed policies from citizens do not provide liability coverage for pool and pet or animal related liabilities. In this event the Umbrella liability coverage may or may not apply. This is something that should be discussed with the insurance agency or carrier that provides liability coverage.

If we can provide you with any further information or with assistance concerning your insurances, please let us know.

Very truly yours,

Alan S. Gassman

_______________________________________________________________________________________

Dear Liability Insurance Agency and/or Carrier:

I recently met with my estate planning lawyer and wanted to make sure of the following:

1. Please confirm that we have Personal Liability Umbrella insurance covering our automobiles, boats, recreational vehicles, and all properties owned. I would like quotes on the following coverage limits, $1,000,000, $3,000,000 and $5,000,000, with and without Uninsured Motorist coverage.

2. Please confirm that we are covered for animal liability under our primary homeowners insurance and confirm that the Liability Umbrella would also extend to animal liability. We have been told that the primary homeowners may exclude animal liability and that some Liability Umbrella policies will not provide coverage when the primary homeowners insurance excludes same.

3. Please confirm that we are covered for pool related accidents occurring on our property and also confirm that the Personal Liability Umbrella policy will also extend coverage to pool related accidents.


4. Can you please confirm that we are covered for cars being driven by _____________________.

5. Can you please confirm that we are covered for the investment property that we own at ______________________________. It is titled under the name of ______________________________?

6. Can you please confirm that we are covered for our ______________________________ boat, which is ______ foot long and is normally stored at ______________________________. The horsepower is ______________.

Are we also covered for trailering the boat with our trailer?

Also, can you please confirm that we are covered for our waverunner/jet ski which is a _________________ with horsepower of _________________. It is stored at ________________________.

7. You do not handle the coverage for our vacation ______________________________ in ______________________________ or our vacation ____________________________ in ______________________________. Is our potential liability relating to the use of these properties covered under our umbrella, or do we have to obtain a separate umbrella for these properties?

Our ______________________________ and _____________________________ are stored and used up in our ______________________________ ______________________________.

8. ______________________________ drives the car owned by ______________________________ both for personal purposes and with respect to the ______________________________ business. We assume our coverage includes business driving both by ______________________________ and by ______________________________ who occasionally drive the car for the business.


9. Can you please confirm that we are covered for our motorcycle being driven by ___________.

10. Is there anything not mentioned above that comes to mind that we should be aware of?

Please send our lawyer, Alan S. Gassman, a copy of your response to this letter, which has been generated as a part of our estate planning. Alan's email address is [email protected] and his street address is 1245 Court Street, Suite 102, Clearwater, Florida 33746. His fax number is (727) 443-5829. Please send us a copy of your response as well.

If you have any further suggestions with respect to our coverages please let us know.

Thank you very much for your assistance herewith.

Best personal regards,


6. Failure to revisit the plan ever 2 to 4 years, or when there are significant changes.


MEMORANDUM

TO: PROFESSIONAL ADVISORSFROM: ALAN S. GASSMANDATE: JULY 1, 2010RE: LLC CHARGING ORDER PROTECTION FOR SINGLE-MEMBER LLCS & OTHERS******************************************************************************************

Last Thursday, the Florida Supreme Court issued a decision to the effect that creditors can seize the entire ownership interest of a member/debtor who owns 100% of an LLC, even though the applicable LLC statute provides that the remedy of a creditor against a debtor’s LLC membership interest is a charging order.

While this decision was not unexpected, in the context of “single-member LLCs” it also mentioned that the Florida LLC Statutes may permit a creditor to “seize” a debtor’s interest in a multiple-member LLC. Although this was not the direct holding of the case, there will probably be litigation in many courts on the issue of whether a creditor can seize control and outright ownership of multiple-member LLC interests. The Court did conclude that a creditor can only obtain a charging order with respect to a debtor’s ownership interests in a limited partnership (LP). A “charging order” is the right of a creditor to be paid if and only if the LLC or limited partnership decides to make a distribution. Current charging order law does not give the court the ability to force entity distributions or to provide a creditor with any management or voting rights.

Efforts are underway to have the Florida Legislature amend the LLC statute in 2011 to clarify that a charging order is the only course of action a creditor can pursue. The banking industry may oppose such efforts, but the same treatment clearly applies to limited partnerships in Florida, and has been intended and understood to apply to LLCs as well.

Creditors seeking a judgment against a member of a multiple-member LLC also face issues as to whether the creditor can vote the membership interests or take over management to force a sale or distribution of LLC assets.1 Creditors can more easily pursue the assets of an individual than assets that are held under a multiple-member LLC. The creditor would have to first levy the individual’s LLC interest, and then deal with limitations on assignability, management rights, and transfers, as described above. It is presently unknown how trial court judges will deal with these issues.

1 Other language in the Florida Supreme Court’s opinion seems to indicate that if the Operating Agreement provides that all other members are required to consent to the transfer of membership rights to a creditor, then any other member can withhold consent. This may prevent a creditor from taking over a member’s right to participate in the management of the LLC or to force a distribution from the LLC or the liquidation of the LLC.


As a result of this decision, clients with LLCs who want to help assure that a creditor would be unable to obtain outright ownership and possible control of their member interests should consider one of the following:

a. Make sure that the LLC Operating Agreement has provisions which would make it difficult for a creditor to obtain control. This may include having voting and non-voting member interests, and separating management rights from ownership rights. These are common estate tax planning mechanisms that are often employed in LLC planning, and will provide an extra measure of security and peace of mind. Some clients will have restrictive certificates issued as well.

b. LLCs may be converted to limited partnerships (or limited liability limited partnerships, a type of limited partnership that generally provides more creditor protection), which clearly have charging order protection, as verified by the above referenced Florida Supreme Court decision.

If and when an LLC converts to a limited partnership or a limited liability limited partnership or implements voting/non-voting rights, it is considered a continuation of the same entity, and no new taxpayer identification number, transfer of assets, or other inconvenience needs to occur, except in special circumstances. Unfortunately, it is not clear under the tax law whether limited partnerships or limited liability limited partnerships can be taxed as S corporations.

c. Married couples often own LLC interests as tenants by the entireties, particularly where a creditor would likely obtain a judgment against only one spouse. Creditors of one spouse only can generally not reach tenancy by the entireties assets.

d. Where the client owns less than 50% of the LLC, the creditor would typically be unable to obtain control of the LLC. The same situation may apply where there are irrevocable management rights granted to one or more individuals.

BACKGROUND -

In 2003, a Colorado bankruptcy court found that charging order protection should not apply with respect to single-member LLCs, because the reason for the charging order protection is to protect the non-debtor members. Since that time other courts outside of Florida have reached the same conclusion. We expected the Florida Supreme Court to follow this same path, rather than try to weaken charging order protection for all LLCs, which has been supported by Florida appellate court decisions for over 20 years. In fact, the Florida Bar published a book entitled “Asset Protection in Florida” in 2008 which simply states that “a creditor can only obtain a charging order” with respect to a debtor’s LLC interest. We, therefore, expect that the Legislature will correct this deviation.


Three Florida District Court of Appeal opinions (in 1976, 1986 and 1998) confirmed that the charging order is the exclusive remedy of a creditor of a partner in a partnership, and the present LLC charging order statute uses the exact language from the partnership statute that was the subject of those three opinions. That partnership charging order statute language was adopted word-for-word into the LLC statute after the 1976 and 1986 cases, so it seemed clear that the Legislature wanted charging order protection to apply to LLCs and partnerships equivalently. In 2005, the limited partnership charging order statute was rewritten to explicitly provide that a charging order was the exclusive remedy for a judgement creditor with respect to a debtor’s limited partnership interest. The Supreme Court seems to have erroneously concluded that because the LLC statute was not updated at the same time, the Legislature must have intended for creditors to have other remedies available for judgments against an LLC member. The Supreme Court did not appear to understand that the LLC and limited partnership statutes were both originally written in 1993 with identical intent, and that the committee that handled the revision of the limited partnership statute in 2005 did not work on the LLC statutes, and did not intend to change the legal effect.

Most clients will probably just wait to see if the Legislature clarifies this law, but depending upon individual circumstances, some clients may wish to make simple changes to their LLC arrangements to attempt to enhance protection, or convert LLCs to limited partnerships or limited liability limited partnerships.

Please let us know if you would like to have further information, or discussion, on this new development.








Spouse can be trustee or co-trustee of bypass trust and/or marital deduction trust – can protect from estate tax on second death, creditors, subsequent spouses, and aggressive son and daughter-in-laws.

Are children better off inheriting directly or becoming trustees of trusts that pay them amounts as reasonably needed for health, education, and maintenance to maintain their standards of living. Protect from the child’s creditors. Protect from estate tax on the child’s death. Protect from divorce claims. Protect from mistakes or imprudence by requiring that the

child serve as co-truustee?


During bothspouses'lifetimes:

Upon firstdeathin2009:

Duringsurvivingspouse'sremaininglifetime:

Upon (Passes Estate secondTax Free) death:

Afterdeathsofbothspouses:


Family(By-Pass)

Generation Skipping Trust(Not taxed in surviving spouse's estate)

QTIP Non-GST Trust

(Marital Deduction Trust that is not generation

skipping)

Generation Skipping TrustsFor Children


distributions)

First DyingSpouse's Revocable Trust

Remaining Assets$3,500,000*

Life Insurance Trust(Irrevocable and Owns Life

Insurance on First Dying Spouse)

Held for Surviving Spouse & Children

May be Generation Skipping to be held as Separate Trusts

for Children

Surviving spouse can have the right to

redirect how assets are distributed on

second death.


Surviving Spouse's Revocable Trust(Will include assets owned jointly on first death)

$3,500,000* Remaining Assets

Generation Skipping Trusts For Children

(will merge with first dying spouse's Generation Skipping Trusts shown on left)


distributions)

SurvivingSpouse's Revocable Trust

PROTECTIVE TRUST LOGISTICAL CHART WITH LIFE INSURANCE

•Assumes first spouse dies in 2009 and that the surviving spouse dies in a later year when the estate tax exemption is still $3,500,000.

•The Unified Credit Exemption is $3,500,000 in 2009, is infinite for those who die in 2010, and is scheduled to go back to $1,000,000 in 2011.

•Many expect that the estate tax exemption will be locked in at $3,500,000 when Congress and the new President finally act on this.

Copyright © 2010 Gassman, Bates & Associates, P.A. Page 31 Page 31

TRUST SYSTEMS FOR CHILDREN AND FUTURE GENERATIONS

TO: ESTATE PLANNING CLIENTSFROM: ALAN S. GASSMAN, ESQUIREDATE: September 9, 2009RE: TRUST SYSTEMS FOR CHILDREN AND SUBSEQUENT GENERATIONS❀❀❀❀❀❀❀❀❀❀❀❀❀❀❀❀❀❀❀❀❀❀❀❀❀❀❀❀❀❀❀❀❀❀❀❀❀❀❀❀❀❀❀❀❀❀❀❀❀❀❀I. THE TRADITIONAL APPROACH:

A. On the death of the surviving spouse there is a separate share for each child.

B. Each child receives what the Trustees deem appropriate and receive percentages of principal upon attaining certain ages, such as:

Age Percentage of Remaining Assets

25 33 1/3%30 50%35 100%

C. Release as needed plus at specified ages.

D. The child may become Co-Trustee at a certain age, such as 30, and sole Trustee at age 35.


Page

II. A MORE PROTECTIVE APPROACH FROM A POSSIBLE DIVORCE AND CREDITOR PROTECTION STANDPOINT FOR THE CHILD:

Child becomes a trustee but has trust protection for life.

A. Assets are held in a Protective Trust that is as immune as possible from creditor claims and divorce claims.

B. The child is to receive amounts as reasonably needed for health, education and maintenance of themselves and descendants.

C. The child may serve as Co-Trustee upon reaching a certain age, such as 25, Co-Trustee with their choice from a list of selected people or a licensed trust company at a later age, such as 30, and sole Trustee at age 35.

D. The child can designate how the assets would pass on the child’s death, which may be restricted to lineal descendants or perhaps up to 1/3rd to a spouse or charity.

III. AN EVEN MORE PROTECTIVE APPROACH:

Independent trusteeship for entire life of child.

A. The same as II above, except the child must serve as Trustee for life with their choice of any licensed trust company.

IV. WITH EACH OF THE SYSTEMS DESCRIBED ABOVE THERE CAN BE SPECIAL STIPULATIONS, SUCH AS NOTHING BUT EDUCATIONAL EXPENSES AND SUPPORT UNTIL A FOUR YEAR DEGREE OR A CERTAIN AGE HAS BEEN ATTAINED, A RESTRICTION ON THE CHILD SERVING AS A CO-TRUSTEE OR TRUSTEE DURING THE PENDENCY OF A DIVORCE, CREDITOR PROBLEM, REACHING A CERTAIN ADVANCED AGE, AND EVEN REQUIREMENTS THAT THE CHILD’S DISTRIBUTION WOULD BE LIMITED TO A PERCENTAGE OF W-2 INCOME OR TIMES WHEN THE CHILD IS A FULL-TIME HOMEMAKER WITH YOUNG CHILDREN AT HOME.


WHY HAVE A CORPORATE OR PROFESSIONAL CO-TRUSTEE

While family members may seem like the best choice for trusteeship of long term trusts to benefit spouses and children, we often recommend consideration of having the family member serve as co-trustee with their choice of a licensed trust company or a professional individual to act as co-trustee in order to avoid major pitfalls that often occur. Examples are as follows:

1. Loss of assets often occurs by reason of:a. Loans authorized by the fiduciary which can later not be repaid.b. High risk investments that did not seem high risk to the non-professional trustee at the

time they were made.c. Liberal distribution and beneficiary/loan decisions made where a feeling of generosity

was allowed to influence what should have been an attitude of conservatism for long term benefit.

2. Tax and funding mistakes are often made by well meaning individuals who do not hire and closely follow the advice of appropriately specialized advisors. Non-specialized advisors may mean well, but sometimes give mistaken advice, and a non-professional fiduciary would never know the difference.

3. Family squabbles that can often occur when one family member has decision-making authority over other family members with no one to “blame decisions on.”

The professional trustee will commonly be a bank or brokerage firm affiliate, an experienced CPA or a lawyer who works extensively in the trust administrative area, or in some cases an offshore trust company.

We always recommend that selected family members or advisors have the ability to replace an acting trustee from a list of alternate trustees or categories thereof to help assure responsiveness, competitiveness and reasonableness as to fees charged, and to exert a reasonable degree of influence over trustee decisions.


Common examples.- The Surviving Spouse - When one spouse dies the surviving spouse receives

$2,000,000.00 of life insurance premiums in trust to support themselves and the children. Instead of serving as sole trustee, the surviving spouse can serve with their choice of any trust company or any one of certain persons named in the document. The spouse can negotiate fees before making a decision and terminate the acting professional co-trustee with an alternate trust company or listed individual at any time and for any reason.

The spouse is much less likely to be “bossed around” or inappropriately influenced by a new spouse or by the children in later years where a professional co-trustee is serving.

- The Elderly Client - When an elderly client loses their spouse they are often quite shaken up both emotionally and sometimes from a health standpoint. By having a co-trustee involved they have added security and independence from well meaning loved ones and caretakers who might exert undue influence or make mistakes from an investment or fiscal responsibility standpoint.

- A Child - Monies left to an adult child who is responsible but has marital, emotional spending or other issues such that it is best that the assets be managed and paid out in a professional manner with the child perhaps having the power to replace the trustee or trustees with alternate independent trustees.

A Gambler – Monies left to people who have gambling tendencies, including entrepreneurs who tend to do deals and risk losing assets are much more secure held with a co-trustee.



Will the bypass trust be funded on the first death?

Can any large inheritances by shifted in trusts to bypass the child?

Annual gifting based upon $13,000/per person/per year.

Gifting discounted limited partnership and/or LLC interests to have more effective gifting.

Installment sales to irrevocable trusts.Grantor retained annuity trusts.Other strategies.


Moving More Value OutOf Taxable Estates by Using

Discounted Limited PartnershipOr LLC Annual Gifting

10 Year Gifting Period$13,000 Annual Exclusion Allowance

35% Valuation Discount

Year

Permitted Annual Gifting

Cumulative Value with 7% Growth

Permitted AnnualGifting

Cumulative Value with 7% Growth

Value Added By Contributing $200,000 More in Year 1

1 $13,000.00 $13,000.00 $213,000.00 $213,000.00 $200,000.002 $13,000.00 $26,910.00 $13,000.00 $240,910.00 $214,000.003 $13,000.00 $41,793.70 $13,000.00 $270,773.70 $228,980.004 $13,000.00 $57,719.26 $13,000.00 $302,727.86 $245,008.605 $13,000.00 $74,759.61 $13,000.00 $336,918.81 $262,159.206 $13,000.00 $92,992.78 $13,000.00 $373,503.13 $280,510.357 $13,000.00 $112,502.27 $13,000.00 $412,648.34 $300,146.078 $13,000.00 $133,377.43 $13,000.00 $454,533.73 $321,156.309 $13,000.00 $155,713.85 $13,000.00 $499,351.09 $343,637.2410 $13,000.00 $179,613.82 $13,000.00 $547,305.67 $367,691.8411 $0.00 $192,186.79 $0.00 $585,617.06 $393,430.2712 $0.00 $205,639.87 $0.00 $626,610.26 $420,970.3913 $0.00 $220,034.66 $0.00 $670,472.97 $450,438.3214 $0.00 $235,437.08 $0.00 $717,406.08 $481,969.0015 $0.00 $251,917.68 $0.00 $767,624.51 $515,706.8316 $0.00 $269,551.92 $0.00 $821,358.22 $551,806.3117 $0.00 $288,420.55 $0.00 $878,853.30 $590,432.7518 $0.00 $308,609.99 $0.00 $940,373.03 $631,763.0419 $0.00 $330,212.69 $0.00 $1,006,199.14 $675,986.4620 $0.00 $353,327.58 $0.00 $1,076,633.08 $723,305.5121 $0.00 $378,060.51 $0.00 $1,151,997.40 $773,936.8922 $0.00 $404,524.74 $0.00 $1,232,637.22 $828,112.4723 $0.00 $432,841.47 $0.00 $1,318,921.82 $886,080.3524 $0.00 $463,140.38 $0.00 $1,411,246.35 $948,105.9725 $0.00 $495,560.20 $0.00 $1,510,033.59 $1,014,473.3926 $0.00 $530,249.42 $0.00 $1,615,735.95 $1,085,486.5327 $0.00 $567,366.88 $0.00 $1,728,837.46 $1,161,470.5828 $0.00 $607,082.56 $0.00 $1,849,856.09 $1,242,773.5329 $0.00 $649,578.34 $0.00 $1,979,346.01 $1,329,767.6730 $0.00 $695,048.82 $0.00 $2,117,900.23 $1,422,851.41


Based upon a two year GRAT with payments of 49.4208% oforiginal contribution at the end of year one, and 59.305% oforiginal contribution at the end of year two, the value of a giftcaused by a $4,000,000 contribution is approximately $1,000.

One spouse can fund a trust on a tax advantaged basis tobenefit the other spouse and their descendants.

Other Spouse = Trustee

GRANTORSPOUSE

Year One $1,976,832.00Year Two $2,372,198.40

Assuming 10% per yeargrowth in assets, the GRATTrust will have $293,286.40 After the second year, trust assets can be held for the lifetime after two years. benefit of Trustee Spouse and Descendants.

Assuming 15% per year Assets not accessible to creditors of thegrowth in assets, the GRAT Trustee/Beneficiary Spouse, or theTrust will have $644,444.80 descendants.after two years.

Annuity payments payable to the Grantor/Spousewho is a Florida resident should be protectedfrom creditors under Florida Statute Section 222

Contribution of $4,000,000

Repayment Obligations:

LIFETIME BYPASS

GRAT

LIFETIME BYPASS GRAT(GRANTOR RETAINED ANNUITY TRUST)


TABLE OF CONTENTS/CHECKLIST


Completed To Be Done ?



3. Failure to have appropriate ownership/beneficiary designations for life insurance, retirement accounts, IRA’s and annuity contracts.



6. Failure to revisit the plan every 2 to 4 years, when there are significant changes.



QUESTIONS?


Date post:	11-Jan-2016
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SATURDAY, NOVEMBER 20, 2010 A WEBINAR BY: ALAN S. GASSMAN, J.D., LL.M. [email protected]...

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