ASSET PROTECTION

TWO DOCTORS TALK ASSET PROTECTION - ANIMATED SHORT FILM

2010-11-22T10:36:00.000-08:00

The following is the first in a series of short animated films on Asset Protection, wealth and business concepts. It’s light hearted, but addresses many serious issues and misconceptions in a way we hope is easily digestible and fun to watch.

PROFIT RETENTION STRATEGIES FOR MEDICAL PRACTICES

2010-11-19T09:25:00.000-08:00

IT’S NOT JUST WHAT YOU MAKE; IT’S ALSO WHAT YOU KEEP.

With the economic impact of the new healthcare laws and the President’s final 2011 budget uncertain, practice owners and managers would be well served to focus their attention at this time on profit retention strategies. The thousands of doctors we serve are facing challenges including:

■Current Depressed Economic Conditions
■Decreasing Compensation and Insurance Reimbursement Rates
■Increasingly Hostile Litigation System that Targets YOUR wealth
■Stalled or Negative Investment Momentum
■Increasing Overhead and Liability Insurance Costs
■Increasing burdens of Income and Estate Taxes; the estimated “death tax” will be 55% of everything over $1MM in 2011 as of the time of publication
A properly constructed profit retention plan is generally easy to implement and is one of the only ways owners can take more dollars home without earning extra dollars.

Some ideas to help you keep a larger portion of every dollar you make:
Increasing Business Tax Structure efficiency. You walk around turning off lights to save money but is your business tax structure maximized to pay as little as legally possible? One of my Associates, attorney Trisha Lotzer, of Lotzer Law Group in Scottsdale, Arizona examines this issue below. Trisha’s practice, like mine, includes a heavy emphasis on working with medical practices and their owners and she has successfully negotiated over $200 million dollars in transactions including successful medical and dental practice formations, affiliations, purchases and sales.

Guest Author, Attorney Trisha Lotzer
The purpose of profit preservation is to preserve or even increase a practice’s profitability regardless of changes in healthcare policy or expiring tax cuts. Profit preservation plans should be tailored in the context of governmental policies, business operations and customized to maximize the profit preservation potential consistent with personal and professional goals, such as estate and transition or succession planning. Important strategies that owners should consider at this time include changing from an S-corporation or C-corporation status, energy studies, cost segregation studies, insurance and investment audits.

Currently, your practice’s tax status is either working for or against you in terms of profit preservation. With this fact in mind, how do you know which is the right election for your practice and how do you make sure that you are not passing up any dollars that you rightfully earn?

Most healthcare practices and small businesses are organized as S-corporations, or as LLCs with an S-election. This election is generally advantageous for tax purposes because it allows practice owners to avoid the “double taxation” that necessarily accompanies C-corp status and allows owners to benefit from earnings that “pass through” to their individual returns. Whether you are a C-Corp or an S-Corp, it is especially important to consider the negative consequences of a C-Corp, such as double taxation, and reassess your corporate tax status.

Following are two (simplified) examples and clarify what is meant by “double taxation” and “pass through” income. Let’s compare an S-Corp and a C-Corp that each earn $1,000,000 of taxable income after qualifying deductions and expenses:

The C-corporation that earns $1,000,000 is taxed at the highest corporate tax rate of 35%. That leaves $650,000 after taxes are paid. If you, the practice owner, take that $650,000 as a dividend that dividend will be taxed at 20% (the anticipated dividend tax rate). The result of the tax on the dividend results in another $130,000 in taxes, for a grand total of $480,000 in taxes and you, the practice owner, nets $520,000.

With the S-Corp. that earns $1,000,000 the practice owner would net $600,000 and pay just $400,000 in taxes. This is because the $1,000,000 “passes through” to the owner’s individual tax return. And, even in the highest bracket, the most the owner would be taxed is 40% because there would be no “double tax” on a dividend.

(Note from Ike: This is one of many formulas that competent tax counsel must advise you on. Other common formulas often include the physician taking a commercially reasonable salary, let’s say $250K, and taking the balance as dividends from the corporation they own. This moves a larger portion of practice income to the capital gains rate, using the hypothetical numbers above, 20% for capital gains vs. 40% as personal income.)

This merely represents the most basic “double tax” scenario. There are other taxes, including state taxes and self-employment taxes, and other factors that must be considered and weighed for your particular practice scenario. Tax policy must also be taken into consideration when electing tax status as a strategy for profit preservation.

For example, in 2011, some S-Corp practice owners may find themselves pushed into higher personal tax brackets. Based on current reports from congress and the White House, the President’s proposed budget will likely include a tax cut for middle-class taxpayers and the previously enacted tax cuts on upper-income taxpayers would be allowed to expire. If that occurs, individuals currently taxed at 33% would be taxed at 36% and those taxed now at 35% would be taxed at 39.6%. Therefore, we can reasonably anticipate that a number of practice owners will have a higher income tax for certain individuals and for that reason it is reasonable to consider a change to C-Corp status.

While there are a few exceptions, there is a rule that states that if you lose your S-election you can’t re-elect S-Corp. status for five years. For this reason, current S-Corp owners and those contemplating a change from S-Corp to C-Corp status should be especially cautious. Change to or from a C-Corp should be considered by ever practice owner but it should only be executed with the guidance of qualified tax and wealth preservation specialists.

Trisha’s examination of this issue above is a great start, here are some other profit retention strategies I encourage my clients to examine:

Cost Segregation Studies. These studies allow meaningful tax deductions now when you need them most as opposed to spread over 30 years at about 3% per year the way they are typically taken. Most commercial property, even leased, qualifies for the study and the deductions and we can even arrange for a free feasibility study for commercial property with an aggregate value of at least $1MM, an easily attainable entry level. As a bonus, you can even re-capture lost depreciation for as much as the last 20 years!

Energy Studies. Again, owners of commercial properties are seeing energy tax credits of up to $1.80 per square foot when the study is completed and simple low cost changes are made. Would that kind of recurring savings be valuable enough to you to, for instance, change the kinds of light bulbs you use and add a skylight? In most cases it is.

The financial “Audit”. Give your insurance and investment planning a physical and make sure it is working as hard for you as you did to earn it. We have seen that at the worst, some clients lost as much as 60% of their investment portfolios due to the market and their investment allocations while others were down only a fraction of what the market lost and are relatively free of anxiety. Why the huge disparity in results between advisors? What we see is that it is relatively easy to make money in good times by using a simple allocation table that at first glance seems well diversified between different types of investments such as technology, energy and etc. What those plans, such as the cookie cutter ones we see from certain commercial brokerage firms are typically lacking in is a good down-market strategy that values principal protection as highly as it does growth. There are ways to get all or most of the market growth available with guaranteed rates of return or principal guarantees. These types of strategies, when properly allocated, are part of the backbone of what saved the second, more fortunate group of investors described above. These clients are not only whole or close to it, but are now poised and financially equipped to take advantage of emerging opportunities.

Similarly, we find that many practice owners are paying more than necessary for various types of insurance coverage they have in place while they are at the same time lacking in many types of coverage I now describe as essential or are underinsured in areas like their disability insurance. To put it simply, the cost of life insurance, as just one example is now cheaper for the consumer than it was a few years ago. This means that any policy that is more than a few years old should be audited to see if it can be converted or replaced at a lower cost. How dramatic can the changes be? In one case, a doctor’s children will receive 500% more from one of her life policies because of some simple changes we made and issues we spotted without her paying any increase in premium.

Again, as the economy and income and profit slow, never taking a step back, or at least taking as few as possible, becomes more important than ever before. Remember, a portfolio that is down 50% will need to DOUBLE to get back to where it was. How long did it take you to double your money the last time? Do you have that kind of time left? If you don’t like the way you answered those questions for yourself, perhaps it’s time to take a good look at how you are structured and what kind of stop-loss measures you have in place. In many cases it is not too late to make some positive changes and “buy and wait” is not the right answer for every investor or every investment.

Increasing your personal tax efficiency. We deal with high net worth clients every day and are continually surprised by the amount of money that they leave on the table for the government by not maximizing their legal options. For most physicians “just” an IRA or 401K is not adequate tax planning. Even if the money you save is “long term” or retirement money that cannot be used now, you still get to keep it. Many of the most sophisticated programs provide multiple benefits like estate planning and Asset Protection.

A few examples of planning to consider include section 79, post retirement medical reimbursement, defined benefit programs and captive insurance plans. Don’t know where to start? Don’t worry, we can help direct you to experts to show you which plans apply to your unique situation and which have features like guarantee of principle, low market risk, tax deductibility and Asset Protection.

Examining your current practice tax status and the other measures suggested above are all highly effective profit preservation strategies. Each strategy should be examined with caution and undertaken only after a careful analysis of the overall economic factors of the practice and the long term effects or plans of the practice and its owner.

Most strategies can be implemented rather quickly and effectively at any time during the fiscal year. Some mid-year changes may require additional income tax reporting work by shareholders and advisors. However, in many cases this small amount of paperwork can yield great rewards and is a powerful way to preserve practice profits in uncertain times. As always contact us for more info or to discuss these issues and how they apply to your practice.

RELATED ARTICLE: BUSINESS SURVIVAL PLAN

http://www.proassetprotection.com/2009/10/2010-business-survival-plan/

ABOUT OUR GUEST CONTRIBUTOR:

Lotzer Law Group, P.C. – Phoenix, AZ: http://lotzerlaw.com/

Attorney Trisha Lotzer Specializes in business law for corporations, small businesses, medical groups and medical and dental practices. She has successfully negotiated over $200 million dollars in transactions including over $95 million dollars of successful medical and dental practice formations, affiliations, purchases and sales. She can be reached at 866-570-4449 or at: Trisha@LotzerLaw.Com

CIRCULAR 230 NOTICE: To comply with U.S. Treasury Department and IRS regulations, we are required to advise you that, unless expressly stated otherwise, any U.S. federal tax advice contained in this article is not intended or written to be used, and cannot be used, by any person for the purpose of (1) avoiding penalties under the U.S. Internal Revenue Code or (2) promoting, marketing, or recommending to another party any transaction or matter addressed in this article.

Managing Investments held in an offshore Asset Protection Trust

2010-10-07T15:58:00.000-07:00

Managing Investments held in an offshore Asset Protection Trust

As much as you may be told otherwise, using the massive deterrence and level of protection available in offshore Asset Protection systems can very complicated. This complication requires a team of experienced and knowledgeable professionals working to make sure that you are doing things safely, legally and effectively. That team typically includes an Asset Protection attorney, trustee, offshore bank, a great CPA, and an investment advisor. As a team they watch over your family and assets. Financial Advisor Richard Arnold is one such experienced professional. We asked him to share some important basics below. -Ike

By Richard L. Arnold

Physicians, business owners, real estate developers and others are increasingly concerned with protecting their assets/net worth in these difficult economic, political and litigious times. Those who have prepared in advance for potential lawsuits or negative economic events have considered establishing Asset Protection Trusts. These Trusts can have their assets held by a foreign bank, and managed by a financial advisor in the U.S. An Investment Policy Statement is prepared that defines the return objectives, risk tolerance and time horizon of the trust.

Here are a few answers to FAQ’s related to managing your investments in an offshore Asset Protection Trust:

• The foreign bank is the custodian for the investments in the Asset Protection Trust, therefore it is important to choose a bank that is financially solid as the investments will be in excess of insurance on deposits. Financial information on the banks can usually be obtained and evaluated.

• Generally, foreign banks can buy any U.S. individual stock, ETF or mutual fund. They can also buy foreign stocks, bonds and mutual funds, but contrary to typical wealth management in the U.S., money managers are normally not used due to the volume of transactions. If the trust is using a U.S. Advisor, purchase recommendations are sent by the Advisor to the Trustee, who then instructs the bank to make the purchase.

• The custodian bank charges transaction fees to buy and sell securities, which are about 1.8% for both a purchase and a sale. If the bank is managing the assets, additional fees run about 1.1% to 1.3% depending on the size of the account. This fee can be avoided by using a U.S. Advisor whose fees generally range from 70 to 90 basis points depending on the size of the trust. Be sure to choose an advisor who is experienced with offshore trusts.

• IRS rules require the preparation of various forms and there have been recent changes to the reporting requirements. Consult a knowledgeable tax specialist to be sure you are complying. The tax requirements are not onerous, but of course must be complied with. We work with tax advisors who have experience in reporting offshore investments.

We operate as a multi-family “family office”, managing approximately $1B in assets. Please call me if you are interested in discussing our services further, or contact Ike Devji.

Richard L. Arnold, Advisor and Operations Manager
CB&T Wealth Management and The Corundum Group
1 South Nevada Ave., Suite 200
Colorado Springs, CO 80903
Direct (719) 228-1083 Cell (719) 330-1226
Rick.Arnold@centralbancorp.com www.centralbancorp.com

2011 Business Plan - Survival and Positive Momentum

2010-09-24T16:23:00.000-07:00

© Ike Z. Devji, J.D.

The first version of this went to my clients in December of 2007. I hope your advisors shared similar insights with you.

As we move into the fourth quarter of 2010 we look back at the lessons learned and forward to new opportunities. Below are some critical points we have seen illustrated many times by those we work with, some of the most successful and intelligent people in their various professions and businesses. Despite the phenomenal track record many of them have in terms of making money safely, predictably and responsibly for many years, no one was left untouched by the recent crisis. Here are some of the “lessons” of the last 3 years we feel it is most important to reflect on and examine for yourself as we tackle 2011.

As always, contact me for more specific information on any of these issues.

We have seen that those who have weathered this storm most effectively and with a minimum amount of trauma shared several characteristics:
- They and their advisors were aware of potential exposures and were proactive in addressing them;

- They are able to make their personal, family overhead commitments from existing resources for an extended period of time, even without additional cash flow;

- They were willing and able to adjust their lifestyles and expenditures to current economic conditions;

- They lived very well, but well within their means, as opposed to at the limits of their means; - They had assets that allowed them to meet existing business financing burdens and other fixed costs in a form that they were able to liquidate at minimal delay and expense;

- They had top counsel in place on tax, business and estate issues, and that counsel used a variety of strategies that not only served the primary goals but also protected those assets for the family. Some examples are the use of Insurance and Annuity Products and ILITS and Split Dollar agreements that preserve certain assets for the family by statute;

- They had great credit and relationships with banks that allowed them to agree on terms that were best for all parties involved, and had these relationships with several institutions;

- They had long term assets that were able to be made liquid with minimal penalty and delay, despite that liquidation not being part of the original plan, i.e. long term investments with an escape or liquidity plan built in;

The right financial advice matters now more than ever.

We have seen that at the worst, some clients lost as much as 60% of their investment portfolios due to the market and their investment allocations while others were down only a fraction of what the market lost and are relatively free of anxiety. Why the huge disparity in results between advisors?

What we see is that it is relatively easy to make money in good times by using a simple allocation table that at first glance seems well diversified between different types of investments such as technology, energy and etc. What those plans, such as the ones we see from big commercial brokerage firms or “wire-houses” are typically lacking in is a good down-market strategy that values principal protection as highly as it does growth. There are ways to get all or most of the market growth available with guaranteed rates of return or principal guarantees. These types of strategies, when properly allocated are the backbone of what saved the second, more fortunate group of investors described above. These clients are not only whole or close to it, but are now poised and financially equipped to take advantage of emerging opportunities.

Again, as the economy and income and profit slow, never taking a step back, or at least taking as few as possible, becomes more important than ever before. Remember, a portfolio that is down 50% will need to DOUBLE to get back to where it was.

How long did it take you to double your money the last time? Do you have that kind of time left? If you don’t like the way you answered those questions for yourself, perhaps it’s time to take a good look at how you are structured and what kind of stop-loss measures you have in place. In many cases it is not too late to make some positive changes and “buy and wait” is not the right answer for every investor or every investment.

NOW is always the best time to act on preventative legal planning.

This year we saw many successful people who always meant to complete essential planning like Asset Protection and advanced Estate Planning precluded from doing so either wholly or completely. In some cases their unexpected legal exposures made the planning ineffective or illegal, in others their financial positions in terms of debt, credit and cash flow changed so rapidly they were locked out.

We understand that doing this kind of planning takes time, energy, and resources that are already scarce for the dynamic individuals we work with, and that it seems to lack the kind of time sensitivity that other matters, like responding to a lawsuit, would justify. The real truth however is that every day that passes without these issues being properly addressed jeopardizes your net worth and your family’s security, the thing that many of you are working so hard to create.

We have countless stories from the last 6 months alone of fortunes lost because of the way easily protectable assets were held and exposed to creditors, families thrown into crisis when the bread winner passes away in an accident without adequate estate planning and life insurance or is disabled without disability coverage in place, and unexpected liabilities taking away dreams.

We equate this lack of attention to these issues to driving to work every day on a busy freeway without auto insurance or operating without a malpractice policy in place. These are odds that most cannot afford to bet on. Take the time and make the investment in YOURSELF and the years you have put into your current level of success and address these issues now. Preserving what you already have when money is harder to make is a good first step.

No program lasts forever, when the door is open seize the opportunity. Many of the most productive and sophisticated wealth preservation techniques such as Accounts Receivable Financing to leverage and protect future income and Premium Financing for large estate planning cases have disappeared or slowed to a crawl as the banking and insurance industries continue to be devastated. Even clients with nine-figure net worth levels are having trouble obtaining the kind of low cost financing that was available for them to help leverage their wealth and avoid estate taxes even 6 months ago. Add to that increasingly stringent underwriting by insurance companies and you have the worst possible storm for the affluent. We are now in the unfortunate position of having to tell many of those we counseled on these issues a year ago and who skeptically heard us say that there was a time pressure involved that the programs are not available or that they are no longer qualified under more stringent underwriting guidelines. Of course, they can still pay for the planning, but at the full cost and by paying the premiums directly in cash at a time when cash flow is king as opposed to 6 months ago when they could have had it for as little as interest only at less than 6% fixed rate loans. What does this mean? In one case it meant a client with an eight figure estate tax exposure looking at a premium of over $250K per year as opposed to less than $50K. It’s just math.

We like leveraging wealth and using credit, but you must have a disaster plan. Those in the real-estate business are the most obvious example of what a lack of credit and financing can do, but all types of industries have been crippled by current economic conditions. We have many of the most successful real estate professionals in the country as clients and have felt and shared their pain. What has been less obvious is the impact on other businesses like shipping, dining, small businesses that rely on services and discretionary income, banking, appraisal services, elective medical procedures, health and beauty businesses, the list is infinite.

No business is recession proof.

Diversify and properly insulate your income streams if possible and be ready to be flexible and spot ways to identify new opportunities for your business and your skill set.

Realize that your niche, as you have defined it, may come to an end and know when to direct your assets and energy to those new opportunities. As examples, some of our clients who were major players in single family housing are now in the “economy” apartment market segment and are doing well. Doctors are expanding their practices and adding high value cash services like medically supervised weight loss to practices that were focused solely in other areas. Others have created booming new businesses like debt and credit repair that directly reflect the current economy.

Don’t take your market position for granted.

In a down economy discount solution, product and service providers emerge in every market. These competitors will be selling price first and many consumers won’t see the differences until they have been poorly served and you have lost the business. Some steps to fight this:

- Make sure that your network and professional relationships are as strong and developed now as they were before you reached your current level of success;
- Look for ways to distinguish yourself and your business and maintain the highest standards of professionalism and service;
- Look for every way to add value and collaborate with other top services providers you work with so that you are a natural and logical part of every project or client they are involved with. Become part of a best of class team of teams that delivers the highest value to the consumer. This is true of everything from medical services to commercial contracting;
- Continue to be the best, or at least great at what you do. “Good enough” should not be part of your vocabulary.

Guard your credit like gold.

Good credit has always been important on both personal and business fronts, but it is now more important that ever. As credit markets have tightened even the wealthy are having trouble obtaining credit for every day issues like home and auto purchase or leasing. Banks are scared and have pulled in the reigns on lending to all but those who have sterling credit, “good” is no longer good enough. They are also using late payments of any kind to move to the default interest rates permissible under various types on loan and consumer credit agreements as a way to generate fees and increase revenue internally. On a personal level this could mean that your VISA at 8.9% jumps to 29.99% APR if your spouse sends in the check late.

On a business level it is much worse. If your course of business has been to pay certain credit lines down late to a friendly creditor, it could now put you into default or cause an acceleration. We are also hearing that clients who have used revolving credit lines for years as part of their business model either for capitalization or to pay recurring expenses are suddenly finding that their credit lines have been terminated or drastically reduced as is permissible in the fine print of most such agreements. This is despite the fact that the client has had no change in income or credit. Banks are simply deciding that they have too much exposure and are proactively limiting your ability to draw that money out.

Solution? If you have a credit line that you know you are going to need or cannot risk losing – draw the money out now and look at the interest cost like an insurance premium; you may not want to pay it but if you need the “insurance” of having that money available it will not be available at any cost, certainly not in any short term scenario.

There are services out there that we have referred friends and clients to with great results. For an investment of a few hundred dollars many negative or inaccurate items can be removed in a short period of time increasing your credit score by dozens of points.

Check your business and personal credit reports and see if they are accurate.
We are also seeing that banks that are in financial trouble and which need to reduce their outstanding debt balances are playing dirty tricks like re-appraising property they financed over 18 months ago to “current market value” at ridiculously low valuations then going back to the borrower and saying they need more collateral or they will call they note as the “fine print” entitled them to do. How bad can this be? In one case the bank re-appraised my client’s multi-million dollar commercial property at about 50% of current fair market value and wanted an additional seven figures in collateral. Fortunately, this client had sterling credit and good professional relationships that allowed him to re-finance at a lower rate with a more solvent and ethical bank.

Keep more of every dollar you earn.

There are many things each of us could do to maximize our retained earnings. Again, now that money is harder to make, another way to increase revenue is to devote a small amount of resources to increasing efficiency.

These are just a few of the most obvious ways we see clients successfully achieving this goal:

Cost segregation Studies

These studies allow huge tax deductions now when you need them most as opposed to spread over 30 years at about 3% per year the way they are typically taken. Most commercial property, even leased, qualifies for the study and the deductions and we can even arrange for a free feasibility study for commercial property with an aggregate value of at least $1MM, an easily attainable entry level. As a bonus, you can ever re-capture lost depreciation for as much as the last 20 years!

Energy Studies.

Again, owners of commercial properties are seeing energy tax credits of up to $1.80 per square foot when the study is completed and simple low cost changes are made. Would that kind of recurring savings be valuable enough to you to change the kinds of light bulbs you use and add a skylight? In most cases it is.

Increasing Business Tax Structure efficiency

You walk around turning off lights, but is your business tax structure maximized? One of my Associates, Mr. Tom Maguire of Hebets and Maguire, as just one example, routinely saves both public and private corporation clients a significant amount of money on a re-occurring basis by refining and perfecting the choice of corporate formation, stock ownership options and identifying the most efficient business succession and executive compensation models. This goes far beyond the CPA taking the right deductions.

Increasing personal tax efficiency

We deal with high net worth clients every day and are continually surprised by the amount of money that they leave on the table for the government by not maximizing their legal options. For most, a 401K is not adequate tax planning. Even if the money you save is “long term” or retirement money that cannot be used now, you still get to keep it. Many of the most sophisticated programs provide multiple benefits and may also serve or support goals like estate planning and Asset Protection.

One glaring example is the use of special life insurance policies with high cash values that grow tax free, allow withdrawals tax free, and which offer statutory protection against creditors in many states. As an example, in Arizona that creditor protected amount is “unlimited” after 24 months in a plan. Other examples of planning to consider includes section 79, post retirement medical reimbursement, 412i defined benefit programs.

Don’t know where to start? Don’t worry, we can help show you which plans apply to your unique situation and which are guarantee of principle, no market risk, tax deductible and Asset Protected programs.

Doctors Asset Protection 101 - Featured on Wills, Trsust & Estates Blog

2010-08-30T12:19:00.000-07:00

The Wills, Trusts and Estates Prof blog of Professor Gerry W. Beyer recently featured my article "Asset Protection 101 For Physicians".

Professor Beyer, a Governor Preston E. Smith Regents Professor of Law at Texas Tech Univ. School of Law, has a great, informative blog that draws upon a variety of sources in related fields and it is an honor to have been included.

The link to the post, summary and downloadable PDF are below.

http://lawprofessors.typepad.com/trusts_estates_prof/2010/08/asset-protection-for-doctors.html

NEVADA TRUST FOR ASSET PROTECTION? BETTER MAKE SURE YOUR TRUST COMPANY STILL EXISTS

2010-08-11T11:36:00.000-07:00

Even within the specialized Asset Protection legal community professional opinions vary on the use and effectiveness of Nevada and other states' Domestic Asset Protection Trusts (DAPT's). One thing all agree on however, is that for such a strategy to hold up to even the weakest attacks the formalities of the state's trust laws must be met to the letter.

Since many Nevada DAPT's have been created by attorneys in other practice areas who dabble in Asset Protection or by promoters with no on-going guidance or client contact available (often not even attorneys) I think it is inevitable that a large number of people who have purchased Nevada trusts are going to wake up one day, need to "use" their trust and find that the trust company appointed and required by the state laws of Nevada no longer exists or that they have moved. In this case the trust, lacking proper legal formalities under Nevada Law, would offer little or no protection at all.

The full article on the Nevada trust business and those leaving, including the oldest trust company in the state, is here:
Nevada’s Oldest Trust Company Calls it Quits After 107 Years in Business

I suspect that we will see many planners and clients caught unaware by theses changes. Even worse, we will also hear tales of trust companies collecting fees and continuing to manage trusts even with their legal status revoked.

As always, we are watching the development and defensibility of the DAPT in various jurisdictions and hope to use it when and if it ever becomes a viable alternative to to the proven results of International Asset Protection Trusts. We don't feel the case law and the courts are there yet, especially given the current social and political climate that is so hostile to wealth and business owners.

Ike Devji

Tougher Tax Law For Overseas Assets

2010-08-10T14:48:00.000-07:00

August 10, 2010

Tougher Tax Law For Overseas Assets
(Dow Jones) A new U.S. law that is part of a crackdown on tax havens means that wealthy clients will be hit with stricter filing requirements next tax season.

New rules will result in duplicate reporting for some taxpayers and steep penalties for those who fail to comply. The law makes it more difficult to hide assets overseas, partly by taxing foreign banks that don't share information about U.S. account holders.

READ MORE:

Tougher Tax Law For Overseas Assets

The link above illustrates the need for proper tax counsel and full reporting when dealing with any offshore assets.

FRAUD - 10 WARNING SIGNS ABOUT YOUR 401K

2010-08-09T14:04:00.000-07:00

The U.S. Labor Department publishes

10 signs that your 401(k) retirement account may be subject to fraud:

1) Your quarterly 401(k) statement is consistently late or comes at irregular intervals.

2) Your account balance appears to be inaccurate.

3) Your employer failed to transmit your contribution to the plan on a timely basis.

4) A significant drop in account balance appears that cannot be explained by normal market ups and downs.

5) Your 401(k) statement shows that your contribution from your paycheck was not made.

6) Investments listed on your statement are not what you authorized.

7) Former employees are having trouble getting their benefits paid on time or in the correct amounts.

8) Unusual transactions show up.

9) Frequent and unexplained changes take place in investment managers or consultants.

10) Your employer has recently experienced severe financial difficulty.

This was excerpted from a a larger article by Jim Gallagher in St. Louis today - recommended reading if you or your clients have a closely managed retirement account of any kind.

http://www.stltoday.com/business/columns/jim-gallagher/article_f1ae39ae-58ef-5729-ab06-9d41edf6a850.html

Life Settlements: A Risky And Wild Investment

2010-07-30T11:13:00.000-07:00

As investors seek options that are resistant to the instability of the Real Estate and Securities markets many new options (and old ones) are being touted by promoters. Some are safe, others entail serious risks. This article is a great summary of issues to think about in Life Settlements.

Ike

(Dow Jones) Life settlements are not wildly popular investments. But they are wild investments. And to that end, federal regulators and lawmakers are fast at work trying to tame these slippery products, which promise a much higher return over more traditional conservative offerings.

A life settlement is a transaction in which an individual with a life insurance policy sells that policy to another person, who then assumes responsibility for paying the premiums.

For a great overview of the RISKS involved in these policies see the entire article:
http://www.fa-mag.com/fa-news/5882-life-settlements-a-risky-and-wild-investment.html

Arizona Real Estate Looks Grim for 2-5 Years - Which Means So Do A Lot of Things

2010-07-20T15:18:00.000-07:00

I attended the SYEP (Scottsdale Young Estate Planners) Meeting this afternoon. A local realtor shared some info that is supported by what I've seen from many other sources including my clients in the Real Estate business and in related businesses from fine dining to dry-cleaning:

-The next 2-5 years in local RE market will be ruled by short sales;
-FEDs are pushing banks to allow and work with more short sales;
-Lending is happening but mostly under the $400K (jumbo loan) limit;
-50% of AZ homes are underwater;
-Less than 5% of loan mods are working;
-The Tax Credit only worked primarily on homes under $400K;
-Inventory is slowly being absorbed and fewer homes are hitting the sale market (rentals?);
-All income levels are in trouble, but big homes in Paradise Valley are suffering the most - some are at 50% discount;
-Don’t plan on making money on "flipping". The local properties are all being bought up by syndicates that are making close deals and keeping individual players out of the market - they will outbid you on the courthouse steps.

Personally, I'm concerned about what's coming next year, when all the 5 year A.R.M.s written in the 2006 buying frenzy all mature and can't be re-financed, and will trigger a second massive wave of foreclosures and walk-always in the Phoenix metro area.

Those affected include builders, developers, and all others who make their living off the sales, maintenance and furnishing of new homes, from AC service to the pool guy.

I'd guess the consignment furniture business will be big along with mini storage and residential rentals for those out of their homes. It will be great time to be in debtor-creditor law, bankruptcy, debt settlement and credit repair.

Those in businesses that are logically related need to take a good long look at their assets, expenses, liabilities and legal and financial planning ASAP while they still have legal, cost effective options available. It will be too late when you really feel the pinch.

Those that are prepared will be in a great spot to take advantage of a buyers market and emerging opportunities and cash, AS ALWAYS, will be king. For more thoughts on getting ready for the flood - see what I sent my clients in Dec 07, and every year since, here: 2010 Business Survival Plan - http://arfinance.blogspot.com/2009/10/2010-business-survival-plan.html

Ike

ASSET PROTECTION F.A.Q.s - WHAT YOU SHOULD KNOW

2010-07-16T16:08:00.000-07:00

What is Asset Protection?
Assert Protection is a proactive, holistic system of legal and financial tools and strategies that preserve wealth and assets in all forms from loss, waste or spoilage. It also accurately analogized as NET WORTH INSURANCE.

Is it Legal?
Absolutely, if done at the right time by a professional and in a tax neutral way. Asset Protection planning in and of itself, if done at the right time, is a valid legal purpose on its own. Many of the tools and strategies used in Asset Protection also have legitimate business purposes for other reasons like tax efficiency, investment management consolidation, wealth transfer, and estate tax avoidance to name just a few.

Am I wealthy enough to do Asset Protection?
Probably, there are good strategies available at nearly every income and net worth level. The number one mistake made by lawyers, CPAs and Financial Advisors when advising clients if they need Asset Protection is telling them they are “not rich enough” to worry about it. That is terrible advice. While most of our clients are seven to nine figures in net worth, we also have a large group that is on their way to accumulating significant wealth. What all these clients have in common is that they have worked hard to accumulate what they have, regardless of the total dollar value. If the loss of all or most of your current assets would pose a significant threat to your family, business and way of life, you should probably examine the options available to you.

Will it get me in trouble with the IRS?
Not if it’s done the right way. The tools and strategies we use to protect thousands of clients are tax neutral and require full compliance and tax reporting. We never want to see your planning jeopardized because it put you harm’s way with the IRS. None of plans involve “secrecy” or “hiding” assets. Those amateur plans often assume that you will commit perjury and are based on the “hope” that you can hide something and that the courts won’t find it or ask about it. Hope is not a plan.

I already have a Revocable Living Trust (RLT), isn’t that Asset Protection?
No, if that’s the case you have great estate planning, an important and necessary part of any good system. However, an RLT provides absolutely ZERO protection against judgments, lawsuits and a hostile world. The first word is “revocable” so the courts will simply order that you revoke the trust and hand over the house, investments and other assets it holds. An RLT is Death Planning, as opposed to Asset Protection which is Life Planning.

Can I wait to do it until I really need it?
No. The number one flaw in most Asset Protection plans is TIMING. Most people wait until they have an exposure to take simple steps that could have protected a lifetime of effort. Trying to gift, move or hide assets after you have an exposure is fraud. In fact there is a specific name for it, Fraudulent Conveyance. Transfers you make under this harsh light can be set aside completely and create a hostile situation with the courts. The best time to act is always now, and every day that passes makes the planning you do a little stronger. Just like with insurance, you can’t insure yourself against an event or loss that has already occurred, only against future exposures.

What can be protected?
Almost everything, a partial list of the assets that can be protected would include:
- Investments like cash stocks, bonds and etc.
- Residences
- Investment Real Estate
- Interests in Businesses
- Valuable personal property like Art, Jewelry, Collections
- Business Equipment
- Future Income
- Cash Value of Life Insurance Policies

Do I lose control of my assets?
No, most our tools allow direct control by the client or someone the client wants in control, until and unless it is more efficient or safer for the client to delegate management to a fiduciary like a trustee. You will decide when and if that happens.

Are your Asset Protection tools International (offshore) or Domestic?
We use a system that incorporates both kinds of tools, but primarily domestic ones. What specific tools we prescribe to any individual client depend on a variety of factors including the nature of the assets they have, their value and the threats the clients faces. Every plan, like every client, is unique.

Can my lawyer do this?
Probably not. The upper level tools and strategies we use to protect thousands of clients and billions of dollars in assets are unique and special tailored to this purpose. If your planner was aware of these tools and risks, and was informed about your risks and the options available to you, it would already have been done and you would not be reading this. There are many potential planning pitfalls that lawyers who work primarily in other areas are simply not aware of and now matter how smart your counsel is they can’t be an expert at everything. Asset Protection is the sole focus of our legal practice.

How Do I start?
Just call and we will set a mutually convenient time to talk on the phone or in person. We will ask you a series of questions covered by attorney-client privilege that will allow us to get a real idea of the risks you face and what needs to be done to address them. You don’t need to do any “homework” before the call and most of the people we talk to can provide us enough detail to create a good plan. We will create a specific written plan of action and also provide you a very specific fee quote that will allow you to see how a small investment can protect a lifetime of hard work.

ESTATE PLANNING 101 - Should I have a Trust or Will?

2010-06-21T10:29:00.000-07:00

An estate plan is always necessary unless you want your estate to pass through “operation of law” which involves the long, uncertain, public and expensive process at your death with a stranger (the courts) deciding who gets everything you leave behind. This process often leads to heartache, delay and additional stress for those you leave behind, especially if they need the assets to sustain the family or if (all too commonly) family members may fight over what you leave behind.

A Simple Will comes into effect at your death, controls the distribution of your assets (who gets what and when), and names who the Executor of your estate, the person you chose to be in charge and carry out your wishes, will be. A Will is the most basic form of estate planning and still requires the estate and its assets to go through the probate process, meaning that there will be an expense and delay in transferring assets at your death. A will is also public, meaning that a record of exactly what you left and to whom is available. In our view, it’s best suited for those with limited and simple assets, few or no heirs, and those with no minor children, dependents or pets that require specific care and guardianship guidance.

A Revocable Living Trust (RLT) on the other hand includes all the elements of a will, is established and can take title to a certain assets during your lifetime when you (and your spouse) can actively manage and change it. The RLT avoids probate, passes assets privately with little or no public record and typically includes a variety of sophisticated estate tax avoidance measures. (This last issue is especially important given that many seasoned estate planners are preparing their clients for an expected estate tax regime that takes 55% of everything a married couple leaves over $2 Million as of January 1, 2011.) The RLT also names and has specific guidelines for the Trustees of your estate, appoints Guardians for your children and dependents and can retain wealth and “sprinkle” income off the principal to your heirs. It allows a countless variety of sophisticated directives including what you want done if you have some sort of incapacitation condition like an illness or mental issue, typically referred to as “living will” and “health care power of attorney” provisions.

If you don’t have an estate plan, or have had substantial changes to your family structure, wealth, children’s guardians, asset structure or gifting plans it’s time to get experienced help.

The basic estate planning tools noted above are only the tip of the iceberg. These are “death planning” tools, and do not protect assets during your life. A wide variety of Asset Protection, estate planning and family wealth management tools are available more easily and cost effectively than you know, call us to discuss your wishes and concerns!

AUTO INSURANCE AND ASSET PROTECTION - HOW MUCH DO YOU NEED?

2010-06-18T15:10:00.000-07:00

The results of an auto accident can be financially, physically and emotionally devastating. To help address this issue proactively, (the way any good Asset Protection strategy works) I asked my friend and Arizona attorney Michael Troncellito to give us some pointers. PART ONE of Michael's guidance deals with specific dollar amounts and types of automobile coverage insurance that are necessary to keep you safe in a sea of drivers of various skill, sobriety and legal capacity.

Yours, Ike

GUEST AUTHOR ATTORNEY MICHAEL TRONCELLITO

We all buy insurance because we are required to. Arizona and many other states have financial responsibility laws. Did you buy coverage to protect yourself from others with no or insufficient insurance? Probably not; not many people do. Most roll the dice hoping that the other drivers on the road will be at least as financially responsible as we are. However, the situation is often different than we hoped. We need to protect ourselves from these drivers with different types of insurance coverage.

The three most important types of coverage that I do not see enough accident clients have are:

-Medical Payments Coverage (“Med Pay”);

-Uninsured Motorist Coverage, (“UM”); and

-Under Insured Motorist Coverage (“UIM”).

Med Pay is a type of coverage purchased through your auto policy that will cover medical bills regardless of who is at fault for the accident. You can purchase varying amounts of Med Pay coverage. I recommend at least $5,000.00 worth of coverage to my clients. The premium is reasonable; usually between $85 and $120 per year. If you are not at fault for causing the accident, your premiums for Med Pay coverage will not increase. Use $5,000.00 worth of Med Pay coverage once and it will take the insurance company between 40 and 55 years to recoup that $5,000.00 in payments to you. If you don't have health insurance or have physical/medical conditions that could cause you to sustain greater than average injury you should have even more.

Uninsured Motorist Coverage is, in my professional opinion, an absolute necessity here in Arizona. If someone does not have insurance and causes an accident, you are likely out of luck when it comes to collecting your damages. But, if you have Uninsured Motorist coverage, your medical bills, pain and suffering, and lost income damages suffered as a result of an uninsured driver will be paid. Annual premiums on $100,000.00 per person coverage range from $85 - $185. If you did not cause an accident, your Uninsured Motorist premiums cannot rise simply by virtue of you using this optional and additional coverage.

Under Insured Motorist coverage is just as important as Uninsured Motorist coverage. They both work the same way. The difference is that Under Insured Motorist coverage will kick in and pick up the tab after the other driver’s insurance coverage is exhausted. The premiums are similar to Uninsured Motorist premiums, and the insurance company is prohibited from raising your rates for simply using the additional and optional coverage.

While I am not a fan of insurance companies, I am even less a fan of you not knowing how to protect yourself. If your insurance has not been reviewed lately, you should contact your agent. If your agent hasn’t called you in the last nine (9) months, you should get a new agent. Speak to a professional about these coverage types. If you have no one to speak to, feel free to call me. I can get you in touch with people who may be able to help you.

Our guest author, Michael Troncellito, http://phxinjurylawyer.com/ is an attorney who practices in litigation and personal injury law. He can be reached at mtroncel@cox.net or by calling his firm at 602-548-8595. Coverage limit requirements may be even more onerous for many of our high net worth readers and clients - always use information of this type as a general guide of issues to examine, not legal advice specific to you and your family.

Why Does a creditor protected CASH ALTERNATIVE make sense? Because 60% of AZ banks are vulnerable to FAILURE!

2010-06-14T10:48:00.000-07:00

We have been warning advisor partners and clients for some time about the vulnerability of banks across the country and how we feel a little risk spreading is a good idea from both a bank solvency and Asset Protection standpoint.

The first link below is to an article that shows how vulnerable some banks in Arizona are, as just one local example of a national crisis. There have been over 80 bank closings across the country since January 1 of this year and a highly placed banking executive has informed us that the FDIC has basically run out of money twice in the last nine months. The second Link describes one of the solutions we are implementing.

THE PROBLEM:
Report: 60 Percent of Arizona Banks Vulnerable to Failure:http://tinyurl.com/2dcgnp9

And one of the SOLUTIONS: Creditor Protected Alternatives To Cash:http://tinyurl.com/lkwqtv

Please take a look at this and share with anyone you feel it would help. As always, call us for help or with questions.

Yours, Ike

What Happens To My Stuff When I Die?

2010-05-25T14:03:00.000-07:00

The Following is a no-nonsense overview of some good basic Estate Planning questions and options by my friend Attorney Jay Young, a partner at the law firm of Marquis & Aurbach in Las Vegas. Call Jay and his team for help or with questions and make addressing this issue a top priority and an essential part of any well thought out financial plan for your family.

Yours, Ike

WHAT HAPPENS TO MY STUFF WHEN I DIE?

I tried for 15 years to get my friend to do some basic Estate Planning. He assured me he didn't need my help, and that he had everything "under control" without spending money on an attorney to do a Will and a Trust. My friend died last month and I am now trying to help his widow through the financial mess he left behind.

Now, my friend was an extremely intelligent man and very capable in many ways. But he did not have things "under control". Now, his widow will have to spend thousands of dollars in attorney fees, put his estate through probate, and lose almost 1/3 of the assets they worked so hard to accumulate. His widow is learning through my friend's mistakes that if you do not have an estate plan, the State will determine who gets your assets, not you.

Following is an overview of the ways one may transfer assets upon his or her death, discussing the risks and rewards of each method. We will also discuss the estate planning tools that are available to you to avoid the risks associated with each transfer method.

What Happens to My Stuff if I Die With or Without a Will?

No matter how many times you tell your spouse that you want "Johnny" to get your Ford Motor stock, your survivors will not decide who gets your assets upon your death unless you complete some basic estate planning. Those who die without a Will or who do not title assets such that they pass to a designee by operation of law or under the terms of a contract (discussed below), allow the State to determine who will receive their assets upon death. Assets that are not titled to provide for transfer at death may only be transferred by court order.

Unfortunately, those court proceedings are expensive. It is estimated that the average cost of these types of court proceedings is $10,000. Compared to the cost of simple estate planning devices, this is a great expense and is very avoidable. Having a Will does not even protect you from having to go to court, however. A Will is nothing more than directions to a judge saying. "Dear Judge: I do not want my assets to pass according to statute. Instead, I want them to pass as follows . . .." In other words, a Will virtually GUARANTEES that your loved one will have to go to court and spend attorney fees. There has to be a better and less expensive way, right? Read on.

How Can I Make Sure my Assets Pass by Operation of Law?

Some forms of ownership of an asset declare legally who will receive the asset upon your demise. Owning property in joint tenancy, as community property with right of survivorship, or designating that assets are held for the benefit of, payable on death to, or to be transferred on death to a designee are recognized in the law as valid ways to transfer ownership of an asset upon your death.

While these methods are fairly easy and cost-effective, people usually get into trouble when they THINK they have made these designations, but have not. My friend "forgot" to title cemetery lots and to designate a beneficiary on a bank account and stocks even though he thought he had everything "under control".

How Can Contracts Help me Pass Assets on my Death?

You can designate by contract that upon your death, certain assets pass to your designee. These contracts include life insurance policies, partnership agreements, shareholder agreements for closely help corporations, trusts, retirement benefits, stocks, etc.

How Can an Estate Plan Help?

A proper estate plan can help to make sure your assets pass to those you intend to receive them. It can ensure that your dependents are cared for both financially and physically (especially for minors). An estate plan can also help reduce taxes and attorney fees and keep your loved ones from having to go to court. The cost of a simple estate plan is a fraction of the average cost of going to probate court.

Many people think that a Trust is only for rich people. They would be wrong.

A Living Trust is a tool that should be utilized by anyone over 18 years old who has children and/or real property. When properly formed and funded, a Trust replaces a Will and will provide for the management and distribution of your assets upon your death without having to go to probate court. During your lifetime, you have complete control over your assets, even though you would place all assets (homes, bank accounts, stocks, etc.) into the Trust (meaning the Trust is the owner of the assets). You will need to designate a successor trustee, whose job it will be to transfer the property in your Trust according to your written desires. A Trust can be changed as often as you like after it is formed. When you die, your successor trustee will simply follow your directions and may transfer your assets without having to go to court or incur those attorney fees.

Of course, there are other estate planning tools that we recommend along with a Trust. Those include a Living Will (directive to doctors whether you desire life support, etc.), a Pour-Over Will, Power of Attorney, and others depending on the scope of your needs and amount of your assets.

How Can I Get Started Protecting my Family?

Call 702.821.2419 for a free consultation with one of Marquis & Aurbach's excellent estate planning attorneys. They can meet with you and explain how to best protect your family (every situation is unique and your estate plan should be designed just for you). Whether you make any changes is up to you, but let them help educate you on whether your family is at risk and how you can avoid that risk. www.marquisaurbach.com

Beyond Prenups - Where Asset Protection meets Domestic Relations Law

2010-05-12T14:16:00.000-07:00

We advise all of our clients to address pre-nuptial planning and tell them that combined with what we do, the value and surety that tools like the Asset Protection trust and our other tools provide will give them great additional security and take a great finite "snapshot" of their assets entering the marriage.

It has been our experience that careful planing also reduces or eliminates areas of conflict and dispute and helps control the financial and legal costs of such battles that enrich no one but the lawyers.

The link below is to an article in Private Wealth magazine that exapnds upon this concept.

Beyond Prenups - Where Asset Protection meets Domestic Relations Law
http://www.fa-mag.com/component/content/article/5521.html?issue=144&magazineID=3&Itemid=211#josc601

Tips To Avoid A Lawsuit - An Expert's View

2010-05-05T09:52:00.000-07:00

This article is by my friend and colleague Douglass Lodmell, a nationally recognized Asset Protection expert and founder of one the leading Asset Protection only law firms in the country, Lodmell & Lodmell, which I formerly managed and am now of-counsel with. One of the most basic concepts in the martial arts is "avoid harm" and while we are firm believers in having a great, pro-active defensive plan we also place great value on behavior and thinking that minimizes exposure in the first place - here are some of Doug's tips on that.

Yours, Ike

Perhaps these tips bring to mind the oft-quoted adage, it's not paranoia if they really are out to get you. That's pretty accurate, says Lodmell. There are plenty of greed-blinded, entitlement-minded predators out there who are all too willing to separate you from your hard-earned money. Protect yourself as best you can-but don't let fear and cynicism become your defining characteristics.

Don't flaunt your wealth. Don't practice a lifestyle that advertises you have a lot of disposable income. Even if you don't consider yourself wealthy, if you're driving a top-of-the-line luxury sedan and openly discussing lavish vacations, plenty of other people will assume that you are-and will see you as a juicy target for a lawsuit.

Draw up a pre-nuptial agreement before marrying. It may not be romantic advice, but from a legal standpoint it's definitely wise. Being served for divorce is the most common lawsuit.

Identify and correct any existing personal or business liabilities. Use well-drafted and thought-out planning before the fact, and make sure you have planned for dispute resolution in the most efficient manner for after the fact. A majority of businesses fail in the first three years, and these often turn from high hopes to high drama as partners fight over the remaining assets. Good planning before there are problems can limit future potential trauma.

Know the employment laws backward, forward and inside out. Few areas are as treacherous as those involving the employment of other people. Disgruntled ex-employees can fairly easily exaggerate or even fabricate incidents that "prove" they were victims of harassment or discrimination. Know how to legally interview, hire, and fire employees, and make sure those working for you know as well.

Don't play favorites with employees. You must treat everyone equally. Think twice before you give an employee a special break or extra time off for any reason. This also applies to being too harsh on one employee and not others. If you don't do the same for everyone, then you could be in for trouble.

Be scrupulously careful about doing anything that might be construed as sexual discrimination. Here are some disturbing statistics: according to Jury Verdict Research, 38 percent of all verdicts between 1996 and 2002 involved claims of sexual discrimination. Equally sobering is the report from Jury Verdict Research that 67 percent of sexual discrimination court cases end with the plaintiff winning. And in 2000, the mean award for sexual discrimination was a hefty $529,373.

Understand vicarious liabilities. Employers can be held accountable for the actions of their employees-sometimes even for actions the employers specifically told the employees not to do. Train them effectively. And if you have children, you have a whole other set of worries. Parents are often held accountable for the actions of their children (e.g., auto accidents).

Increase your automobile insurance coverage to the highest dollar amount. Your medical practice isn't the only place where you're at risk for a lawsuit-our nation's roads are fast becoming a highway to wealth. Make sure you are insured to cover a good chunk of medical expenses should you, your spouse or your children be involved in a lawsuit.

Implement binding Arbitration/Alternative Dispute Resolution agreements with all staff and everyone with whom you do business. The American Arbitration Association estimates that 80 to 90 percent of the disputes it mediates and/or arbitrates are quickly and cost-effectively resolved without litigation. It's just good business sense to legally require that any grievances between you, your patients, clients, or even your vendors be settled out of court in arbitration.

Adequately warn customers about potentially dangerous situations. Personal injury lawsuits are big business. New York City paid $53 million in 2002 for "slip and slide" complaints, which led them to shift the burden for such claims to property owners. Putting up signs like "We use microwave ovens" or "Caution: wet floor" may seem simple, but they can go a long way toward preventing lawsuits.

Treat your clients and customers in an exemplary manner. It may sound naïve or simplistic, but it's true: being nice usually pays off. Most of us simply don't like to sue people who we think are doing a great job. On the other hand, we have no problem suing those who "didn't care about us in the first place." If you needed it, that's one more reason to practice the Golden Rule!

"Yes, we do live in troubled times and our legal system is dysfunctional," says Lodmell. "But instead of bemoaning the lack of justice in our society, we must become a force for change. Any time you get the opportunity, speak up in favor of personal responsibility. Denounce greed. Always do what's right and set a good example for your children. Unlike changes in legislative and judicial reform, changes in public attitudes cannot be mandated. They can be changed only through grassroots efforts at the citizen level. Be the change you would like to see . . . the country you save might be your own."

PODCAST - Bay Area Attorney Madan Ahluwalia interviews Arizona Asset Protection Attorney Ike Devji on Asset Protection basics

2010-04-08T16:29:00.000-07:00

Recent interview that introduces the Asset Protection topic from a legal perspective - the first in a continuing series on the topic:

http://www.ahluwalia-law.com/wordpress/wp-content/uploads/audio/April_2010/04-03-10_Attorney_Madan_Ahluwalia.mp3

STATES WITH MOST ABUSIVE LAWSUIT SYSTEMS

2010-03-23T14:24:00.000-07:00

A TRIO of startling articles are linked below for your information. The first one highlights the erosion of what we have always cautioned as being the "emperors new clothes" tort reform and med-malpractice caps which the penny-wise and pound foolish have always thought would protect them. The second article is on the most abusive lawsuit jurisdictions in the U.S. which include not only what you'd expect (California) but also some southern states; good ol' boys love torts too. Finally, a short piece on illinois and the lawsuit crisis there. All good quick reads.

Yours, Ike

THE LINKS:

Georgia Supreme Court declares caps on malpractice lawsuits are unconstitutional

California has one of the worst legal climates

Illinois' Lawsuit Climate Among Worst in the Country

Warning For Employers: Service Helps Job Applicants Lie to You

2010-03-03T10:58:00.000-08:00

Warning For Employers: Service Helps Job Applicants Lie to You

Please read this important warning about a troubling web site brought to my attention by my friend and employment law expert Rachel Weiss. Many of my clients have employees that are in sensitive positions, and whose actions can potentially place those I serve in jeopardy - this service creates huge liability. I'd love to see the owners of the company below SUED when one of their "clients" kills or injures someone or creates some other harm, theft or loss because they got a job based on the false history and credentials they created. This is especially terrifying for medical businesses.

Thanks, Ike

If any of you are involved in any way with your company’s hiring process, you need to be aware of a service called Career Excuse.

Career Excuse essentially provides job applicants with a completely or partially fabricated work history, complete with fake company names and fake references with phone numbers.

Real people will answer your phone calls and confirm whatever the applicant states in his or her resume. Career Excuse has become so popular that they’re not taking new “subscribers” at this time. (Of course, individuals currently filling out applications and submitting resumes may already be signed up).

Visit their website – CareerExcuse.com – for more information. In particular, read the “What If I Get Caught?” page, which assures its clients that lying on a resume is not a crime.

Please do not hesitate to contact me with any questions about this or any other employment or litigation issue. Rachel R. Weiss (602) 256-4448 rweiss@gblaw.com

Increased Physician Exposure Under the False Claims Act

2010-03-02T14:51:00.000-08:00

Increased Physician Exposure
Under the False Claims Act

This is a guest piece by my friend Matt Weber, an expert health Care Attorney that helps protect doctors through out the Western U.S. with the law firm of Holland & Hart.

The Federal Goverment is cracking down on Medicare (and other provider) billing errors and lumping those with errors in the same boat with criminals and those commiting intentional fraud. Matt has provided some simple steps that will allow your practice to spot and fix these issues in a proactive, time and cost efficient manner, rather than at the point of a gun and at considerable disruption, heartache and expense.

Yours, Ike

By Matthew G. Weber, Esq., Holland & Hart LLP, Denver

The HHS Office of Inspector General reported healthcare fraud, waste and abuse savings and recoveries of nearly $21 billion last year. In addition, Congress enacted the Fraud Enforcement and Recovery Act of 2009 (FERA).

FERA dramatically increases funding for enforcement activity and also amends the False Claims Act (FCA) to create additional risk areas for physicians and medical practice groups. Now more than ever, your practice needs a solid compliance program to avoid costly investigations and penalties.

Physicians immediately can reduce this exposure by enhancing their ability to:

•Promptly return overpayments,
•Correctly bill government contractors such as Medicaid Managed Care Organizations and Medicare Advantage plans, and
•Protect non-employee agents and contractors from retaliation for good faith attempts to stop FCA violations, including whistleblowing activities.

Under FERA, it’s now a FCA violation to improperly retain an overpayment even if the overpayment is not the result of the submission of a fraudulent claim. In addition, a claim that is fraudulent can violate the FCA even if it is never “presented” directly to the government for payment. It’s enough if the claim is submitted to a federal contractor such as a Medicaid or Medicare managed care plan. It’s also enough if an “under arrangements” provider submits a false claim to a hospital that receives DRG Medicare payments.

That means that plans and hospitals will be monitoring billing by their providers like never before. At the same time, anti-retaliation protection has been extended to agents and contractors, so physicians must guard against actions during billing disputes that could be misconstrued as retaliation against those plans and hospitals.

What can you do right now to protect your practice? For starters:

• Implement a system for tracking and promptly returning overpayments,
• Step up monitoring and audits to ensure appropriate claims, and
• Revise your anti-retaliation policy to protect agents and contractors, and train your staff so they don’t inadvertently create the basis for such a claim during a billing dispute.

For more information or a personal review, please contact Matt Weber in Holland & Hart’s Denver office at 303-395-8565, mweber@hollandhart.com or through his LinkedIn profile: http://www.linkedin.com/in/matthewweber

Issuing a form 1099-C May Bar a Lender From Pursuing a Deficiency

2010-02-25T13:18:00.000-08:00

This article came to me from my friend Attorney Phil Guttilla, a tax and estate attorney that is one of my go-to guys and who is helping people with the tax consequences of being part of entities that are in crisis due to the current market.

Yours, Ike

A recent Arizona Court of Appeals decision held that an Internal Revenue Service Form 1099-C sent by a lender to a delinquent borrower was prima facie evidence that the lender intended to cancel the debt.

In AmTrust Bank v. Fossett, 1 CA-CV 08-0840, the Court stated that this evidence may be rebutted by the lender; however, the lender's intent was a factual issue which barred both parties from obtaining an early decision by summary judgment.

Generally accepted accounting principals and Federal tax law require lenders to report a discharge of indebtedness, which may give rise to taxable income for the borrower.

Under Arizona law, a discharge of debt may occur when a lender agrees not to sue or otherwise renounces its rights against the borrower by a signed writing.

In AmTrust Bank v. Fossett, the borrowers argued that because they reported and paid taxes as a result of the lender's Form 1099-C, the lender was precluded from pursuing a deficiency under Arizona law. The Court recognized that under Federal law, certain conditions mandate that the lender file a Form 1099-C even if it still intends to pursue collection. The Court also noted that if the lender was not required to report under Federal law but did, then that is also a factor to be considered in determining whether the borrowers were still liable for the debt.

The concurring judges noted that other courts have remarked in similar situations that there is no reason why a lender can not include a statement with the Form 1099-C sent to a borrower explaining the reason for issuing the Form 1099-C and a notice of the lender's intent to continue to pursue collection. While not controlling, the comment was instructional and we believe that a lender should include a reservation of rights and explanation letter with each Form 1099-C.

For more information on when a lender must file a Form 1099-C or for more information regarding the suggested form of letter, please contact Attorney Phillip Guttilla, pguttilla@rcalaw.com , (602) 440-4845 or see more about Phil Here:http://www.rcalaw.com/View-user-profile.php?qsln=g&user=96

9 Tips for Negotiating with Corporate Creditors

2010-02-09T09:09:00.000-08:00

This is a great simple outline by my friend Sean Shepherd about negotiating with corporate creditors. As always, get good legal counsel and implement a professional asset protection plan NOW to help protect your family's assets from an infinite universe of personal and professional exposure. - Ike

Guest Column By Sean Shepherd

Negotiating with creditors to effect an out-of-court workout is certainly not an easy task. Facing a loss, creditor managers and banks often adopt an adversarial posture that initially may be difficult to overcome.

The goal is to establish a consensual tone and tenor while acting to protect your own interests. Despite what they may say, credit managers and banks will be acting in their best interest and it is important to realize that their goal is to maximize their recovery. Accordingly, here are some tips that will help during negotiations:

1) Liquidity Analysis - Start by performing a comprehensive liquidity and cash flow analysis that uses current operating characteristics as a base line. The goal is to first determine what the business can afford to pay on a periodic basis.

2) Game Plan - Have a game plan BEFORE approaching the creditor and never agree to pay more than what the cash flow analysis suggests is feasible.

3) Understand the Other Side – This is one of the universal keys to negotiating—i.e., understanding your opposition’s needs and objectives. During negotiations, attempt to uncover the creditor’s needs and their bottom line—that is, the absolute minimum that they will or can accept. Depending on individual circumstances, 50% to 70% percent of the current balance of the credit is generally not unreasonable.

4) Stay Calm - Credit managers and banks may use a variety of tactics to coerce the borrower into a revised arrangement that is ultimately unrealistic. Hence, stay calm and never become intimidated by the person that you're negotiating with, even if they threaten you with lawsuits or other actions. Studies indicate that a calm person thinks more clearly and effectively than one aroused.

5) Timing - Don't lose sight of the fact that most successful negotiations take place over a matter of days or even weeks, with several rounds of offers and counter-offers. Don't become discouraged if the process seems to be taking longer than expected.

6) Alternatives – Try to present a couple of different restructuring/repayment alternatives so that you’re presenting a ―choice‖ to select from. This is, again, a key tactic in successful negotiations. If the company can afford, for example, to settle an account by paying a lump sum (as opposed to a payment plan), you'll have much more negotiating leverage. This is the universal power of cash, and it works in all venues.

7) Opposing Tactics - Remember that the person you're negotiating with is a trained professional when it comes to debt collections. A common tactic is for them to use complex legal terminology (during conversation or in correspondence) in order to confuse or intimidate the counter-party. Attend very carefully to what's being said and make sure that you understand exactly what you're being asked to agree to. If a legal issue arises during negotiations, side-line the topic by simply indicating that you can’t agree or comment until you’ve consulted with the attorney involved in the process.

8) Draft & Execute the Agreement - Once a workout agreement has been reached, make absolutely sure that everything that's been agreed upon is accurately expressed in writing, and that the agreement is fully executed by all parties—i.e., signed and dated.

9) Know the Law - Never lose sight of the fact that anyone attempting to collect a debt outside of court must conform with the Federal Fair Debt Collection Practices Act—understand what this says and what rights it affords the borrower.

Sean Shepherd is the Director of Business Development for VALCOR Consulting. VALCOR provides a full menu of enterprise valuation services and restructuring support to the middle market. Mr. Shepherd can be reached at: sshepherd@valcoronline.com or 602.214.4321

Florida Court: Insurer of Physician is not obligated to indemnify based on business liability policy’s professional services exclusion

2010-02-03T09:26:00.001-08:00

The District Court of Appeal of the State of Florida (the “Appeals Court”) recently affirmed the trial court’s determination that a doctor’s business owner insurer was not obligated to indemnify the doctor for a wrongful death suit that resulted, in part, from the mis-filing of laboratory results by the doctor’s assistant, although it did have a duty to defend.

SEE THE WHOLE STORY HERE: http://tinyurl.com/yar5tva

Warning for small businesses and those who serve them about Employee Lawsuits

2010-02-01T11:45:00.000-08:00

The link below is to a new article shedding light on the potential costs of employee lawsuits, an issue you have likely heard me talk about before. The Second link is to my piece on how we FIX this. Feel free to share with friends and clients who have employees.

Overtime lawsuits finding new targets :Small employers get hit as others wise up

http://sacramento.bizjournals.com/sacramento/stories/2010/02/01/story1.html?b=1265000400%5e2807911&ana=e_pft

SAFELY DEALING WITH EMPLOYEE EXPOSURE IN A DOWN ECONOMY:
http://arfinance.blogspot.com/2009/06/dealing-with-employee-exposure-in-down.html

Federal Estate Tax for 2010 - What you must KNOW and DO

2010-02-01T09:57:00.000-08:00

What you need to know: The Congressional debate on estate tax legislation has been put on pause during its recess, allowing current legislation that repeals the federal estate and generation-skipping transfer taxes to take effect.

What you need to do: Individuals should determine whether these changes will affect their estate planning and stay abreast of the situation in Congress once discussion resumes.

See all the details and the full article from LEXOLOGY here: http://tinyurl.com/yejuhze

The Foreign Account Tax Compliance Act of 2009 (Rangel-Baucus Bill)

2010-01-29T14:57:00.000-08:00

The Foreign Account Tax Compliance Act of 2009 (Rangel-Baucus Bill)

Recent Offshore Tax Haven Legislation

Since 2007, numerous attempts have been made at passing targeted tax haven legislation. Although none of these initiatives has progressed in any meaningful way thus far, under the Obama Administration there is a much higher likelihood that this type of legislation will be promoted.

SEE THE WHOLE STORY HERE

http://www.lexology.com/library/detail.aspx?g=0bab19ec-e537-4822-bf77-f67d6ebf0dcd&utm_source=Lexology%20Daily%20Newsfeed&utm_medium=Email&utm_campaign=Lexology%20subscriber%20daily%20feed&utm_content=Lexology%20Daily%20Newsfeed%202010-01-29&utm_term=

Life insurance proceeds received by limited partnership not included in gross estate of insured limited partner

2010-01-28T14:04:00.000-08:00

In Private Letter Rulings 200947006 & 200948001, the IRS considered whether a series of transactions among a partnership, corporations and trusts which altered the ownership and beneficiary designations of two life insurance policies required inclusion of the policies in the insured's estate.

See the Whole Article here: http://tinyurl.com/y865vlp

MUNI BOND BOND EXPOSURE - WARNING

2010-01-18T11:54:00.000-08:00

This article by investment expert Jeff Christenson was originally published in this month's issue of WORTH magazine. It sheds light on how the economy and depressed tax revenue threaten the value of Muni Bonds, what many consider to be the safest part of their portfolio. A must read for advisors, investors and CPAs. - Ike

As State Budgets Troubles Worsen, What’s Next for Muni’s?

A new crisis, that has not yet been addressed, exists within state and municipal
budgets. According to the Center on Budget and Policy Priorities in Washington, DC, an unprecedented level of state fiscal problems have been brought on by the worst decline in tax receipts in decades and these revenue declines show no signs of letting up.

The current recession is expected to be more severe than the last one, causing state fiscal problems to deepen and last longer than previous recessions. At least 48 states are addressing budget shortfalls for fiscal year 2010 totaling $168 billion and an unusual number of these states are still struggling to adopt a budget for fiscal year 2010, two months after the July 1st start date.

These fiscal problems are expected to continue into fiscal year 2011 and likely beyond. At least 36 states are anticipating significant deficits for fiscal year 2011, and these shortfalls are estimated at an additional $180 billion. Combine the shortfalls for the 2010 budget and those estimated for 2011, and the estimated total is at least $350 billion.

Unemployment, which peaked after the last recession at 6.3%, has already exceeded 10%, and many economists expect it to continue to rise. This continued rise in unemployment would further reduce state income tax receipts, thereby significantly increasing demand for Medicaid and other state-provided services. Also, sales tax receipts have fallen more severely than during the previous recession due to a reduction in the consumer’s access to sufficient lines of credit. This reduction in state revenue has forced states to implement a combination of spending cuts, withdrawals from reserves, and use of federal stimulus dollars. When combined with falling property tax receipts due to rising residential and commercial delinquencies and defaults, state and municipal revenues may continue to decline for some time.

Although we see a high level of risk in the municipal bond markets currently, with equity markets rallying, municipal bonds trading at premiums, and more cash moving off of the sidelines and into the markets each day, market conditions may stay positive through year-end or early next year before the sentiment reverses.

Investors who cannot afford to lose their current unrealized gains from the recent rally should be cautious and mindful of the increased risk to capital and strongly consider moving out of municipal bonds to protect capital.

During last year’s financial crisis, municipal bond prices fell by an average of 20%. The current rally has led to a recovery in pricing, with many municipal bonds again trading at premiums. This recovery in pricing is concerning, given the increasing budget shortfalls and the most extensive expense cuts by states and municipalities in history. Given the relatively low yield of most municipal bonds, the ratio of risk to reward seems out of balance. In fact, this may be one of the greatest selling opportunities in history.

Link to the article in WORTH: http://worth.com/index.php/advice?id=168&view=single

Disclaimer:

The views are those of Jeff Christenson and should not be construed as investment advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. Past performance does not guarantee future results.

Securities and Advisory Services are offered through Multi-Financial Securities Corporation, member FINRA, SIPC. Christenson Wealth Management is not affiliated with Multi-Financial Securities Corporation.

SCAM - “Brokers” and ‘Up Front Fees’ for Venture Capital

2010-01-07T16:26:00.000-08:00

This is a guest column by Greg George, a professional due diligence expert that I use as a resource. There are a huge number of people looking for financing due to the current lending climate and the bad guys know it. Here's what one expert has to say.

Yours, Ike

Risk and Threat Management – Presented by Greg George

Posted in Awareness by gtiadvisors on January 7, 2010

I’ve been monitoring what appears to be the longest discussion string in LinkedIn history (up to 223 comments now) going on at the Private Equity and Venture Capital Group.

The discussion question is: What do you think about ‘up front’ fees..? (for funding a deal)

There has been very good information posted, there has been very bad information posted, smart ass comments and bullying here and there (yes, very professional), those postulating their own ‘expertise’ – “…this is how good I am, I’ve done these $20mm+ deals, and…” etc etc (never tout yourself as an expert, it diminishes your credibility – If you’re worth the recognition, others will do that for you), and I’ve even seen a few spamming in trying to sell their services/deals – astonishing…

A few thoughts on ‘brokers’ and other middle men/women requiring fees ‘up front’ – usually under the guise of due diligence work that needs to be done, we have to better position your business plan and pro-forma’s, along with all the assurances and window dressings of how they will get your deal funded – these are great sales people, and most are frauds.

You’ll never get to a closing, they will stall and stall and stall… for months – and you may never see the ‘up front’ fees you gave them again. If you think an alternative financing or equity funding program might be the right deal for you, at minimum, at least find out:

•Who these people really are
•Talk to several past success deal client references they ’should’ provide
•Who do they represent as potential investors on your behalf
•What are the sources of funds (don’t get sucked in to a money laundering or tax evasion racket)
See if the person and firm are even licensed in the U.S: do a FINRA broker check.

FSA (UK) – also provides alert lists of EU and other international players in the finance and equity funding game not registered or vetted.

Another growing dimension of these economic times, new groups and angel investors charging ‘up front’ fees just to hear your pitch – a good example of what’s going on with these guys see: VentureHype (a great resource for many VC, Angel, start-up and investing topics) – the article also links to a well done ‘rant’ by Jason Calacanis on these practices.

Bottom line 1: If you do not have the expertise and require consulting help to get your business plan, pro-forma’s, your perfect 7-slide ppt for your pitch, and everything else up to speed (and rehearsed many times) to be received as an attractive, fund-able opportunity – set a budget, hire a competent firm or person and pay them to help you accomplish this.

Consulting services to get this right the first time, has nothing to do with capital raise.

Bottom line 2: Assume any “up front ‘broker’ fees” to arrange funding are frauds. Period (I’ve been dealing with these kind of people for a long time).

$4mm in up front fee frauds have come across my desk the past many months, especially since the real financial crash began to fall in September, 2008. In some cases we have been able to get the “up front fees” back on behalf of clients, even those fee’s that were wired offshore before the ink on the check was dry. We continue to work on others (leveraging RICO is a wonderful thing).

I have participated as an advisor to investors and as a decision panel member riding shotgun over the due diligence drill on companies seeking funding… during the past 12 months, the several organizations, equity firms, angels, family offices and high net worth individuals I’ve worked with have funded more than $30mm in start-ups, acquisitions and expansions – not one dime of any ‘up front fee’ was involved.

_________________________________________________

Greg George is Managing Partner of GTI Advisors; Threat Management Practice Group. A senior advisor to executives, business owners, private equity investors, M&A teams and transaction lawyers, Greg provides guidance on matters of enhanced due diligence research, threat analysis, security issues, actionable intelligence, fraud avoidance, and corporate espionage realities. For further information please visit http://gti-advisors.com or contact Greg directly: greg@gti-advisors.com

What you must know about Selling a business in a depressed economy.

2010-01-05T13:31:00.000-08:00

There are certain things we always warn our clients about when they are selling a business.

One of the issues we regularly address is making sure that the seller and their unrelated personal and business assets are adequately protected from any potential future litigation, including that often created by the buyer if he or she can't make the business work like you did and existing employees that may not be happy about the change or losing their jobs.

Our advice; plan for the worst (implement legal, proactive asset protection strategies) hope for the best, and have professional counsel in the sale and valuation of the business. For help in the valuation area I turned to our friend Sean Sheppard with Valcor, a professional business valuation company that works with clients nationwide.

Preparing a Business for Sale in a Depressed Economy
By Sean Shepherd

Economic tidal waves have crashed against the shores, affecting every business sector. Enterprises that have been in operation for 20, 30 and more years are now hanging on by a thread. In every sector you will find a business that faces an uncertain future, finding someone to buy the business and prepping the company for sale could be their best remaining option.

Like most economic crunches, cash is king. However, many business leaders do not have experience managing a business around cash flow. They have spent their entire careers focused on earnings and growth, and now find it hard to change their tact in such stormy seas.
Assess your financial condition. Is the company financially under performing or distressed? This assessment should show how much cash you need to generate and how quickly you need it.

Short-term cash requirements will trump a long-term strategy. In a less severe marketplace, it is smart to develop a sound long-term strategy and stay on course. If a short-term cash crisis drives a company out of business, your long-term strategy becomes irrelevant.

Cash flow wins vs. earnings per share. The key to survival is cash flow. That becomes an epic shift in mind-thought for most CFOs and managers. Since companies don’t normally focus on cash, that have troubles determining what their cash position is - or how long their cash will last. Distressed companies should track and forecast cash flow weekly, or even daily.

Attack from all angles. To build a war chest of cash, the company requires all of the leadership to be on the same page in making cash the top priority. All potential cash sources must be thoroughly examined over and over again. These sources include everything from uncovering price leakage to reducing cost and working capital to selling underutilized assets.

Build a portfolio. Develop a portfolio to generate cash. Focus on cost and working capital to generate an immediate liquidity cushion and to fund longer-term structural programs such as selling off business units or closing stores. A tactical combination of activities will strengthen the balance sheet and help to capitalize on the rebound.

Action speaks louder than analysis. Companies do not have time for detailed analysis or extended period of times pondering and thinking. The longer the company waits to choose a path, fewer options become viable.

Fire drill. Develop multiple downside financial scenarios for the business to learn what the key trigger points are, and more importantly, what specific actions you will immediately take to save cash.

Dig in and get back to growth a later date. Businesses focus on growth, except in the current economy. That usually means closing plants, laying off staff, liquidating underused assets, spinning off non-core businesses, and terminating unprofitable customer relationships. After digging in, there will be a reduction in cash erosion and new cash generated through asset sales.

Play for time, without stalling. Distressed sellers have only so much time available to arrange a sale. It depends upon liquidity: it’s a straight forward concept, the less capital you have, the less time you have to sell, and the lower the purchase price you’ll likely receive. The cost of accepting a new co-owner, or even taking on additional debt, may be worth it for the extra weeks or months to find the right buyer. Short-term cash infusions at this juncture also may provide you with an alternative to unappealing offers from opportunistic buyers. In this environment that sort of buyer will be the norm, and will seek out companies in desperate straits. The company will be so anxious to sell that it will accept a low price and unfavorable terms.

Court your buyer(s) and be flexible. The liquidity situation also will determine how to market a company to prospective buyers. From a tactical point of view, they may want to confine your efforts to a short list of prospective buyers that are willing to conduct abbreviated due diligence in exchange for pricing concessions or strong material adverse clause provisions that enable the buyer to pull out without repercussions.

Which type of acquisition makes the most sense for the company? If they have two or three distinct operations, it may be easier and more lucrative to sell each division to separate buyers. A buyer may anticipate synergies with one a certain product lines, but have no use for another part of your business. For example one of your divisions is in better financial condition than the others, meaning they may get a higher amount for that piece than if it were bundled with the-troubled segments.

Recognize the buyer’s needs in advance. Although due diligence often is considered the buyer’s responsibility, distressed sellers must perform their own due diligence. Buyers considering your company will expect to unearth some problems, but reduce the chance of future surprises. For example, that you should tell the buyer if you expect a further deterioration of your customer base or a lower growth rate going forward. Also, a seller’s representative will have compiled the following request for information from prospective buyers:

• Buyers historical and current financial performance numbers
• An accurate tally of assets
• Conservative future growth and performance forecasts
• Detailed analyses of all regulatory issues or outstanding litigation claims
• Provide up-to-date and detailed records of suppliers and customers
• If applicable, which third-party agreements would most benefit from such an alliance

Is short, different companies have different needs and there is no one solution to address how to prepare an enterprise for sale.

Now batten down the hatches, possible tidal waves ahead.

For help or more info, please contact:

Sean Shepherd sshepherd@valcoronline.com or 602.954.0010

YEAR END TAX SCAMS GETTING A BIG PUSH - AND PUSH BACK - FROM UNCLE SAM

2009-12-21T09:50:00.000-08:00

At the end of every year clients of all types (especially MD's) and advisors rush to find last minute ways to minimize the tax liability for the year. We see many plans of questionable value and legality pushed through in the last couple of weeks when due diligence is slowed by Holiday schedules and your trusted advisors' massive workloads. Here are some potential landmines to look out for. If you are being pressured into funding a plan over the holidays, make sure you know exactly what you are stepping into and have experienced counsel.

Where did this list come from? THE I.R.S.

In contrast to their many legitimate roles, foreign entities are increasingly being promoted as a means to divert income and conceal assets for taxpayers who have no real operations in a foreign country.

In addition to preferential tax regimes and protection against creditors (which is how and why I use them to protecet people every day - with full tax reporting), most tax havens also offer strict laws against disclosure of banking and business records. Generally, these nations do not have income tax treaties with the United States, and tax evasion is not considered a criminal act subject to Mutual Legal Assistance Treaties. Promoters of many abusive offshore schemes rely on the difficulty of access to records of tax haven banks, attorneys, and trustees. Furthermore, in the absence of government scrutiny, some offshore banks, attorneys, trustees, and other service providers have been known to falsify or fabricate records.

Despite being hidden or disguised, the income and assets of U.S. persons are still subject to U.S. tax. Taxpayers should be aware that abusive offshore arrangements will not produce the tax benefits advertised by their promoters and that the IRS is actively examining these types of arrangements. Furthermore, taxpayers and/or the promoters of these offshore arrangements may be subject to civil and/or criminal penalties.

Following are summaries of some identified schemes that make the IRS mad:

(Offshore) Limited Liability Companies (LLCs) - In response to efforts by the Organization for Economic Cooperation and Development (OECD) to eliminate harmful tax competition, some nations labeled as tax havens have accused OECD members of carrying on the very practices the members seek to stop. One example put forth is the ease with which nonresident aliens may do business through limited liability companies (LLCs) domiciled in the United States, in comparative anonymity. An October 2000 report by the General Accounting Office gives insight into the use of corporations as conduits for illicit funds. Abuse of anonymous corporations in the U.S. by foreigners mirrors the abuse of tax haven entities by U.S. persons.

Offshore Deferred Compensation Arrangements - Many highly compensated professional persons and business owners in the U.S. have been solicited to participate in "offshore deferred compensation plans". The U.S. taxpayer is encouraged to sever an existing employment relationship and substitute an arrangement in which the nominal employer is a foreign "employee leasing" company. The supposed result of this abusive arrangement is that the taxation of a large portion of the professional's or business owner's salary is deferred while he/she gains immediate access to the funds through loans or offshore-based credit cards. An improper deduction for employee leasing expenses is also created on the corporate tax return.

Fictitious or Overstated Invoicing - Some U.S. taxpayers have entered into schemes in which the taxpayer's U.S. business is billed by a purportedly unrelated offshore entity for goods or services (e.g., "consulting services") that are either nonexistent or overvalued.

Factoring of Accounts Receivable - A U.S. taxpayer's business may discount or "factor" its receivables to a purportedly unrelated foreign business entity. The discount or factoring fee significantly reduces U.S. tax liability, and is moved to an offshore entity where it can either be invested free of U.S. tax or repatriated for the taxpayer's use and enjoyment.

Abusive Insurance Arrangements - Some promoters have devised arrangements that are characterized as insurance arrangements, giving rise to a deduction for the U.S. taxpayer for "premiums" paid to a purportedly unrelated offshore insurance company. Often these arrangements are merely self-insurance, lacking in real transfer of risk.

Shifting of Income Using Offshore Private Annuities - Some promoters suggest that U.S. taxpayers may avoid or substantially defer tax on income streams or capital gains by exchanging property for an unsecured private annuity. In another abusive scheme an offshore private annuity is used in conjunction with an offshore variable life insurance policy as a devise to "decontrol" a foreign corporation or other entity used in an abusive sequence of transactions. As a result the promoter claims that the foreign corporation or entity is owned by the insurance policy and is not a, controlled foreign corporation, passive foreign investment company, or any entity controlled by a U.S. person whose income could be taxed in the United States to its owner.

Offshore Internet Business - For businesses conducted primarily through the internet, promoters offer "kits" which give the appearance that the business is foreign owned and operated. Transactions may be routed through offshore servers, and business receipts may be collected through offshore bank accounts or credit card merchant accounts. These schemes particularly target businesses that offer delivery of computer software and other digital products such as music, pictures, or video. They may also provide a means of operating offshore gaming activities.

Offshore Wagering - Over the last few years, gambling websites have proliferated on the Internet. Many of these virtual casinos are organized and operated from offshore locations, where the operators feel free from State and Federal interference. The operators of these activities may suggest that players in the U.S. are not subject to tax on their winnings, and may handle collections and disbursements in ways designed to facilitate avoidance of U.S. taxes.

Repatriation of Offshore Funds Using Credit Cards (such as MasterCard and VISA) issued by tax haven domiciled banks are a preferred method used by U.S. taxpayers to anonymously and covertly repatriate offshore funds that may or may not have been previously taxed. American Express cards are used in the same way but differ in that these cards are issued directly by American Express rather than by member banks.

Original link to I.R.S. - http://www.irs.gov/businesses/small/article/0,,id=106559,00.html

Estate Tax to Temporarily Expire Until Next Year - Now the Really Bad News

2009-12-17T09:13:00.000-08:00

Given the depressed value of many real estate and investment portfolios, there has never been a more tax efficient and advantageous time to implement the right kind of estate planning, start transferring assets at their current value and improve and tune up the life insurance components of your planning, here's why:

The 45 percent tax on estates of over $3.5 million for individuals, or $7 million per couple, is scheduled to expire on Dec. 31, 2009, only to return in 2011 at a 55 percent rate for all estates of over $1 million. During 2010, estates would be taxed at the capital gains rate of 15 to 28 percent when heirs sell off more than $1.3 million in inherited assets.

Call us for help in making sure that 55% of your life's work is not lost to a system that is VOLUNTARY - that's right, I said ESTATE TAX IS VOLUNTARY. Why? Because the law allows you to structure, transfer and insure you way to ZERO estate tax liability if you are willing to put a small amount of time, money and effort into it.

See the whole story here: http://www.webcpa.com/news/Estate-Tax-Temporarily-Expire-Until-Next-Year-52743-1.html?ET=webcpa:e623:134343a:&st=email

Yours, Ike

Do You Really Need A Buy/Sell Agreement?

2009-12-08T12:33:00.000-08:00

The post below is excerpted from the news letter of a colleague, financial advisor Steve Beatty who works with successful business owners all over the U.S. from his offices in the Las Vegas area. This edition of Steve's newsletter really deserved to be shared because it efficiently summarizes we exposures of not having a buy sell in place that can easily wipe out a business or family.

Yours, Ike

Part I

In our last issue of this Newsletter, we discussed the problems that can arise if a business continuity (buy/sell) agreement designed for one event (usually the death of a shareholder) is called upon to manage the more likely event of a shareholder’s departure during his or her lifetime. Lifetime departures may occur due to the retirement, termination, divorce or bankruptcy of an owner.

While it is true that poor design or failure to update the agreement—especially in tough economic times—can create significant problems, does that mean you and your co-owners shouldn’t have one in place? In a word, NO! The business continuity agreement may be one of the most important documents that you, as a co-owner of a closely held business, will ever sign.

For an idea of why, consider the case of Acme, a fictional company.
George Acme’s son-in-law, Tom Gardner, had worked for George for over 20 years. Tom had gradually assumed operational management and was the acting CEO. In recognition of Tom’s contribution, George had sold Tom—mostly at a low value—25 percent of the company.

Everyone expected that Tom would one day own Acme, Inc. But before that day arrived, George died and Tom's sister-in-law became the executor of George’s estate. She decided to sell George’s share of the company—at its full fair market value and for cash—either to Tom or to the highest bidder. At the time, she did not understand that no third party would acquire a majority position in a company co-owned and run by a disgruntled CEO.

Had Tom and George created a business continuity agreement that reflected their wishes about value, control and successor ownership, the business would have transferred at a fair price to the benefit of all concerned. Because they had not done so, Acme was unlikely to continue at all.

As mentioned earlier, a business continuity agreement can control the transfer of ownership in a business when a variety of events occur including: an owner’s death, permanent and total disability, termination of employment, retirement, bankruptcy, divorce, and a business dispute among the owners.

The buy/sell agreement can further require that the business or the remaining owners to purchase the departing owner's stock; or it may give an option to the business or the remaining owners to buy that ownership interest.

Lastly, it may give the departing owner the option to require the company to buy his or her ownership interest.

The agreement should establish the value of the stock, set the terms and conditions of the buyout, and give additional protection to all owners. In short, the business continuity agreement tells owners to whom they can sell, at what price and terms, and under what restrictions they can sell stock.

Advantages of a Buy/Sell Agreement.

The disadvantages of a buy/sell agreement are few if the document is well drafted and is kept updated for changes in ownership, value and other circumstances. (See Issue175.) With that in mind, the major advantages of a buy/sell agreement are:

1. Ownership in the business can be transferred only in accordance with the agreement. This benefits both the owner wishing to transfer stock and the other owner(s) wanting to acquire stock. In the first instance, the buy/sell agreement can provide a selling shareholder, or his/her estate, with a purchaser for fair value and upon terms and conditions that are mutually acceptable. For remaining owners (such as Tom), the agreement provides that any transfers of ownership must be made, or at least offered, to them. This eliminates the threat that an outside party or a co-owner's spouse or children will become owners of the business, thereby diminishing management, control and value.

2. Valuation is set not only for purposes of a sale, but also for estate tax valuation purposes. Privately owned businesses are notoriously difficult to value. Your idea of your business's value at your death may be much lower than the IRS's. If you haven't created a binding process for valuing the business, the IRS is free to impose its own determination of value. Take the initiative by designing a valuation appraisal process in your buy/sell agreement.

3. The terms and conditions of any transfer of stock, including interest rate, length of buyout period, and security can be fixed. In addition, where possible, the transfer can be funded. The agreement provides a clear estimate to a departing shareholder of how much money he or she will receive and how often. Likewise, the remaining shareholders know in advance the extent and duration of their buyout obligations. This allows both parties to plan their respective futures.

Had Tom and George created a buy/sell agreement with terms like these, a valuable business could have been transferred successfully. That transaction would have benefited Tom, George’s estate (family), Acme’s employees, customers, vendors and community.

Subsequent issues of The Exit Planning Review™ discuss all aspects of Exit Planning. The provider of this Newsletter (Steven Beatty) offers you unbiased information about what you may need to know — How To Run Your Business So You Can Leave It In Style™.

To get more info on these topics and Steve's great newsletters please contact him directly 702.804-6474 sbeatty@invest4business.com

OWN A BUSINESS? SEE THIS GREAT END OF YEAR TAX STRATEGY

2009-11-24T08:29:00.000-08:00

YEAR END DEDUCTION OR TAX ON RETAINED EARNINGS?
GUEST COLUMN By Ira L. Barnett, LUTCF

OK. We’re coming to the end of the year and my C-corporation made more money than projected (surprise, surprise in this economy) and has a decision to make: take a tax hit to Retained Earnings or find a deduction to offset some of the profits.

The Federal government, anticipating the Baby Boomer’s need for extended healthcare services, as they age, and wanting to deflect high utilization of Medicaid, created HIPAA (OK, this isn’t the only reason).

HIPAA (The Health Insurance Portability and Accountability Act of 1996) affects how Long Term Care insurance (LTCi) premiums and benefits are taxed, but, in this context, the primary concern is deductibility of the premiums.

Hey, wait a minute, we’re Baby Boomers. Spouse and I are getting older and we can expect, as that happens, that one (or both) of us will develop a condition that doesn’t allow us to do the things we used to do as easily as we used to do them. In fact, we may need, on occasion, someone to give us a hand.

Since we’re a C-corporation, we have kind of a ‘Trifecta’:

1. I can deduct, as a business deduction, 100% of the cost of LTC insurance for myself
AND for Spouse.

2. The premiums paid are not includible as income on my/our personal tax return.

3. Benefits paid aren’t taxable, at time of claim.

Oh, by the way, I do NOT have to cover any other employee. I can pick and choose, and if I only want to cover myself and Spouse - it’s OK.

But, if we do cover another employee, we can give them a very reduced benefit plan (compared to ours), and maybe, get some accommodations on the premiums charged and/or the underwriting rules applied to all of us. Wow, this is getting better and better.

In fact, I need to call my brother-in-law. His firm is an LLC taxed as a corporation and he’s eligible also. Oh yeah, Cousin Lou has that not-for-profit, and he’s can do this too.

Guess the next step is to sit down (and quickly) with my accountant and attorney, and that LTC insurance specialist that was calling, and have a conversation (wonder why my financial planner didn’t bring this up?).

Ira L. Barnett, LUTCF has been in the financial services industry since 1980. He is consulting with CFP®’s, CPA’s, attorneys and stock brokers to help them integrate Long Term Care insurance into
their practices, not as an insurance product, but, as a risk management strategy,.

Ira’s practice is centered in Orange County, California and he can be contacted via e-mail at iraleeb@aol.com or by telephone at either (847) 361-0030 or (714) 983-7901.

CIRCULAR 230 NOTICE: To comply with U.S. Treasury Department and IRS regulations, we are required to advise you that, unless expressly stated otherwise, any U.S. federal tax advice contained in this e-mail, including attachments to this e-mail, is not intended or written to be used, and cannot be used, by any person for the purpose of (1) avoiding penalties under the U.S. Internal Revenue Code

ESSENTIAL LEGAL AND FINANCIAL PLANNING CHECKLIST FOR BUSINESSES AND MEDICAL PRACTICES

2009-11-12T13:48:00.000-08:00

The following is a basic “must have” checklist (in no order) that most of our business owner and physician clients find to be indispensable. Many sources of loss or exposure can be easily planned for and addressed in a proactive manner.

The days of opening your doors and simply running a cash register are long gone; things are now much more complex. KEEPING your wealth requires an experienced and sophisticated team and in some cases almost as much effort as MAKING it in the first place.

Who's on your team? Do they have the skills and professional partners required to do the job or have you and your business outgrown them?

We see recurring patterns and common needs across many successful businesses. We help clients all over the U.S. coordinate all or any of these issues with the team of professionals we have assembled to help maintain their hard earned success. Please review this list to see which areas you need to update or explore. As always, call us with questions.

1. Asset Protection Planning – Think of it as Net Worth Insurance. Distancing you from your assets and protecting them from your personal and professional liability. This requires simple, cost effective and pro-active planning today while you still have well defined legal options. There is little or nothing to be done, except paying defense attorneys, if you get caught in a suit before you do something.

2. Coordinated Financial Planning – Making sure the money you make is working as hard for you as you worked for it and that the planning you have in place includes both growth and loss prevention strategies.

3. Disability Insurance – Protecting your cash flow against injury and illness, the times you need it the most. Large amounts of coverage with lots of sophisticated bells and whistles are available. Also, make sure that your cross-purchase or buy-sell agreements are properly funded. If your partner has a stroke or some other debilitating illness, how long will you (or he) be willing and able to make large monthly payments to a non-productive partner?

4. Liability Insurance – Let’s make sure it’s enough, and then let’s have a back-up plan (See item #1 above). This refers to both professional and personal liability coverage. These days we see multi-million dollar exposures from routine events like auto accidents routinely.

5. Life insurance – Making sure you have appropriate amounts to cover estate taxes, generate income for survivors and pay off debts you want settled. We also make sure that you are not paying too much and have the most flexible policy with the greatest number of benefits. Again, cross-purchase and buy-sell agreements must be carefully funded. We routinely see these agreements between our business owner clients that are either unfunded or under-funded. If your partner dies with no coverage or inadequate coverage in place you could easily find yourself across from their family in a courtroom explaining why the business should be liquidated to pay them the deceased’s share.

6. Worker’s Comp Coverage – Making sure that you and your employees are protected against injuries and their rising costs.

7. Employee Benefits Planning – From basic benefits like 401K to Executive Compensation planning. There are a number of ways to provide these benefits, some are more advantageous to you, the business owner than others.

8. Employee Handbook – Governs their rights and your responsibilities, controls actions in the workplace and your employer policy. If you don’t define certain polices the courts (or worse your employee’s attorneys) will define them for you. This is one of the highest ROI investments you can make in your business in my opinion.

9. Employee Dispute Resolution Package – Prevents employee lawsuits and makes you a hard target – reduces your exposure. Right now they win 75% of the time and the average sexual harassment verdict, as just one example, is at $530K. Your business is 5 times more likely to be sued by an employee than for any other reason. Have a plan.

10. Proper Corporate Formation – Is your formation or lack of it exposing you to liability and taxes? Will it hinder you in the case of sale? Do you have too many eggs in one basket? For example if your practice owns the building it operates from you are needlessly exposing the real estate asset to professional liability. Simple fixes can save you millions if something bad happens.

11. Professional Accounting Service – Do you have a good CPA? Taxes & payroll are just the beginning – have a pro. who proactively offers solutions and shows you legal tax avoidance options in addition to administrative and reporting functions we rely upon them for.

12. Real Estate Depreciation / Property Tax Reduction Study – Get tax deductions for depreciation NOW when you need them. You can get large current deductions on your investment real estate in a safe and legal way.

14. Income and Receivables Protection Planning – Make sure the cash flow you use to fund all these other things is safe. Your income can be “equity-stripped” just like a piece of real estate and the value put within protected structures that grow them in a protected and tax advantaged way.

15. Tax Reduction and Retirement Income Planning Including Pensions – Remember – it has to last at least 30 years and account for inflation! Instant lesson, compare the cost of an automobile or a loaf of bread 20 years ago to their costs today and see if inflation made a difference. Imagine dealing with that kind of cost increase on a fixed income 20 years from today.

16. Estate Planning – Who gets what, when and at what cost in estate taxes? You can make the Estate Tax exposure number zero in many cases. We do not consider dying in 2010 (when Estate tax will be zero for a very short time) to be a good estate plan. Do you really think our current national debt will allow doing away with this exposure? We and the tax and estate planners we work with don’t.

17. Exit Plan Strategy – Ok you’ve been successful – now what? Make sure that business is an asset when you want to leave and that the planning you have done minimizes your tax exposures on the sale or transfer. A little proactive work here can save you as much as 50% in taxes.

18. Long Term Care Insurance - The costs of this kind of care are soaring - can you risk your retirement savings and family's legacy by not having it? Medicare has a 5 year look back and requires that you are nearly destitute before they cover essential daily care.

As always – call or email for help or more info on any of these issues. Neither I nor any other planner can an expert at everything, but we have a tremendous list of national partner resources that we use to serve our clients and will be happy to point you to good help.

Yours, Ike Devji, J.D.

Business Owners and Executives - Are You Running Your Company's 401k? BEWARE OF LIABILITY!

2009-11-06T16:14:00.000-08:00

Guest Author Roger Wohlner

Below is a great article by financial advisor Roger Wohlner. It once again points out the difference between what we can and should be doing.

There is tremendous liability in managing investments, and most of you would never dream of taking on that liability for everyone in your company - or have you already done so?

Ike

Why Are You Running Your Company’s 401(k) Plan?

Smart Money recently ran an article depicting several small companies where either the owner or a group of senior managers were in charge of the firm’s 401(k) plan and who were largely making decisions regarding the plan on their own.

The article pointed out that many of these folks do not have a background in either investments or qualified plans.The focus of the article was to point out to plan participants that in many cases their plan was being run by folks who may or may not be qualified to make decisions as to investments offered, the custodial platform, or the plan record keeper.

My take on this article is to wonder why these small/mid-sized company owners and managers would want to take on this responsibility.

First of all, these individuals would be considered plan fiduciaries,which means that they can be held personally liable under certain circumstances for doing a poor job. Effectively managing a 401(k) plan involves taking the time to select and monitor the investments, overall plan expenses, as well as the fees and performance of all plan vendors.

Today it seems that business owners and their senior managers have more on their plates than ever. Running a 401(k) plan is about more than the investments. Total plan cost has always been a key issue and is coming more into the limelight as the spotlight shines on the issue of Fiduciary roles and obligations.

Selection and monitoring of Target Date funds is receiving much attention in the press and in Congress in light of the losses suffered in 2008 by some of the shorter maturity date funds. Defaulting to the funds offered by a bundled provider is not always the right answer, this option will likely come under more and more scrutiny over the next few years.

Even if the business owner is a knowledgeable investor in his/her own right, does this knowledge translate into the ability or the time to select and monitor all aspects of a solid retirement plan that is a great option for the majority of the company’s employees?

I’ve seen instances of plans that will take the suggestions of their bundled provider (a fund company such as Vanguard, Fidelity, or T. Rowe, or an insurance company such as Prudential) and implement those suggestions as the plan’s investment lineup. The representatives of these companies are not plan fiduciaries, but company managers running the plan are. I doubt that these folks are trying to do the plan any harm, but at the end of the day their loyalty is to their employer not the plan participants.

If your company’s plan is via an insurance company, your agent or registered rep may be providing investment advice to the plan. Again, this person is likely not a fiduciary, they receive commissions paid by the provider and their loyalties are at best divided.

In the interest of full disclosure I am a fee-only consultant to 401(k) plans providing advice to small/mid-sized plans. If this post seems self-serving I apologize, but this is a key issue for both owners/managers of these companies and their employees.

In my opinion, running the company’s 401(k) plan requires a level of diligence and expertise that the “do it your selfer” business owner often does not have. Pulling out a Morningstar report on the funds once or twice per year does not, in my opinion, constitute proper diligence and monitoring of the plan.

For further reading in this area, please see Roger's prior posts:

The Process of Monitoring Investment Holdings http://bit.ly/Wnaj8

Characteristics of a Good 401(k) Plan http://ow.ly/ySZf

Hellish Retirement Plans http://ow.ly/yT0i

Here is a link the Smart Money article that inspired this post Who's Running Your 401(k): An Overview http://ow.ly/yT1I

Roger Wohlner,CFP® is a Fee-only financial advisor with Asset Strategy Consultants in Arlington Heights, IL. 847-506-9827; rwohlner@comcast.

People Don’t Live In Delaware. But They Keep Their Money There.

2009-11-04T14:44:00.000-08:00

We see lots of discussion about the "best" legal & financial jurisdictions. If you are familiar with my writing or the work we do in protecting billions of dollars for our clients you know what I think of most domestic jurisdictions and that we think that they have little or no value for Asset Protection despite any nominee corporation b.s. and promises of secrecy that the snake-oil salesmen in various states pedal.

The link below is to an interesting piece about Delaware, which is also now promising Asset Protection through domestic asset protection trusts that we never use because they fly in the face of full faith and credit laws and we don't want our clients to be test cases.

Yours, Ike

See the story here on DEALBREAKER:

Its beaches don’t compare with those of Bermuda or the Cayman Islands. You can’t ski there. But the most boring state in the union is best damned tax shelter on earth.

The First State is finally first at something else, according to the Tax Justice Network. It’s the best place for non-Americans to hide from their taxmen, earning the august moniker, “most secretive financial jurisdiction.”

http://tinyurl.com/DELAWAREWTF

SOCIAL MEDIA FOR EMPLOYERS AND BUSINESS OWNERS

2009-11-02T19:07:00.000-08:00

Massive increase in the use of social media for both business and personal use has created many new issues for employers. As our clients include thousands of business owners affected by these new tools and the liability they create, we turned to Employment Law expert, Attorney Rachel Weiss for a quick outline of current issues.

MySpace and Facebook and Twitter, Oh My!

Time to Start that Workplace Policy

Employers, it’s time to wake up. According to a 2009 survey conducted by Deloitte LLP*, 55% of employees visit social networking sites during work hours. More than a third of the employees surveyed don’t consider what their boss, co-workers, or clients would think about their online postings. Here’s the big red flag – almost 75% say it’s easy to damage a company’s reputation using social media.

While there’s no way to completely eliminate the legal and business-related risks posed by employee online networking activities, developing and enforcing a social media policy is crucial to avoiding legal pitfalls.

The exact wording will depend somewhat on the nature of the business and workforce, but at a minimum, a good social media policy should include these provisions:

1. Don’t expect privacy. Employees do not have a reasonable expectation of privacy if they use social media for personal purposes on a company computer or network.

2. Use good judgment. Employees may not post comments that are disrespectful, offensive or damaging to another employee or the employer’s business interests. The use of social media must not violate any other company policy (such as a computer usage or anti-harassment policy).

3. Only on your own time. Employees are prohibited from participating in social media during work time.

4. Post as yourself. Employees may not post anything that could in any way be attributed to the employer. Employees must notify readers that the views, opinions, ideas, and information are their own and are not sanctioned by the employer, and company trademarks or logos should never be used.

5. Keep secrets. Employees are prohibited from disclosing proprietary information, data, trade secrets or other confidential non-public information.

6. Don’t mess up. Violation of this policy may result in disciplinary action up to and including termination.

Distribute the policy in writing to every employee. Add it to any existing employee handbook.

Finally, enforce the policy. Better to have no policy at all than to have one and ignore it.

Rachel Weiss is an employment law attorney with the Phoenix firm of Gammage & Burnham, PLC. For additional information regarding this or any other employment-related legal issue, Rachel can be reached at (602) 256-4448 or rweiss@gblaw.com.

* Social Networking and Reputational Risk in the Workplace, Ethics & Workplace Survey, Deloitte LLP 2009

2010 BUSINESS SURVIVAL PLAN

2009-10-30T10:55:00.000-07:00

ASSET PROTECTION UPDATE
RECESSION BUSINESS SURVIVAL PLAN
© Ike Z. Devji, J.D.

Another version of this went to my clients in December of 2007. I hope your advisors shared similar insights with you.

As we move into the second quarter of 2010 we look back at the lessons learned and forward to new opportunities. Below are some critical points we have seen illustrated many times by those we work with, some of the most successful and intelligent people in their various professions and businesses. Despite the phenomenal track record many of them have in terms of making money safely, predictably and responsibly for many years, no one was left untouched by the recent crisis. Here are some of the 2008 and 2009 “lessons” we feel it is most important to reflect on and examine for yourself as we tackle 2010.

As always, contact me for more specific information on any of these issues.

The right financial advice matters now more than ever. We have seen that at the worst, some clients lost as much as 60% of their investment portfolios due to the market and their investment allocations while others were down only a fraction of what the market lost and are relatively free of anxiety. Why the huge disparity in results between advisors? What we see is that it is relatively easy to make money in good times by using a simple allocation table that at first glance seems well diversified between different types of investments such as technology, energy and etc. What those plans, such as the ones we see from big commercial brokerage firms or “wire-houses” are typically lacking in is a good down-market strategy that values principal protection as highly as it does growth. There are ways to get all or most of the market growth available with guaranteed rates of return or principal guarantees. These types of strategies, when properly allocated are the backbone of what saved the second, more fortunate group of investors described above. These clients are not only whole or close to it, but are now poised and financially equipped to take advantage of emerging opportunities.

Again, as the economy and income and profit slow, never taking a step back, or at least taking as few as possible, becomes more important than ever before. Remember, a portfolio that is down 50% will need to DOUBLE to get back to where it was. How long did it take you to double your money the last time? Do you have that kind of time left? If you don’t like the way you answered those questions for yourself, perhaps it’s time to take a good look at how you are structured and what kind of stop-loss measures you have in place. In many cases it is not too late to make some positive changes and “buy and wait” is not the right answer for every investor or every investment.

NOW is always the best time to act on preventative legal planning.

This year we saw many successful people who always meant to complete essential planning like Asset Protection and advanced Estate Planning precluded from doing so either wholly or completely. In some cases their unexpected legal exposures made the planning ineffective or illegal, in others their financial positions in terms of debt, credit and cash flow changed so rapidly they were locked out.

We understand that doing this kind of planning takes time, energy, and resources that are already scarce for the dynamic individuals we work with, and that it seems to lack the kind of time sensitivity that other matters, like responding to a lawsuit, would justify. The real truth however is that every day that passes without these issues being properly addressed jeopardizes your net worth and your family’s security, the thing that many of you are working so hard to create.

We have countless stories from the last 6 months alone of fortunes lost because of the way easily protectable assets were held and exposed to creditors, families thrown into crisis when the bread winner passes away in an accident without adequate estate planning and life insurance or is disabled without disability coverage in place, and unexpected liabilities taking away dreams.

We equate this lack of attention to these issues to driving to work every day on a busy freeway without auto insurance or operating without a malpractice policy in place. These are odds that most cannot afford to bet on. Take the time and make the investment in YOURSELF and the years you have put into your current level of success and address these issues now. Preserving what you already have when money is harder to make is a good first step.

No program lasts forever, when the door is open seize the opportunity. Many of the most productive and sophisticated wealth preservation techniques such as Accounts Receivable Financing to leverage and protect future income and Premium Financing for large estate planning cases have disappeared or slowed to a crawl as the banking and insurance industries continue to be devastated. Even clients with nine-figure net worth levels are having trouble obtaining the kind of low cost financing that was available for them to help leverage their wealth and avoid estate taxes even 6 months ago. Add to that increasingly stringent underwriting by insurance companies and you have the worst possible storm for the affluent. We are now in the unfortunate position of having to tell many of those we counseled on these issues a year ago and who skeptically heard us say that there was a time pressure involved that the programs are not available or that they are no longer qualified under more stringent underwriting guidelines. Of course, they can still pay for the planning, but at the full cost and by paying the premiums directly in cash at a time when cash flow is king as opposed to 6 months ago when they could have had it for as little as interest only at less than 6% fixed rate loans. What does this mean? In one case it meant a client with an eight figure estate tax exposure looking at a premium of over $250K per year as opposed to less than $50K. It’s just math.

We like leveraging wealth and using credit, but you must have a disaster plan. Those in the real-estate business are the most obvious example of what a lack of credit and financing can do, but all types of industries have been crippled by current economic conditions. We have many of the most successful real estate professionals in the country as clients and have felt and shared their pain. What has been less obvious is the impact on other businesses like shipping, dining, small businesses that rely on services and discretionary income, banking, appraisal services, elective medical procedures, health and beauty businesses, the list is infinite.

No business is recession proof. Diversify and properly insulate your income streams if possible and be ready to be flexible and spot ways to identify new opportunities for your business and your skill set.
Realize that your niche, as you have defined it, may come to an end and know when to direct your assets and energy to those new opportunities. As examples, some of our clients who were major players in single family housing are now in the “economy” apartment market segment and are doing well. Doctors are expanding their practices and adding high value cash services like medically supervised weight loss to practices that were focused solely in other areas. Others have created booming new businesses like debt and credit repair that directly reflect the current economy.

Don’t take your market position for granted. In a down economy discount solution, product and service providers emerge in every market. These competitors will be selling price first and many consumers won’t see the differences until they have been poorly served and you have lost the business. Some steps to fight this:

- Make sure that your network and professional relationships are as strong and developed now as they were before you reached your current level of success;
- Look for ways to distinguish yourself and your business and maintain the highest standards of professionalism and service;
- Look for every way to add value and collaborate with other top services providers you work with so that you are a natural and logical part of every project or client they are involved with. Become part of a best of class team of teams that delivers the highest value to the consumer. This is true of everything from medical services to commercial contracting;
- Continue to be the best, or at least great at what you do. “Good enough” should not be part of your vocabulary.

Guard your credit like gold. Good credit has always been important on both personal and business fronts, but it is now more important that ever. As credit markets have tightened even the wealthy are having trouble obtaining credit for every day issues like home and auto purchase or leasing. Banks are scared and have pulled in the reigns on lending to all but those who have sterling credit, “good” is no longer good enough. They are also using late payments of any kind to move to the default interest rates permissible under various types on loan and consumer credit agreements as a way to generate fees and increase revenue internally. On a personal level this could mean that your VISA ay 8.9% jumps to 29.99% APR if your spouse sends in the check late.

On a business level it is much worse. If your course of business has been to pay certain credit lines down late to a friendly creditor, it could now put you into default or cause an acceleration. We are also hearing that clients who have used revolving credit lines for years as part of their business model either for capitalization or to pay recurring expenses are suddenly finding that their credit lines have been terminated or drastically reduced as is permissible in the fine print of most such agreements. This is despite the fact that the client has had no change in income or credit. Banks are simply deciding that they have too much exposure and are proactively limiting your ability to draw that money out.

Solution? If you have a credit line that you know you are going to need or cannot risk losing – draw the money out now and look at the interest cost like an insurance premium; you may not want to pay it but if you need the “insurance” of having that money available it will not be available at any cost, certainly not in any short term scenario.

There are services out there that we have referred friends and clients to with great results. For an investment of a few hundred dollars many negative or inaccurate items can be removed in a short period of time increasing your credit score by dozens of points.

Check your business and personal credit reports and see if they are accurate.
We are also seeing that banks that are in financial trouble and which need to reduce their outstanding debt balances are playing dirty tricks like re-appraising property they financed over 18 months ago to “current market value” at ridiculously low valuations then going back to the borrower and saying they need more collateral or they will call they note as the “fine print” entitled them to do. How bad can this be? In one case the bank re-appraised my client’s multi-million dollar commercial property at about 50% of current fair market value and wanted an additional seven figures in collateral. Fortunately, this client had sterling credit and good professional relationships that allowed him to re-finance at a lower rate with a more solvent and ethical bank.

Keep more of every dollar you earn. There are many things each of us could do to maximize our retained earnings. Again, now that money is harder to make, another way to increase revenue is to devote a small amount of resources to increasing efficiency.

These are just a few of the most obvious ways we see clients successfully achieving this goal: - Cost segregation Studies. These studies allow huge tax deductions now when you need them most as opposed to spread over 30 years at about 3% per year the way they are typically taken. Most commercial property, even leased, qualifies for the study and the deductions and we can even arrange for a free feasibility study for commercial property with an aggregate value of at least $1MM, an easily attainable entry level. As a bonus, you can ever re-capture lost depreciation for as much as the last 20 years!
Energy Studies. Again, owners of commercial properties are seeing energy tax credits of up to $1.80 per square foot when the study is completed and simple low cost changes are made. Would that kind of recurring savings be valuable enough to you to change the kinds of light bulbs you use and add a skylight? In most cases it is.

Increasing Business Tax Structure efficiency. You walk around turning off lights, but is your business tax structure maximized? One of my Associates, Mr. Tom Maguire of Hebets and Maguire, as just one example, routinely saves both public and private corporation clients a significant amount of money on a re-occurring basis by refining and perfecting the choice of corporate formation, stock ownership options and identifying the most efficient business succession and executive compensation models. This goes far beyond the CPA taking the right deductions.

Increasing personal tax efficiency. We deal with high net worth clients every day and are continually surprised by the amount of money that they leave on the table for the government by not maximizing their legal options. For most, a 401K is not adequate tax planning. Even if the money you save is “long term” or retirement money that cannot be used now, you still get to keep it. Many of the most sophisticated programs provide multiple benefits and may also serve or support goals like estate planning and asset protection.

One glaring example is the use of special life insurance policies with high cash values that grow tax free, allow withdrawals tax free, and which offer statutory protection against creditors in many states. As an example, in Arizona that creditor protected amount is “unlimited” after 24 months in a plan. Other examples of planning to consider includes section 79, post retirement medical reimbursement, 412i defined benefit programs. Don’t know where to start? Don’t worry, we can help show you which plans apply to your unique situation and which are guarantee of principle, no market risk, tax deductible and Asset Protected programs.

OWN VACANT PROPERTY? HERE'S A RISK YOU MAY NOT BE AWARE OF - YOUR INSURANCE HAS BEEN CANCELLED

2009-10-21T14:42:00.000-07:00

The news is filled with stories about the unfortunate reality of vacant properties. As just one example, office property in Phoenix Arizona now stands at a 26% vacancy rate and the news regularly features stories on homes and commercial properties that have been stripped and damaged by squatters, theives and vandals.

We have also seen the devastating results of this kind of damage first hand as clients with vacant luxury homes and Class A offices have had their property stripped right down to the copper wires in the walls, pool equipment and even garage door opening systems!

Homes and businesses alike are standing empty. Many owners may who purchased homeowners/dwelling or business insurance policies while the homes or businesses were occupied have incorrectly assumed they are still secure with that coverage in place now that the property is vacant.

WHY ISN'T IT COVERED?
Vacant or unoccupied property presents special challenges. The premium charged for occupied property does not take into consideration the increased exposure of vacant and/or unoccupied property. The insurance provided by most policies is limited, and may not respond at all if the property has been vacant for more than 60 consecutive days (prior to a loss)!

Many if not most insurance companies will cancel coverage immediately if they become aware of the vacancy. Even if the policy is not canceled there may be major problems in the event of a loss. The occupancy status is considered essential (material) to the insurance company. When the use and/or occupancy of a property changes many insurance companies no longer want to insure the property.

WHAT THIS MEANS
If you have vacant commercial property and your coverage is cancelled you would be personally labile for the following:
- Accidents and Injuries on the property;
-Catastrophic loss from flood or fire;
-Vandalism and Theft including broken glass;
-There is no coverage for freezing of a plumbing, heating, air conditioning, or automatic fire protection sprinkler system or of a household appliance caused by freezing if a structure has insufficient heat, and/or the water system has not been shut off and drained;
- On a commercial building if there is 31% or less occupancy in addition to the above, ALL claims are reduced by 15%;
-Depending on the policy and insurance company involved the entire policy may be void in the event of a vacancy.

There are, however, solutions. We pride ourselves on helping to find solutions to these issues for our clients and partners. One of these solutions is our friend Geri Custer, at Geri Custer Insurance who provided us with this important information. We must, however, be first made aware of the vacancy or occupancy. Please contact Geri if your property undergoes an occupancy change and she will help guide you through the necessary steps to obtain proper coverage. See more about her at her great informational website here: www.insureUS.biz or call them at 602.942.2669.

Ike Devji's Article Featured Nationally on Financial Advisor Match

2009-10-19T15:40:00.000-07:00

The Article: Creditor Protected Cash Alternative and Wealth Multiplier?

Was picked and published on FinancialAdvisorMatch.Com as of this AM.

Click here to see the article in full :http://www.financialadvisormatch.com/community/articles/1253_creditor_protected_cash_alternative_and_wealth_multiplier_.html

ARE YOU AN ACCIDENTAL TAX CHEAT? THE IRS IS LOOKING FOR YOU.

2009-10-12T16:19:00.000-07:00

The IRS is currently running a "Voluntary Disclosure Opportunity" that expires October 15, 2009.

You have likely heard reference to this amnesty event in the context of allowing those with "secret" offshore accounts (see my other posts on this amateur practice) to report them and get square with the tax man - but there are many other situations that require reporting and which are often intentionally or accidentally overlooked - be sure you and your clients are fully aware.

If any of the following situations apply in your case, make sure that you file proper forms to report these transactions and if required declare income prior to the extended deadline of October 15, 2009 in order to avoid severe and harsh penalties including criminal penalties:

1. Do you have a foreign bank account including a security account, credit
card account etc outside the United States that you did not report as
required by law?

2. Do you have unreported income from a foreign country?

3. Do you own any unreported foreign entities such as corporations, trusts,
partnerships or disregarded entities?

4. Do you own Mexican real estate through Mexican Bank Trusts?

5. Do you have rental income from property outside the United
States?

6. Did you receive unreported inheritance from outside United States?

7. Are you a beneficiary in any trust formed in foreign jurisdiction? Did
you receive any unreported distribution from the trust?

8. Have you sent money outside United States by way of loan, equity etc in
last few years and not reported it to the IRS?

If any of the above situations apply to you, please contact professional accounting help as soon as possible so that they can help you - Penalties will be exceptionally harsh after October 15, 2009.

My thanks to Pallav Acharya, CPA, FCA, CIM of CPA global Tax & Accounting
for this list. Phone: (480) 889-8949 - Pallav is in Scottsdale, AZ and works with clients all over on international taxation issues.

TAX IMPLICATIONS OF REAL ESTATE DEBT REDUCTION PLANNING

2009-09-28T10:57:00.000-07:00

The excerpt below shows the serious tax implications of Debt Negotiation and Reduction on Real Estate that are often overlooked it the process.

To add insult to injury, owners of distressed property may realize gross income and incur tax liability from a real estate debt workout with a lender. Fortunately, certain provisions under the Internal Revenue Code, including new legislation, exempt certain debt relief income from taxation or permit deferral of such income.

See the whole article here:
http://www.globest.com/news/1504_1504/florida/181256-1.html

CREDITOR PROTECTED CASH ALTERNATIVE AND WEALTH MULTIPLIER?

2009-09-18T09:59:00.000-07:00

“What is an alternative to my current cash position that will protect my money from litigation?”

By Ike Devji, J.D.

In our current economic environment, all clients want their money both safe and liquid.

When most people consider “safe” and “liquid,” they immediately think of their bank. However, what most people do not know is that their checking or savings account is unprotected from a very real threat: the exposure to an increasingly hostile and predatory litigation system. Consider this:

There are tens of thousands of lawsuits filed each day in this country. The average legal cost of defending a frivolous lawsuit is $91,000, plus the settlement amount itself. The number of lawsuits increases in tough economic times as people look to your wealth as an additional source of income.

Our team often takes commonly used tools and redesigns them to provide protection of client assets, while allowing clients to retain control and liquidity. This where the sciences of Financial Planing and Asset Protection meet. The situations below demonstrate the benefits of a strategy we are using in which we take a universal life insurance policy and design it to provide 98 to 102 percent cash surrender value in the first year.

Current Situation—Cash in the Bank: A healthy 45-year-old male client has a bank checking account with $1 million. He rarely uses this account, but he keeps his money there because he likes to have a certain amount of funds liquid in case he needs to access it quickly.

Here is how a regular, personally held bank account works:
· The account earns about 1 percent interest per year, with income taxable as ordinary income.
· If the client is sued for any reason and loses, the judge can require the transfer of the assets from the client’s checking account and into the plaintiff’s pockets.
· If the client dies, the named beneficiaries will receive the $1 million minus the taxes due.
· If the client needs to use the money, he is able to take the amount needed.

BETTER: Creditor-Protected Cash Alternative:
The strategy our team has designed allows the same client to place the $1 million into a specially designed universal life insurance policy by paying a premium amount of $500,000 in each of the first two years.

The policy will provide the following benefits:
· The account will earn a net interest of about 1 percent annually invested in the policy’s fixed account, and the gains are allowed to grow tax-deferred. If the client is sued for any reason and loses, the money in this account is 100 percent creditor-protected from day one.
· If the client dies, the named beneficiaries will receive a death benefit of $10,624,682, the face amount associated with this specific example, free of any estate taxes.
· If the client needs to withdraw all or part of the money in the account, he is able to do so at anytime with no fees or surrender charges, and he will have access to the money within a week.

To Summarize the benefits again:

- Creditor Protection

- Wealth Multiplier Effect of 10X (in this illustration)

- Liquidity and borrowing options with no penalty

- Death benefit of $10MM plus that passes outside the estate and free of estate tax

My thanks to Insurance and Investing Expert Jeff Christenson for his help on the technical details of the insurance policy. Together we implement this strategy for clients and advisors nationwide.

UNREPORTED FOREGIN BANK ACCOUNTS - DEADLINES AND PENALTIES LOOMING

2009-09-18T09:54:00.000-07:00

People who haven't reported ownership of foreign accounts by September 23 may face jail time and fines.

By Seth J. Entin

Mr. and Mrs. Doe, who are U.S. citizens, have an account with a foreign financial institution. The Does have never reported their ownership of or the income from this account on Schedule B of their U.S. federal income tax returns, and they have never filed Treasury Form TD F 90-22.1 (Report of Foreign Bank and Financial Accounts or FBAR), which they are required to do to disclose this account.

SEE THE WHOLE STORY HERE: http://www.fa-mag.com/online-extras/4478-wednesday-deadline-approaching-for-foreign-accounts.html

MOST COMMON ABUSIVE TAX SCHEMES - WHAT THE IRS SAYS

2009-09-12T10:51:00.001-07:00

I continually warn clients and advisors that there are good and bad methods, tools and practitioners in every business including Asset Protection. The worst plans I see combine abusive tax plans with supposed Asset Protection benefits. These plans typically involve IBCs, Nevada Trusts, and Domestic Asset Protection Trusts in some combination. Generally speaking these are the WORST tools to use for a variety of reasons. We use offshore tools effectively and legally everyday for Asset Protection and other issues. The tools we use are explicitly TAX NEUTRAL because we don't want our clients relying on these tools for protection and estate preservation and fighting the IRS at the same time, a common fatal flaw that is spawned by greed and promises of tax savings that top professionals will never make. Below is what the IRS has to say in their own words.

Yours, Ike

Tax evasion using foreign jurisdictions is accomplished using many different methods. Some can be as simple as taking unreported cash receipts and personally traveling to a tax haven country and depositing the cash into a bank account. Others are more elaborate involving numerous domestic and foreign trusts, partnerships, nominees, etc. The following schemes are not all-inclusive, but just a sample of abusive tax schemes.

Abusive Foreign Trust Schemes: The foreign trust schemes usually start off as a series of domestic trusts layered upon one another. This set up is used to give the appearance that the taxpayer has turned his/her business and assets over to a trust and is no longer in control of the business or its assets. Once transferred to the domestic trust, the income and expenses are passed to one or more foreign trusts, typically in tax haven countries.

As an example, a taxpayer's business is split into two trusts. One trust would be the business trust that is in charge of the daily operations. The other trust is an equipment trust formed to hold the business's equipment that is leased back to the business trust at inflated rates to nullify any income reported on the business trust tax return (Form 1041). Next the income from the equipment trust is distributed to foreign trust-one, again, which nullifies any tax due on the equipment trust tax return. Foreign trust-one then distributes all or most of its income to foreign trust-two. Since all of foreign trust-two's income is foreign based there is no filing requirement.

Once the assets are in foreign trust-two, a bank account is opened either under the trust name or an International Business Corporation (IBC). The trust documentation and business records of this scheme all make it appear that the taxpayer is no longer in control of his/her business or its assets. The reality is that nothing ever changed. The taxpayer still exercises full control over his/her business and assets. There can be many different variations to the scheme.

International Business Corporations (IBC): The taxpayer establishes an IBC with the exact name as that of his/her business. The IBC also has a bank account in the foreign country. As the taxpayer receives checks from customers, he sends them to the bank in the foreign country. The foreign bank then uses its correspondent account in to process the checks so that it never would appear to the customer, upon reviewing the canceled check that the payment was sent offshore. Once the checks clear, the taxpayer's IBC account is credited for the check payments. Here the taxpayer has, again, transferred the unreported income offshore to a tax haven jurisdiction.

False Billing Schemes: A taxpayer sets up an International Business Corporation (IBC) in a tax haven country with a nominee as the owner (usually the promoter). A bank account is then opened under the IBC. On the bank's records the taxpayer would be listed as a signatory on the account. The promoter then issues invoices to the taxpayer's business for goods allegedly purchased by the taxpayer. The taxpayer then sends payment to the IBC that gets deposited into the joint account held by the IBC and taxpayer. The taxpayer takes a business deduction for the payment to the IBC thereby reducing his/her taxable income and has safely placed the unreported income into the foreign bank account.

Original Link:http://www.irs.gov/compliance/enforcement/article/0,,id=105822,00.html

How Many Lawsuits are There in the U.S. & What are They For?

2009-09-02T10:54:00.000-07:00

The article below has a great summary of lawsuit facts that helps shed light on what all this "lawsuit and Asset Protection fuss) is about. Your wealth is the product being sold by attorneys nationwide, choose not to let them have it and take action. - Ike Devji

(Reprinted with Permission from the SixWise.com Security & Wellness e-Newsletter www.sixwise.com)

The U.S. legal system ensures that every American who feels they have been injured or victimized is able to seek justice through the court system -- clearly a noble and necessary protection. However, in recent decades the United States has earned the nickname as the most "litigious society" out there, in part due to major increases in lawsuits involving everything from hot spilled coffee to neighbors' disputes.

The United States has more lawyers per capita than any other country.
In fact, Americans spend more on civil litigation than any other industrialized country, according to a study in the Economic Journal, and twice as much on litigation as on new automobiles.

Why the disparity? Part of the reason, according to the Economic Journal study, has to do with incentives to sue, of which Americans have plenty. While in most European legal systems the loser in a suit must pay a large portion of the winner's legal fees, in America each party pays their own. So, simply speaking, in America there's nothing to lose.

More Lawyers Per Capita Than Any Other Country
As of 2006, there are over 1 million lawyers in the United States, according to the American Bar Association -- more per capita than any other country.
As the number of lawyers has increased, so has the number of civil claims, up 12 percent from 1993 to 2002.
In all, over 16 million civil cases were filed in state courts in 2002, according to the State Court Guide to Statistical Reporting,2003, from the National Center for State Courts. Trial lawyers earned an estimated $40 billion in lawsuit awards that same year.

What Are All These Lawsuits For?
Demand for legal services is increasing across the board, but particularly in such areas as health care, intellectual property, venture capital, energy, elder, antitrust, and environmental law.

The largest jump in lawsuits has been seen in the health care industry, where doctors have been paying significantly higher liability premiums to defend against potential litigation. While some say the increase in health care lawsuits may provide a safer environment for patients, opponents believe they are keeping patients from receiving the best care.

Some interesting facts:
- Over 16 million civil cases were filed in state courts in 2002.
- 79 percent of doctors report that they've ordered more tests than they would based only on professional judgment due to litigation fears, according to a Harris Interactive Poll.
- The American Medical Association lists 21 states as being in a "medical liability crisis."
- 71,000 drug lawsuits have been filed in federal courts since 2001 -- and have outnumbered asbestos, tobacco and auto safety lawsuits since 2002.
- 45 percent of U.S. hospitals reported that the liability crisis has caused a loss of physicians and/or reduced coverage in emergency departments.

How do Americans Feel About the Legal System?
News about frivolous and controversial lawsuits makes headlines just about everyday. But when a 14-year-old sues her friend for losing her iPod, the music industry sues a 12-year-old for downloading music from the Internet, and lawyers are eyeing fast food companies and snack food makers as targets in potential class-action lawsuits of the future, litigation, it seems, gets taken to a new level.

Frivolous lawsuits alone are said to cost the United States $200 billion a year, according to Congressman Terry Everett, and all of these potentially unwarranted claims are having an affect on how Americans view the legal system.

According to a survey conducted by Harris Interactive, 76 percent of those surveyed feel that fear of frivolous lawsuits discourages people from performing normal activities.
Further:
- Only 16 percent trust the legal system to defend them against frivolous lawsuits.
- 54 percent do not trust the legal system.
- 67 percent strongly agree (and 27 percent somewhat agree) that there is an increasing tendency for people to threaten legal action when something goes wrong.
- 83 percent feel that the legal system makes it too easy to make invalid claims.
- 56 percent think that there are fundamental changes needed to make the civil justice system work better.

Perhaps most telling of all, most Americans surveyed (55 percent) strongly agreed (and another 32 percent somewhat agreed) that the justice system is used by many as a lottery, to start a lawsuit and see just how much they can win.

STATES RELEASE LISTS OF TOP INVESTMENT SCAMS

2009-08-27T18:47:00.000-07:00

I am seeing a massive increase in investment fraud, theft, and embezzlement among our affluent business owner clients right now. This exposure is coming from both outside sources AND partners, executives and employees of all types.

I continually post issues and warnings here, in my private email update newsletters to clients and advisors and on Twitter to try to help, but the scams evolve so fast and multiply so quickly that it's impossible to keep up with this human "virus", even with the help and tips supplied by other top pros like my friend Greg George at
GTI-ADVISORS.COM, a leading professional due diligence firm.

The list below is currently being circulated by state and local govt. nationwide and includes many of the issues that I have commented on previously including here in my previous post on Affinity Fraud taking advantage of personal, religious and cultural connections: http://tinyurl.com/kjdwxm

Please take a moment to protect yourself or your clients by taking a look at this report, it applies to EVERY city and state in the country.

LIST OF TOP TEN INVESTOR FRAUD SCHEMES:

http://www.cc.state.az.us/Divisions/Administration/news/090821Top%20Ten%20Investment%20Schemes.pdf

LONG TERM CARE INSURANCE - CAN YOU AFFORD NOT HAVE IT?

2009-08-17T14:40:00.000-07:00

10 Vital Points to consider about your LONG TERM CARE INSURANCE

As an Asset Protection attorney ANY avoidable source of loss, risk or exposure to my clients is unacceptable. One often overlooked area is the possibility that you or a loved one may need long term care as a result of age, illness or accidents. In cases where such care is required, the financial effects can be devastating even to the most affluent clients and are a needless expense that can be avoided.

For help in this area I turned to an expert, Dr. Jonathan Smith, M.D. a medical specialist who knows what this care costs and who now provides education and coverage to clients and advisors all over the U.S. on this easily addressed but potentially serious exposure. He shares important thoughts on this issues with us below. The insurance part is good enough, but some options are also both creditor protected AND have a return of premium guarantee if you never need it. Interestingly, even DOCTORS (who know better) often neglect this area of their own planning.

Here are Dr. Smith's points, they are tough to argue with...

1. The successes of medical science and the Medical Profession have helped people to live longer, but not necessarily healthier.

2. Women live longer than men.

3. The Federal Government says "at least 70% of the people over age 65 will require some form of Long Term Care services at some point in their lives". (1)

4. The Term Long Term Care services is applied to any 1 of 3 levels of services a person receives when that person fails to perform at least two of the six Activities of Daily Living (ADL), or is mentally incompetent.The ADLs are:

A - ambulating, walking around

B - bathing oneself

C - continence; continent of urine and/or stool

D - dressing

E – eating; feeding oneself

T - transferring; moving between bed and chair, etc

5. The inability to perform the ADLs may occur at any age.Example: as a result of a severe automobile accident, a person is left unable to walk (Ambulating). Toileting and Bathing are accompanying failures. As a result, who is going to move that person to a toilet each time there is a need to urinate?Or shall that person be left to soil him/herself?

6. The cost of care can be CATASTROPHICALLY EXPENSIVE.

Example: When the minimum wage in California is $8.00 per hour for UNSKILLED help, the cost for labor for home-help is $192.00 per day, and, if paid from a tax-deferred account, is nearly $120,000.00 per year! (assuming an overall tax rate of 40%)

7. Medicare and private health insurance programs do NOT pay for the majority of long term care services. (1)

8. Successful business owners have a special tax advantage when it comes to protecting earned assets from the aforementioned real and crippling financial losses.

9. Successful business owners can own PEACE OF MIND for themselves and their dependents, thus sparing each other the effects of the potentially devastating financial losses.

10. The successful business owner can experience the DIGNITY of receiving care at home, instead of 'spending down assets' to be eligible to be admitted to a Medicaid facility. He still has the ability to leave a LEGACY with the premium payment money returned upon his death.

It comes as a surprise to many that there is an insurance policy that has been around since HIPAA (1997) which specified Long Term Care Insurance as "A Health Benefit" in the tax code. (HIPAA LEGISLATION PUBLIC LAW 104-191 AUGUST 21, 1996 IRC Sec. 7702B)

Such a product is QUALIFIED LONG TERM CARE INSURANCE with CONTRACTUALLY-GUARANTEED FULL REFUND OF ALL PREMIUMS PAID with no reduction in the refund for benefits paid.

HOW DOES IT WORK? Money is paid to the the Insurance Company; the amount is enough to buy the Peace of Mind, the Dignity of the Insured and/or his family, and the size of intended Legacy.

The premium payment may be partially tax deductible, or completely tax deductible, if paid as a benefit to employees in a C corp,{IRC Sec. 162(a) and Regulations.162-10; IRC Sec. 162(a) and ISP Coordination Paper UIL 162.35-02; IRC Sec. 7702B(a)(3) IRC Sec. 7702B(a)(1)}: and is ERISA independent (ERISA: 29 USC 1191b IRC Sec. 1167; Not subject to ERISA) (please consult your tax attorney/ accountant we never provide specific tax advice in a setting like this).

Long term care Insurance is 'purchased' for a level of benefits, and upon death of the insured, the insurance company contractually guarantees to refund all premiums paid (and this is a nontaxable event!{IRC Sec. 7702B(b)2(C)(1)(E)}

As of January 1,2010, PPA (2006) suggests a 1035 exchange from a qualified plan to Qualified Long Term Care Insurance (PENSION PROTECTION ACT PUBLIC LAW 109-280 AUGUST 17, 2006, SECTION 844)

(Sec. 844) Excludes from gross income any charge against the cash value of an annuity contract or the cash surrender value of a life insurance contract made as payment for coverage under a qualified long-term care insurance contract which is part of or a rider on such annuity or life insurance contract if the investment in the contract is reduced (but not below zero).

Requires an individual excluding such charges from gross income to file a return with the Secretary of the Treasury. (http://thomas.loc.gov/cgi-bin/bdquery/z?d109:HR00004:)

I recommend anyone interested consult a specialist; use these references for guidance:

(1). http://www.longtermcare.gov

(2) www.aarp.org/families/caregiving/state_ltc_costs.html

(3) www.dhcs.ca.gov/services/ltc/Pages/ConsAWordfromtheDirector.aspx.

About guest author Jonathan Smith, M.D.

More than a quarter century in Anesthesia practice (monitoring of people’s health, managing their risks and protecting them from death), made me aware of the financial burden on people living longer, but not necessarily healthier. I saw the need for Guaranteed Full Refund of Premium Long Term Care Insurance as a way to protect Earned Assets from the often debilitating losses to long term care, while preserving Dignity by affording home care; and capital for a Legacy. I own such a policy and advocate the concept. Clients and advisors can reach me directly at jonathan.smithmd@gmail.com for help.

THE ROLE OF "SECRECY" IN ASSET PROTECTION

2009-08-12T13:18:00.000-07:00

The Excerpts and Links below emphasize yet another reason that the
best Asset Protection plans are:

1. Tax Neutral;
2. Involve paying and reporting taxable income from all sources;
3. Are drafted by a professional with experience in such issues;
4. AND DON'T RELY ON SECRECY

I tell our clients this:

Secrecy is hiding something and “hoping” no one finds it. Hope is not a plan as we have learned since the last election. Secrecy based plans rely purely on that hope of secrecy and your willingness to perjure yourself before the courts.

Have a real plan that is tax neutral and which you CAN disclose without fear.

The Cost Of Secrecy
By Barbara T. Kaplan
On February 18, something happened that should be taken as a wake-up call by investors with secret foreign bank accounts: UBS AG signed a deferred prosecution agreement with the U.S. Department of Justice that resulted in the names and private Swiss account records of 300 U.S. taxpayers being released to the IRS. A second agreement announced this month is expected to result in UBS turning over thousands of more names.

SEE THE WHOLE STORY HERE: http://tinyurl.com/lt8kc3

STORY #2
U.S., Swiss nail deal on secret bank accounts The Swiss and U.S. governments announced a deal Wednesday to settle American demands for the identities of suspected tax dodgers, despite Switzerland's vaunted bank secrecy.
http://www.msnbc.msn.com/id/32386100/ns/business-world_business/from/ET

STORY#3
Days of Secret Swiss Bank Accounts May Be Numbered

http://www.cnbc.com/id/32389493

Liability Insurance and Why the Wealthy are Under-Insured

2009-08-12T13:05:00.000-07:00

The excerpt and link below are from a great article on liability insurance and why so many affluent people are under-insured and exposed. I write on this topic myself extensively and I warn clients like this:

Buy as much liability insurance as you can afford, assume it won't work, apply or be sufficient and have a solid back-up plan. If for no other reason I want to see the insurance there to catch the bullet on the legal defense fees, which on their own can be devastating.

Ike

“Liability”—the responsibility for injury, death or damages to another—is a word that sends chills down people’s spines. Anyone who owns a home, drives a vehicle, operates a business or engages in any number of normal pursuits faces liability exposure.

If one is proved liable for an accident, the consequences can be devastating financially unless you are properly protected. Wealthy individuals face a disproportionate amount of exposure because they often own multiple homes and automobiles, investment properties, private aircraft and yachts.

Wealth management professionals are getting better at including property and casualty specialists in their practices to address such liability exposure, yet statistics show that many high-net-worth individuals still carry low liability coverage in their personal insurance. Why do successful people do this when it obviously puts their wealth at risk?

SEE THE ENTIRE ARTICLE HERE: http://tinyurl.com/mrcef3

MEDICAL PRACTICE - DISPUTES AMONG PARTNERS CAN BE FATAL TO THE PRACTICE

2009-08-11T10:22:00.000-07:00

As you likely know, I have always felt that basic rules of self defense apply almost perfectly to good legal and financial planning.

The best way to avoid losing a lawsuit, for instance, is to never be in one in the first place.

The simple article below addresses conflicts between partners and ways to avoid or handle them. We have seen this issue create devastating results to the detriment of all parties involved. Your partners are smart, financially able to cause you harm, and likely know more about you and your assets than your own spouse. This is all bad news. Cooperation, communication and proactive conflict resolution is key.

Please take a few minutes to review this and pass it on to your friends in the business.
Yours, Ike

DOCTORS: How to Talk to Your Partners; How to effectively diffuse disagreements and preempt disputes. http://tinyurl.com/mkh4ak

Interesting VIDEO interview with Publisher of WORTH Magazine.

2009-08-10T12:07:00.000-07:00

I was recently featured by WORTH magazine as one of their "Leading Wealth and Legal Advisors", I am one of only 3 in Arizona and 24 in the U.S. This is an interview with the Publisher Patrick Williams about the magazine and how it picked and vetted us to be part of the group and who gets the magazine and why.

http://tinyurl.com/kw69bv

19 TIPS FOR MANAGING YOUR LIMITED PARTNERSHIP SAFELY AND EFFECTIVELY

2009-08-05T13:49:00.000-07:00

© 2009 Ike Z. Devji, J.D.

One common and well placed tool for estate planning and Asset Protection is known as a “Limited Partnership”, also commonly called an Asset Management Limited Partnership or Family Limited Partnership (LP).

The tool is one part of a set of tools that forms an individually tailored system. The LP IS NOT a miracle cure that can answer all your problems and hold any kind of asset you care to stuff into it, contrary to what you might read on the websites of amateurs and Nevada LLC and LP mills that are not staffed by attorneys and which are rarely drafted for a particular purpose like ours are. Remember, there is no one size fits all plan in Asset Protection. Every plan must be tailored to your unique assets, exposures and business needs.

Below are some simple tips for managing your LP, safely, legally and effectively. The LP was created for you as an Asset Protection and Estate Planning vehicle and is officially in the business of “managing your assets and investments” and must act like it to attain the full benefit and protection of the law.

The tool itself, like all of the best Asset Protection tools, is tax neutral. While this planning has incidental tax and estate reduction benefits, we suggest that our clients tread lightly in those areas, and utilize the services of appropriate tax, accounting and legal experts when making decisions regarding these benefits.

1. Make sure that assets transferred into the LP are properly re-titled to reflect the LP’s ownership. Your interest in real estate (properly insulated in an LLC); personal property (transferred through a bill of sale) and marketable securities should be properly transferred to the LP and recorded as soon as possible so that the LP will be the proper titleholder when income is received from these assets. Records of all such transfers should be maintained with your LP records.

2. Risky assets should NEVER be put directly into your LP. They should be safety wrapped in LLCs or other vehicles so that real property liability is one arm’s length removed from the LP itself, this includes raw land. Safe assets, on the other hand, may be directly titled in the name of the LP. Examples of safe assets include stocks, bonds, securities CDs and money market accounts, to name a few.

3. Maintain comprehensive business records. All business receipts should be deposited into the LP account and all LP expenses should be paid from it. Make sure that all federal and state income tax returns are timely filed and accurately prepared. If possible, a monthly accounting of all partnership income and expenses should be maintained.

4. Separate tax returns are not always required for your LP. You may not need to file a separate tax return for your LP. For instance in Arizona, unless you have income that was generated within the state of Arizona they don’t want a tax return. Our client’s LP papers include a letter from the Arizona Department of Revenue to this effect, advise your accountant accordingly and always check with your attorney and/or CPA for specific tax advice – which I am NOT providing here.

5. Assets required for living expenses should remain outside the LP. Those assets necessary for your daily living expenses should be kept outside the LP so that it does not create the appearance that the LP is merely a personal account holding any given partner’s personal assets. If a major contributing partner finds it necessary to dip into the LP due to the nature and level of their contributions, it may lead to a direct piercing by either a judgment creditor of the LP, by a reverse piercing of the LP veil by a judgment creditor of that partner(s), or even by the IRS at the time of that partner’s death.

6. Refrain from co-mingling partnership and personal funds. Once the partnership has been fully formed, and an EIN (tax number) obtained, the LP should establish a separate Money Market account/ and or investment account.

7. Do not have the LP pay personal expenses directly. Instead, make a formal pro-rata distribution from the partnership to all partners if you need to withdraw cash from it. Then use the distribution to pay for the expense.

8. When possible, avoid “non-pro-rata” distributions to any one partner. Instead, make a proportionate distribution to all partners based on their percentage of ownership. These kind of distributions are better structured as a "loan" secured by a note with interest back to the partnership.

9. Consider having each partner make a capital contribution to the LP upon formation. This supports the idea and reality of the LP being a joint enterprise to which all partners have contributed.

10. Operate the LP in accordance with the terms of the partnership agreement. If this proves to impractical or if the LP’s needs change, amend the partnership agreement to accommodate the changes required in the LP’s operation in order to avoid an administrative dissolution of the LP.

11. Make sure that the LP should comply with all organization and filing requirements and other formalities requited by state law. This will help ensure that your LP maintains all required records and will help avoid any proposed administrative dissolution. Strict adherence to all sate law requirements is necessary to meet the stringent scrutiny of the IRS. In your case, you can be assured the LP was properly formed if created for you by us.

12. Do not transfer personal (non-business) assets into your LP. Your LP must have a valid business purpose, in the case of such partnerships we create the business purpose is the management of your assets and investments. The FATAL flaw of transferring non-income producing assets, such as your personal residence, furniture, and personal automobiles creates the appearance that the LP is being used for personal, as opposed to business purposes. More importantly, it carries the liability that each of those items may carry into the LP, defeating the essential purpose for which it was created.

13. Transfer business and income producing assets into the partnership. In addition to stocks and bonds your LP may hold your interest in income producing real-estate (if properly insulated in one or more LLC’s), personally owned office and business equipment, and any equipment necessary to operate a lab, records business or related enterprise. If any of these items are capable of generating liability they too should be isolated in an LLC, and that interest assigned to the LP, as you would with real-estate. Having your LP engage in multiple revenue generating and asset holding activities (i.e. real estate and equipment leasing, stock portfolio management) helps support the fact that this is a valid business that is a legitimate arms length joint enterprise.

14. Use the expertise of investment advisors to find safe growth vehicles for your investments. For instance, a combination of dividend paying stocks and interest bearing bonds could generate immediate, steady, and relatively determinable income that will both increase the value of your assets and prove the fact that the LP is indeed a for-profit business entity as opposed to a mere holding vehicle.

15. Do not transfer assets required to meet your fixed daily living expenses into the LP. Such items would include your personal revolving checking account; this is akin to co-mingling funds. If a court were to find that these assets were required or were used to meet your daily expenses it could include them in your estate thereby weakening the strength of your LP.

16. Make your LP act like a separate business entity. You can get cards and stationery in the name of the LP to help establish a business identity for the LP separate and apart from yourself. More importantly, the partnership should hold an annual meeting and should maintain the minutes of those meetings. In the case of LP’s created and maintained for you by us, we include that service. This is an important reason to schedule and follow-through with your “Annual Review” with a member of our firm. Upon the completion of your review the firm will re-assess the planning we have in place for you, recommend any changes or additions necessary, and generate meeting minutes that you may add to your LP’s records.

17. Memorialize lease agreements in writing. All real estate and equipment held by the LP (through an LLC) should have leases drawn up which are supported by billing invoices to the lessee (usually yourself or the business you own). This both supports the valid business purpose of the LP, the write-offs you may choose to claim (consult your accountant) for payments to the LP for such leases, and makes your accounting process much clearer.

18. File any required gift tax returns in a timely manner. While the planning we create is tax neutral, it does have incidental tax benefits and implications, including those pertaining to “gifting”, the transfer of a portion of your interest in the LP to a family member or other beneficiary. Should you choose to avail of these benefits, please do so with the guidance of a professional accountant familiar with such a process. A federal gift tax return utilizing IRS FORM 709 should be filed with your personal tax returns. Even if no tax is actually owed, the filing of such a return with full and proper disclosures may be of benefit, as it starts a 3-year statute of limitations, after which the IRS is precluded from challenging the valuation and assignment of said gifts.

19. Qualified tax and pension plans, such as IRA’s, should not go into your LP. These types of assets are usually referred to as “qualified plans or accounts” and often have tax benefits that will be negated by changing title away from yourself. Perhaps more importantly, this transfer will destroy the well established stautory protecetion those types of accounts and plans have in place by law.

This is meant to be a helpful introduction, the uses and benefits of the LP go far beyond what I have covered here. As always, call or email with specific questions or to see if this tool should be part of your personal planning.

CIRCULAR 230 NOTICE: To comply with U.S. Treasury Department and IRS regulations, we are required to advise you that, unless expressly stated otherwise, any U.S. federal tax advice contained in this article, including is not intended or written to be used, and cannot be used, by any person for the purpose of (1) avoiding penalties under the U.S. Internal Revenue Code or (2) promoting, marketing, or recommending to another party any transaction or matter addressed in this e-mail or attachment. ALWAYS GET PROFESSIONAL TAX ADVICE.

TOP 10 ARIZONA LAWSUIT VERDICTS OF 2008

2009-07-29T17:32:00.000-07:00

ASSET PROTECTION UPDATE - TOP ARIZONA LAWSUIT VERDICTS OF 2008

We are continually surprised by the number of successful and educated business people and their advisors that underestimate the exposure they and they clients face just from “walking around rich” or even with just the appearance of wealth. We warn people about these exposures and seek to place barriers between this kind of harm and the assets of those we protect on a daily basis.

Sometimes our advice and experience is well-heeded, sometimes it is not. Don’t take our word for it – here are the facts; see the original story store as published in ARIZONA ATTORNEY, the magazine of the State Bar of Arizona by clicking here.

ARIZONA LAWSUIT AWARD SUMMARY

- True to what we are seeing in the real estate market, a home building company claimed the top verdict of $269 million;
- Once again, each of the top 10 verdicts was more than $5 million. The lowest was for $6Million;
- 9 out of the top 10 were more than $10 million;
- There were 24 verdicts over $1 million;
-Other verdicts resulted from actions for breach of contract, condemnation, product liability and elder abuse.

WHAT DOES THIS TELL US?

- That in almost all cases, the amount of liability insurance carried by the defendant was insufficient to meet the verdict;
- That liability insurance remains and important first line of defense, just the cost of defending one of these suits could be financially devastating;
- That the insurance coverage needed to be supported and further recovery limited by active Asset Protection planning;
- That in several cases it is unlikely that the assets of the corporation involved will be sufficient to pay the judgment, placing owners and officers in harm’s way;
- That all industries are vulnerable, this not “just” about any one group or profession;
- That a lifetime of work and the security and future of any of these defendant businesses and their owners and employees can be destroyed by a single law suit;
- That we are in a time, socially, politically and economically that requires each of us to take proactive responsibility for protecting our wealth, or the wealth of those that we serve as advisors.

UNDERSTANDING THE CHECKS AND BALANCES OF THE ASSET PROTECTION TRUST

2009-07-28T15:11:00.000-07:00

We have many questions on how Asset Protection Trusts work and how you and your money are protected in international or "off-shore" jurisdictions. My friend Doug Lodmell created this great piece for our many clients and advisor & attorney partners that explains the basics.

UNDERSTANDING THE CHECKS AND BALANCES OF THE ASSET PROTECTION TRUST

By Douglass S. Lodmell, J.D., LL.M.

Since Asset Protection ultimately relies on removing the assets from both the U.S. jurisdiction, and the control of the clients, a very good question would be: How can a client be sure that the new foreign Trustee doesn’t run away with the money should we ever need to use the Trust? To answer this we need to look at the intricacies of how a well-drafted Asset Protection Trust creates internal and external ‘checks and balances.’

To begin, let’s look at how the plan ‘controls’ the money:

1) We create a legal structure which requires the approval and consent of various parties who act as checks and balances on the assets, and

2) We create a physical tracking mechanism directly with the independent client chosen bank, which holds the money, so that the client is always aware of where the money is.

The Asset Protection Trust has 4 primary roles:

1) The Settlors (the clients)
2) The Trustee
3) The Protector
4) The Beneficiaries

The legal control of the assets is done through a 2 party approval mechanism. This is kind of like requiring 2 signatures on a check. The Trustee is responsible for the management of the assets and has legal title. However, unless the Trustee is the client, they do not have physical possession of the money, which is held at an independent and unrelated bank.

In order for the Trustee to actually do anything with the money, they then must also have the consent of The Protector. This would include things like wiring the money to another bank or even to another account with a different name, or making any changes whatsoever in the physical location of the money

The role of Protector is just that, to protect the assets of the Trust for the benefit of the Beneficiaries. As such the Protector has 2 primary jobs: 1) to approve of the actions of the Trustee, and 2) to remove the Trustee if the Trustee is not acting in the best interests of the Beneficiaries. This is what ensures that the Trustee doesn’t run off with the money.

So who keeps an eye on the Protector? This is where the loop closes back to the only location in which the clients can have 100% security – themselves. The Settlors (clients) have the power to remove and replace the Protector for any reason they choose to at any time. The only exception is if a U.S. court is demanding that they do so to appoint the court or a court representative as Protector, in which case that particular order is ignored.

The only other possible loophole that could endanger the money is if both the Trustee and the Protector conspired together to defraud the Trust. This is highly unlikely in and of itself due to the fact that the Trustee is a large Trust Company and has their own internal checks and balances as well as the fiduciary duty and liability to the Trust, and the fact that the Protector is personally chosen directly by the client and has the same fiduciary duty. Nevertheless, the plan has one final check that ensures that the client themselves always have full knowledge of where the money is, and where it is going to.

This final check is called a “client acknowledgment” procedure. The bank, typically a large private Swiss bank, chosen by the client, will have a hold period prior to the execution of any orders to withdraw funds, or move money from the Trust account. This procedure would require the bank to have a personal confirmation that the Beneficiaries (also the clients) have direct knowledge of the proposed transfer.

While the Beneficiaries are not in “control” of the money directly, since the bank must have a direct personal verification that the Beneficiaries are aware of the transfer, if a proposed transfer is not approved, the bank will be so informed, by the clients themselves. The order would then be delayed for a sufficient period of time for the Settlors to appoint a new Protector, who will appoint a new Trustee.

As you might imagine, the net effect is that it is virtually impossible to make any move with Trust assets without the client’s direct knowledge and consent. This combined with the fact that any serious Asset Protection Plan is going to use only the most stable and reputable institutions to fill any fiduciary role makes having your assets offshore safer than the local bank down the street by far.

The difference is that the bank down the street is in the jurisdiction of the court at the other end of the street. And right in the middle is the all-too familiar lawyers office, which is where all the trouble began in the first place.

Understanding the Arizona Anti-Deficiency Statutes and What they Mean to YOU

2009-07-20T16:58:00.001-07:00

We have many questions and conflicting interpretations of the Arizona Anti-Deficiency statutes and what they really mean and do. For clarification I turned to Attorney Neal Bookspan who is a partner at Phoenix law firm of Jaburg & Wilk and who handles a variety of business, bankruptcy and litigation issues. A link to Neal’s profile can be found by clicking here: ABOUT ATTORNEY BOOKSPAN and I have included some basic contact info for him below as well.

Neal, thanks for your help on this issue. Here’s what Neal had to share:

Ten Truths Regarding Arizona's Anti-Deficiency Laws

1. Arizona's anti-deficiency statutes only provide protection to borrowers on residential property, not commercial property, industrial property or raw land.

2. The Arizona anti-deficiency statutes are A.R.S. §§ 33-729(A) and 33-814(G). Section 33-729(A) applies to purchase money mortgages (when is the last time anyone saw a "mortgage" document used in Arizona??) and purchase money deeds of trust that are foreclosed judicially. Section 33-814(G) applies to deeds of trust foreclosed through a trustee's sale. Almost all deficiency issues in Arizona arise under § 33-814(G).

3. Under either statute, the threshold question is whether the property at issue is "two and one-half acres or less which is limited to and utilized for either a single one-family or a single two-family dwelling." Under the existing case law the dwelling must be built and at least occasionally occupied.

4. The property may be "occasionally occupied" by the owners or rented to third parties and qualify for anti-deficiency protection.

5. Arizona's anti-deficiency statutes apply to second priority mortgages and deeds of trust if they are purchase money obligations. Non-purchase money mortgages and deeds of trust are not protected by Arizona's anti-deficiency statutes.

6. If a purchase money mortgage or deed of trust subject to Arizona's anti-deficiency law is extended, renewed, refinanced, or worked out, the loan retains its status as purchase money and the borrower remains protected by Arizona's anti-deficiency law.

7. To obtain a deficiency judgment after a trustee sale, an action must be brought within 90 days after the sale. If an action is not brought within this time period, the right to a deficiency is lost pursuant to A.R.S. § 33-814(D).

8. The Arizona anti-deficiency statutes are applied both against and to protect guarantors in the same manner they are applied against and protect borrowers.

9. Lenders may continue or postpone trustee's sales. This may be done an unlimited number of times and the only notice given of the new time and place for the trustee's sale is by public declaration at the time and place of the scheduled trustee's sale.

10. Where a deficiency is permitted, the sale of the underlying property results in a credit against the amount of the judgment in an amount equal to the higher of the fair market value of the property or the sales price obtained at a public sale. If a request is made within 30 days of the foreclosure, a judgment debtor may seek to have the court determine the fair market value of the property.

ABOUT GUEST COLUMNIST ATTORNEY NEAL BOOKSPAN

Email: nhb@jaburgwilk.com
Phone: 602-248-1000
Practice areas:Bankruptcy Construction Law Corporate Transactions Creditor's Rights

Remember, the best we can do here is general info - NEVER - specific legal advice, so call Neal for help that is fact specific to you.

TRAITS OF THOSE WHO WILL SURVIVE THE RECESSION

2009-07-09T11:07:00.000-07:00

We have seen that those who have weathered this storm most effectively and with a minimum amount of trauma shared several characteristics:

- They and their advisors were aware of potential exposures and were proactive in addressing them;
- They are able to make their personal, family overhead commitments from existing resources for an extended period of time, even without additional cash flow;
- They were willing and able to adjust their lifestyles and expenditures to current economic conditions;
- They lived very well, but well within their means, as opposed to at the limits of their means;
- They had assets that allowed them to meet existing business financing burdens and other fixed costs in a form that they were able to liquidate at minimal delay and expense;
- They had top counsel in place on tax, business and estate issues, and that counsel used a variety of strategies that not only served the primary goals but also protected those assets for the family. Some examples are the use of Insurance and Annuity Products and ILITS and Split Dollar agreements that preserve certain assets for the family by statute;
- They had great credit and relationships with banks that allowed them to agree on terms that were best for all parties involved, and had these relationships with several institutions;
- They had long term assets that were able to be made liquid with minimal penalty and delay, despite that liquidation not being part of the original plan, i.e. long term investments with an escape or liquidity plan built in;

No business is completely recession proof. Diversify and properly insulate your income streams if possible and be ready to be flexible and spot ways to identify new opportunities for your business and your skill set.

Realize that your niche, as you have defined it, may come to an end and know when to direct your assets and energy to those new opportunities. As examples, some of our clients who were major players in single family housing are now in the “economy” apartment market segment and are doing well. Doctors are expanding their practices and adding high value cash services like medically supervised weight loss to practices that were focused solely in other areas. Others have created booming new businesses like debt and credit repair that directly reflect the current economy.

Don’t take your market position for granted. In a down economy discount solution, product and service providers emerge in every market. These competitors will be selling price first and many consumers won’t see the differences until they have been poorly served and you have lost the business. Some steps to fight this:
- Make sure that your network and professional relationships are as strong and developed now as they were before you reached your current level of success;
- Look for ways to distinguish yourself and your business and maintain the highest standards of professionalism and service;
- Look for every way to add value and collaborate with other top services providers you work with so that you are a natural and logical part of every project or client they are involved with. - - Become part of a best of class team of teams that delivers the highest value to the consumer. This is true of everything from medical services to commercial contracting;
- Continue to be the best, or at least great at what you do. “Good enough” should not be part of your vocabulary.

Guard your credit like gold. Good credit has always been important on both personal and business fronts, but it is now more important that ever. As credit markets have tightened even the wealthy are having trouble obtaining credit for every day issues like home and auto purchase or leasing. Banks are scared and have pulled in the reigns on lending to all but those who have sterling credit, “good” is no longer good enough. They are also using late payments of any kind to move to the default interest rates permissible under various types on loan and consumer credit agreements as a way to generate fees and increase revenue internally. On a personal level this could mean that your VISA ay 8.9% jumps to 29.99% APR if your spouse sends in the check late. On a business level it is much worse. If your course of business has been to pay certain credit lines down late to a friendly creditor, it could now put you into default or cause an acceleration.

We are also hearing that clients who have used revolving credit lines for years as part of their business model either for capitalization or to pay recurring expenses are suddenly finding that their credit lines have been terminated or drastically reduced as is permissible in the fine print of most such agreements. This is despite the fact that the client has had no change in income or credit. Banks are simply deciding that they have too much exposure and are proactively limiting your ability to draw that money out.

Solution? – If you have a credit line that you know you are going to need or cannot risk losing – draw the money out now and look at the interest cost like an insurance premium; you may not want to pay it but if you need the “insurance” of having that money available it will not be available at any cost, certainly not in any short term scenario.

There are services out there that we have referred friends and clients to with great results. For an investment of a few hundred dollars many negative or inaccurate items can be removed in a short period of time increasing your credit score by dozens of points. Check your business and personal credit reports and see if they are accurate.

We are also seeing that banks that are in financial trouble and which need to reduce their outstanding debt balances are playing dirty tricks like re-appraising property they financed over 18 months ago to “current market value” at ridiculously low valuations then going back to the borrower and saying they need more collateral or they will call they note as the “fine print” entitled them to do. How bad can this be? In one case the bank re-appraised my client’s multi-million dollar commercial property at about 50% of current fair market value and wanted an additional seven figures in collateral. Fortunately, this client had sterling credit and good professional relationships that allowed him to re-finance at a lower rate with a more solvent and ethical bank.

ID THEFT ALERT - SCAMMERS POSING AS JURY DUTY OFFICERS

2009-06-18T10:44:00.000-07:00

JURY DUTY SCAM !
This has been verified by the FBI (their link is also included below). It is spreading fast so be prepared should you get this call. Most of us take those summons for jury duty seriously, but enough people skip out on their civic duty, that a new and ominous kind of fraud has surfaced.

HOW IT WORKS:
The caller claims to be a jury coordinator calling about jury duty you missed. . If you protest that you never received a summons for jury duty, the scammer asks you for your Social Security number and date of birth so he or she can verify the information and cancel the arrest warrant. Give out any of this information and bingo;your identity was just stolen.

The fraud has been reported so far in 11 states, includingOklahoma , Illinois , and Colorado . This (swindle) is particularly insidious because they use intimidation over the phone to try to bully people into giving information by pretending they are with the court system. The FBI and the federal court system have issued nationwide alerts on their web sites, warning consumers about the fraud.

Here's the FBI's own story:

http://www.fbi.gov/page2/june06/jury_scams060206.htm

New FRAUD Schemes Prey on Personal, Religious and Cultural Connections to Build Investor Confidence

2009-06-17T16:49:00.000-07:00

Ike Devji, J.D.
© 2009

Something quick, down and dirty I want all our clients and partners to be aware of, as you folks are the ideal candidates for the bad guys – you are among the most successful people in the U.S.

http://www.fa-mag.com/fa-news/4036-sec-advisor-scheme-targets-chinese-americans.html

UPDATE 8/7/09 - Former Rabbi Charged in $35M Tax Fraud Scheme http://tinyurl.com/muesxf

As markets continue to fluctuate and rattle investor confidence a new series of alternative investment fraud schemes are emerging and being exposed faster than I can post all the details.

In times of crisis many people feel comfort doing business with a personal or social contact or a member of their own religious or ethnic community. Unfortunately that comfort level is replacing normal standards of due diligence and often intentionally sidesteps the professional advisor relationships that an investor may have in place, often with tragic results.
Many of these schemes are dressed under broad terms such as private offerings, hedge funds or are related to purchasing intangibles, like deeds of trust.

Common excuses for exclusion of the investor’s advisors include:
- They won’t know how this works;
- Your friends are all in the deal and they all had their people check it out;
- They will say no because we will compete with them;
- This is a special private deal for friends and family only;
- We have an NDA (non-disclosure agreement) you will need to sign and keep this offering confidential;
- We need you to make a decision and fund immediately because we have other investors waiting for this opportunity;
- We have our team and they have checked this out with our own high dollar lawyers;
- We have the “support” of such and such big bank and you they checked us out

Any one or even a few of these may be actually true and valid on any deal, but I have never seen a legitimate opportunity where the promoter used all the tricks on this list. If they have a deal that is worth being part of they will allow you to ask questions and do your homework.

Will your CPA or other advisor have an issue with signing the NDA if he is reviewing an offering on your behalf? I doubt it.
Invest, make money – take calculated risks and allow your team to help guide you! As always – walk with awareness and call us for help if you need it.

ASSET PROTECTION 101 FOR ATHLETES AND MANAGERS

2009-06-17T15:07:00.000-07:00

Asset Protection 101 – What Every Agent and Manager Must Know

Ike Z. Devji, J.D. © 2008

Your clients depend on you to be a source of information on a wide variety of complex topics. They assume, rightly or wrongly, that you are at least informed about every area even marginally related to your core business. One of the areas in which professional athlete clients are increasingly seeking guidance from their management team is in the area of Asset Protection.

Professional athletes are natural targets for lawsuits on a variety of issues for a number of reasons including:

They are, or are perceived to be, holders of large amounts of liquid wealth that can lead to frivolous lawsuit against them;
They are visible and easily identified and as public personalities with lavish lifestyles and spending habits;
The exact amount of wealth they have accumulated is often public knowledge as in the case of their contracts;
They earn large amounts of money in relatively short periods of time;

Any one of these factors on their own would be a legitimate source of concern to most professionals. Add to that the uncertainty of injuries, performance related compensation and relatively short amount of time that any individual might have in their peak earning years and the need to ensure and protect assets and future income stream becomes even more glaringly obvious.

As a trusted advisor you probably already seek to put your clients in touch with professionals who can create safe steady growth and avoid losses and exposures to things like market risk and income and estate taxes. A natural extension of that stewardship is making sure that the growth you are fostering, as well as the balance of your clients’ assets, are safe from exposure to an increasingly predatory and hostile litigation system. Some of your clients have obvious exposures, such as those based on their lifestyles and visibility. Other sources of exposure are more insidious, such as merely being wealthy and visible, owning income property, or something as simple as owning and driving a car every day. The numbers are staggering; we are at a point in our litigation system where we have over 70,000 lawsuits filed per day in the United States alone, many without any real merit. Unfortunately being “right” is not enough to keep our clients safe.

Why are your clients concerned?

As illustrated by the numbers below, awards continue to spiral out of control, fueled by litigation attorneys who have become partners in lawsuits and who are economically incentivized to create and magnify adversarial relations between parties who might otherwise reach some reasonable, if not amicable, settlement.

WHAT ESTABLISHES THE NEED?
Facts about our litigation system for you:
- We live in a society that files some 70,000 lawsuits per day, many without merit;
- The average legal costs of settling a frivolous lawsuit is $91,000 – plus the actual settlement amount itself;
- Only the top 5% of Americans have a net worth of over $1MM. Using that as a baseline, it’s pretty easy to see where even a client who is worth only a few million dollars fits in on the food chain.

COMMON RISK FACTORS – some combination of any of the following:

-They are high net-worth, high liability, or they will be soon
-They are highly visible, traceable, and or collectible
-They have assets that would be difficult to replace if lost or reduced
-They have employees
-They own their own business
-They have professional liability
-They own liability generating assets, i.e. rental property
- They have children
- They are single and need to back up their pre-nup planning.

What we and our clients must take to heart is that litigation attorneys are in business. Just like any business, including yours, they have weekly meetings in which they examine growth, cash flow, revenue goals and new leads or opportunities. This economic motivation is a key and explains in part why we see awards rising and why plaintiffs’ attorneys regularly seek and obtain awards above the limits of applicable liability insurance policies. The average medical malpractice policy, as just one example, is $1MM, whereas the average national malpractice award is about $3.9 million. This leaves the physician holding the bag for the other several million dollars. Could your average client survive that kind of a loss and maintain their financial goals? Likely not.

Can’t we just insure their way to safety?

No, unfortunately, for a number of reasons. First, it’s impossible to insure yourself against every possible contingency and exposure. There will always be many exposures for which no insurance exists or which are not adequately covered by the amount of coverage the client has in place or can afford.

Second, the liability insurance business model is simple: Take lots of premiums in and pay as few claims as possible. The difference equals profit. When an insured contacts their own carrier to report a claim, a number of the questions asked by the insurance company seek to determine if coverage can be reduced or excluded due to the contributory negligence of their own insured. Think about the questions, “Were you wearing your seatbelt? Were you smoking or on your cell phone at the time of your accident? Do you wear corrective lenses? Have you ingested drugs or alcohol within the previous 24 hours?”

Third, the holy grail of the “umbrella policy” and policy limits are rarely fully understood by clients and advisors. To the consumer, “umbrella” means “everything”. To the insurance company it means specific occurrences to specific limits under specific conditions. Add to that the fact that many liability insurance polices are inclusive of defense costs and the actual amount left for the award is reduced, again exposing the insured person personally. For example, your client has a $1 million liability policy in place and gets sued. The insurance company spends $400 thousand on defense costs and loses, resulting in an award of $1.2 million. In this scenario, only $600 thousand is available from the policy to put towards the claim itself. Our advice: buy as much insurance as you can afford, assume it won’t work and have a good back up plan.

A little proactive medicine goes a long way

We are all aware that there is a ton of offense out there. You can’t drive across town without seeing ads for contingency fee attorneys plastered on billboards, bus stops and without hearing their ads on the radio. “Were you injured at no fault of your own? Have you been treated unfairly at work? Did you take a medication that may have injured you? Call us; we will get you compensated at no cost to you”. An interesting experiment is for you to Google “personal injury” and add the name of your city. The number of listings for attorneys will be staggering to you, especially when you consider that all those attorneys are in their offices right now waiting for the phone to ring, or thinking of ways to make it ring.

The question is what kind of defensive planning have your clients examined? They insure their homes, cars, personal property, health and even their very lives, but what level of planning and forethought have they, or you, invested in insuring their net worth? Typically very little forethought, other than liability insurance, has gone into this area. This lack of planning can be disastrous, especially for clients who have reached the pinnacle of their career and who are looking towards retirement. What options would your 38 year old client have if he or she lost a substantial portion of their net worth to a car accident in which there was a fatality, because their child had a party and another teenager died or was injured, or because they were accused of sexual harassment by a disgruntled employee (all issues I’ve addressed for clients recently). Think you or your locality are immune? Just turn on the nightly news and realize that every fatal accident you see reported that day will likely be accompanied by a seven figure lawsuit.

A great deal of the defensive planning involves the proper titling and compartmentalization of assets into acceptable and easily manageable units of risk. It’s easier than it sounds but still needs experienced guidance. The mantras I teach my clients are simple:

1. Own nothing, control everything;
2. What you don’t own can’t be taken from you;
3. The best defense is being an uncollectible target, take steps to remove the economic incentive to pursue you.

As is illustrated below, moving the title of assets to various appropriate and legitimate entities can dramatically reduce the amount of the exposure the client faces, and can actually help make the liability insurance they have in place more effective. How? It removes the economic incentive to pursue the defendant beyond the limits of the policy and forces settlements into a reasonable range. Why pursue someone for more than the limits of their policy through a long and expensive court proceeding if they didn’t have any assets that can be reached? For the plaintiff’s attorney this is a losing proposition and he will likely encourage his client to settle so that he can move on to the next case after taking his share of the award.

In most cases, collectible assets can be sheltered or reduced by over 90% with the use of well tested and established tools like LLCs, Limited Partnerships, Asset Protection Trusts and Receivables and Income Protection plans, to name just a few examples.

As you can see, the vast majority of the client’s collectible assets are accounted for and sheltered in this example. The best tools used are legal, tax neutral and have a legitimate business purpose. The numbers scale easily up or down. Remember, what each client has is all they have, so their $500 thousand may be as important to their long term goals as another clients’ $5 million is to them.

My client already has a “Revocable Living Trust”. Doesn’t this make them safe?

No, this is a dangerous misconception that the majority of your clients are working under. The Revocable Living Trust or RLT is a wonderful estate planning tool. However, like most tools it has a specific purpose, in this case primarily avoidance of probate and estate taxes.

The RLT is, as the first word in the title suggests, REVOCABLE during the client’s lifetime. This means that during a client’s lifetime they can easily be ordered to revoke the trust and tender trust assets for the payment of a judgment by a court. This is a common occurrence. The trust becomes irrevocable only upon the client’s death. Thus, during their lifetime it does not shelter them from any sort of law suit exposure. Conversely, Asset Protection does not replace or duplicate good estate planning, but rather works in conjunction with it.

What exactly can be protected?

Non-qualified investments, cash, stocks, both personal and investment or commercial real estate, business equipment, intellectual property, interests in non-liability generating businesses, valuable collection such as art and cars and even future income and business receivables are just a few examples. We typically exclude the personal checking accounts, personal “daily driver vehicles” and personal property.

Some Basics of Good Asset Protection Planning

Realize your value as a target and do something now, this is pre-planning. You cannot do any effective or legal planning after a lawsuit has been filed or a demand has been made. The time to act is now when waters are calm. Hoping that that it won’t happen to you is not a plan.
Be realistic about the possibility of exposure and about the effect that a six or seven figure judgment would have upon the financial plan in place. The most common mistake made by advisors is telling clients who are worth “only” a few million dollars that they are not big enough to justify doing this kind of planning. This is possibly the worst advice possible. Of course a client worth five or ten or even $100 million needs this type of planning. But who will be affected more? The ten million dollar client can take a hit for a million or two and keep the cars, house, lifestyle and put the kids through college, but your more average client would be financially devastated. They need it even more.
Use the right tools. Asset Protection is part art part science, just like your business. There are certain proven methods and tools that work and others that do not. Be wary of promoters, do it yourself kits and promises of domestic jurisdictions that will make you safe and save you money on taxes. Each tool has a specific business purpose that protects specific types of property, they are not all interchangeable.
No, Nevada Corporations do not work. In fact, they are increasingly viewed as presumptively fraudulent due to a long history of abuse and tax fraud. Thousands of consumers have purchased them under false promises of secrecy, bearer share anonymity and tax advantages. Almost all these promises are completely fictional. Our information shows us that the term “bearer shares” does not even exist in the statutes of the state of Nevada. Unless you or your client live there, do business primarily from or in the state of Nevada and have the assets in question housed in the state, a Nevada LLC will not help you, especially if it lacks a real business purpose as explained below.
Maintain a legitimate business purpose for all legal tools. We commonly see good tools misused by clients and inexperienced planners which do more harm than good. In order to take advantage of the full protection the law affords we must maintain an essential business purpose for the tools we use. The use of limited partnerships for investment management and LLCs to hold investment or commercial real estate are two examples of well proven and tested business usages.
No, transfers to a spouse, child or relative are not effective. This is especially true if the transfer is made after an exposure has occurred. A thinly disguised “gift” will easily be reversed and the property seized by the court in the event of a judgment. Further, these types of transfers are rarely legitimized by the appropriate recording and tax reporting formalities. If you gave your 17 year old your $1 million home at full equity you better have a gift tax return illustrating that, and it better have been done well in advance of the harm complained of. Even if the gift is effectively made, all you have done is given away something you want to protect and exposed it to another person’s liability.
“Just” an S-corp. or an LLC is not enough. Single member or closely held corporations with just one or two owners are exactly they type of entity you commonly hear referred to when you hear the phrase “piercing the corporate veil”. If a business has only one or two owners who closely manage and control the operations of the business on a daily basis, or even worse, which are also directly responsible for a harm or injury, it is relatively simple for a court to pierce the veil and grant access to the owner’s personal assets. This is especially true with successful small businesses and family businesses that often don’t maintain the formalities of keeping personal and business expenditures completely separate, bolstering the argument that the person and the corporation are one and the same.
Get professional, individual help. There are a wide variety of skill levels in every profession, including the law. Many so called Asset Protection professionals are not attorneys, or are attorneys who apply bits and pieces of knowledge from other fields of practice that may actually diminish legal protections in existence. Every plan must be uniquely tailored to the individual, their activities and the unique nature of their assets. There is no one size fits all solution, even though clients with similar assets may have similar looking plans.
The legal tools used are typically tax neutral. Don’t try to combine tax planning and Asset Protection. In most cases, the tools used are taxed neutral and do not provide tax advantage or tax liability. Many times abusive tax structures are disguised as Asset Protection, often promising tax free growth offshore in various trusts or captive insurance plans. As a financial professional you already know that putting money into a plan tax free, growing it tax free and pulling it out tax free is rarely if ever possible. The one general exception to this rule is in the application of certain receivables protection plans.
Don’t forget about income and receivables – protect the source. Very often we see individuals that are concerned about protecting everything they have been fortunate enough to accumulate while ignoring ways to protect their future income. We find that many clients, even those with a very high net worth, often have fixed business and personal overhead commitments based on the expectation of a certain income level. If many of them suddenly had that cash flow tap turned off, they would not be able to sustain their current monthly expenditures. This scenario would force them into a situation where they were either selling off assets, going into qualified plans early and making substantial lifestyle changes. There are options available for qualified clients that can securitize that income stream.
Don’t draw liability in. In many cases clients unintentionally escalate their value as a target. For instance, how many of your clients have vehicles that they or their spouse drive titled in the name of their business? Which of the following three defendants is most exciting to a plaintiff: John Smith; Dr. John Smith, or Smith Cosmetic Surgery? As you can see the corporate defendant is often the most exciting, deepest pocket. In order to fix this we simply transfer the vehicle back to the client’s name and have them take a car allowance from the business. Remember, with a good plan in place your client won’t have substantial exposed assets anyway.

This article just scratches the surface of Asset Protection and provides some generally applicable rules and issues to be aware of. When you and your clients are ready to explore the solutions available, seek qualified counsel that has a proven record of experience in this specific field.

Ike Z. Devji, J.D. – Executive Vice-President, The Wealthy 100,
Of-Counsel, Lodmell & Lodmell, P.C.

JUST ONE EXAMPLE OF PROFESSIONAL RISK:
1. Pro Athletes who Deliberately Injure Another Player Should Face Criminal Prosecution, Says New FindLaw Survey
http://company.findlaw.com/pr/2004/041204.proathletes.html

ASSET PROTECTION 101 FOR FOR FINANCIAL ADVISORS, LAWYERS AND CPA'S

2009-06-12T16:49:00.000-07:00

This article was originally written for and published by ADVISOR TODAY, the journal of the National Association of Insurance and Financial Advisors. It has been used nationwide as a client and advisor education piece and has been selected for presentation at the annual meeting of the Academy of Financial Planning this fall in Anaheim, CA.

A link to the article in its original format is here: http://cfofa.files.wordpress.com/2008/10/advisor-today-ap-1013.pdf

IKE DEVJI and JEFF CHRISTENSON featured in WORTH Magazine

2009-06-12T16:40:00.000-07:00

SEE THE WORTH FEATURE HERE: http://worth.com/index.php/advice?id=5&view=single

Arizona advisors to the Affluent Jeff Christenson and Ike Devji selected as WORTH Magazine national “Leading Wealth & Legal Advisors”

Phoenix, AZ - JUNE 2009

Jeff Christenson, a Phoenix money manager and President of Christenson Wealth Management and Asset Protection Attorney Ike Devji, Executive V.P. of the Wealthy 100, Of-Counsel with the law firm of Lodmell & Lodmell have been selected by WORTH magazine as part of the Leading Wealth & Legal Advisor Program, a vetted venue for top wealth and legal advisors nationwide. This section is designed to introduce some of the country’s leading wealth advisors and attorneys to Worth readers and provide sound guidance on how to maximize advisor relationships. Christenson and Devji will contribute professional columns for the re-launched magazine which has been designed as the essential guide book for the ultra affluent throughout the year.

“Given what’s happened in the market since October, high net worth families are making tough decisions about their investment and legal advisors and the quality of advice they’re receiving,” said WORTH Publisher Patrick Williams. “Giving investors sound information about leading wealth and legal advisors Like Ike and Jeff will help them make a more informed choice when selecting an advisor or adding to their team.”

Devji, who helps protect billions of dollars for clients internationally and who ran one the largest Asset Protection only law firms in the country, agrees, “We find that our client’s needs are increasingly sophisticated and complex as their net worth grows and their business and personal interests and exposures diversify. We often work together to find and refine solutions for each other’s clients and that’s what makes us unique, the team approach and the best of class bench we have built to serve our clients as needed on an a-la-carte basis. That’s what our clients like about us and that’s what Patrick Williams and WORTH found unique about what we do”. Devji has quietly long been the go-to resource for some of Arizona’s wealthiest residents who are interested in proactively protecting their wealth both domestically and offshore.

WORTH has undergone a complete re-invention in the past few months with an aim to enlighten, inspire and serve a select group of high net worth individuals with an avid interest in the intelligent stewardship of their personal wealth. Featuring a contemporary design and compact format (7.875 inches X 10.5 inches) and printed on paper typically reserved for books, the magazine is geared to be an elegant, practical and portable resource for dynamic CEOs, entrepreneurs and investors.

Christenson and Devji, although in different fields, often work together to meet the varied and sophisticated needs of their high net worth clients both in Arizona and across the United States. “Our clients are leaders in every imaginable industry; medicine, real-estate, executives, professional athletes and entertainers and even others in our own businesses”, said Christenson, a 15 year veteran of the financial services industry. “What they all have in common is that they have spent a great deal of time and effort becoming successful and turn to us help them stay that way”.

The duo look forward to being part of the distinguished WORTH community and continuing the work they are known for and which their clients see as more essential than ever.

DEALING WITH EMPLOYEE EXPOSURE IN A DOWN ECONOMY

2009-06-12T16:27:00.001-07:00

DEALING WITH EMPLOYEE LAWSUIT EXPOSURE IN A DOWN ECONOMY - ARE YOU PREPARED?

Are you properly protected from employee liability? For those of you who are business owners and have employees or have clients who do, this is very important, especially if you may have to consider lay-offs or downsize as a result of the current business climate.

American business owners are 5 times more likely to be sued by an
employee than for any other reason, and employees win 75% of the time.

Remember that the people affected by these kinds of economic necessities take it personally, not just as a business decision, and will often turn a necessity based lay-off into a discrimination claim (or something worse) with the help of an employment attorney. Be sure you carefully document any staff reduction, whether based on economic necessity or performance; how would you react if you were fired or laid off amidst fears of a recession? Most people panic and grasp at straws.

Make sure you have adequate employee/work place policy manuals in place and that those manuals include detailed arbitration/mediation policies of the type we have discussed in the past. These policies give you opportunities to amicably resolve the issue in an informal way without being subject to the high risk, expense and distraction of a formal court proceeding. Caution – the “jury of your peers” will be made of employees – NOT employers, and given the current social, political and economic climate being a business owner is more dangerous than ever.

More importantly, if the agreement is properly drafted and implemented the employees (both new and old) MUST comply and we remove most of the economic incentive their attorney was motivated by. This is also a good time to review what your employees are doing with your clients and each other and to remind them of policies that you may have in place to protect you. We must be vigilant of the fact that you are responsible for their actions with clients and how they interact with each other as well. At times like this maintaining safe and proper procedures in everything from billing and id theft prevention to keeping the hallway floor dry is especially important.

If you are my client, or an advisor whose clients we serve, we have likely already discussed the PPDRP or “employee mediation agreement” which includes a mandatory mediation and arbitration policy for any employee-employer disputes, and which I strongly recommend for all clients who have employees. I really feel that this, in conjunction with a good employee handbook is an important step towards closing gaps that may be a source of liability.

The devil is often in the details, and issues with employees can be a huge exposure but can be easily and cost effectively addressed by implementing such a policy. We have thousands of these in place for clients across the U.S. including here in our office and in my family’s own businesses. Remember the employer is going to be held accountable, as the “deep pocket” for just about any grievance the employee has and that they employer is help responsible not just for what happens on the premises and their own interactions with the employee, but also how every employee interacts with the others, that’s a lot of variables! In your case multiply that variable by 50, or even 5 people you might have working for a particular business organization and the reason for my concern becomes clear. Employees are suing more often, winning an average of 75% of the time, and are winning proportionally larger and larger judgments. The average sexual harassment judgment as just one example has risen to $530K.

The problem with the stock arbitration clauses in most employee agreements is that they are unenforceable because they lack the specificity required by the courts. The same is true of the majority of dispute resolution policies we see. The policy we have discussed outlines a clear simple system of procedures that unambiguously provide steps for any employee with a grievance to follow. The agreement “provides actual notice” of the policy in a consistent manner and provides a road map for employees to follow that makes the employer aware of the issue and gives the employer 3 good faith chances to solve the problem before it escalates. As you probably know, many of these exposures occur when people feel they are at a dead end or have no voice or recourse.

The policy is recorded with the American Arbitration Association, is distributed to all employees and as we discussed is a modification of a workplace policy, not a contract that would require offer, acceptance and consideration to be valid and enforceable. The courts have consistently held, as in the landmark “Circuit City” case, that the employer does have the right to amend these policies but that they must “provide notice” of the changes to the employees. We do that and also include important items like a non-disclosure and confidentiality clause.

I hope this helps, please contact me with any other questions. This is a huge exposure that you can’t afford to ignore, especially given the fact that it takes a VERY small amount of time and money to insulate yourself from this exposure.

INTERNET SCAMS AND ID THEFT

2009-04-27T13:14:00.000-07:00

The link below contains some good information about how ID thieves and criminal gangs are capitalizing on current economic conditions. As you know, we have always advised our friends and clients to guard the assets of their identity and credit as carefully as their more tangible assets. These assets are more valuable than ever before, please take a moment to review these points.

CLICK HERE FOR USA TODAY STORY ON IDENTITY THEFT

FRAUD AND IDENTITY THEFT ARE ON THE RISE – TAKE SIMPLE STEPS
When times are tough all types of fraud increase, not just the lawsuits that are typically the focus of these updates. In addition to the obvious financial exposure of having someone access your identity and accounts is the risk to your credit. ID theft can take years and thousands of dollars to fix. ID thieves are trolling nice neighborhoods like yours and stealing trash and mail from your curb and mailbox, as well as using more devious and intricate methods like fake notices that your anti-virus software has expired and you need to click to update. An excellent source of information on these issues can be found here: http://www.ftc.gov/bcp/edu/microsites/idtheft/consumers/deter.html
Some basic tips:
Use a shredder for anything with an account number both at home and at your office. This includes things that you would typically put in your office trashcan. Would you let the person who empties the can at your desk have your checkbook?
Protect personal information of your employees and clients like it was your own – they will hold you responsible if that information is compromised. Make sure that such information is locked up, password protected and ideally traceable, i.e. who logged in and when if stored electronically.
Update your computer security software and make sure your anti-virus and spam ware is regularly updated and correctly functioning.

Be careful about the detail of information available on you online, especially in the age of business-social networking. If you are reading this we have probably had a discussion about distancing yourself from title to certain assets. I am continually amazed about the personal details about assets and family that people put on line.

Check your credit and the credit of your children regularly. ID thieves have started accessing the SS numbers of children and using them as clean slates then running up thousands or more of bad debt. In many cases the family is unaware that this has happened until years later or until the collection calls start coming.

PROTECT YOUR CREDIT - IT IS NOW MORE THAN EVER AMONG YOUR MOST VALUABLE ASSETS:
Good credit has always been important on both personal and business fronts, but it is now more important that ever. As credit markets have tightened even the wealthy are having trouble obtaining credit for every day issues like home and auto purchase or leasing. Banks are scared and have pulled in the reigns on lending to all but those who have sterling credit, “good” is no longer good enough.

They are also using late payments of any kind to move to the default interest rates permissible under various types on loan and consumer credit agreements as a way to generate fees and increase revenue internally. This could mean that your VISA ay 8.9% jumps to 29.99% APR if your spouse sends in the check late, or worse, if your course of business has been to pay certain credit lines down late to a friendly creditor, it could now put you into default or cause an acceleration.

We are also hearing that clients who have used revolving credit lines for years as part of their business model either for capitalization or to pay recurring expenses are suddenly finding that their credit lines have been terminated as is permissible in the fine print of most such agreements. This is despite the fact that the client has had no change in income or credit. Banks are simply deciding that they have too much exposure and are proactively limiting your ability to draw that money out. Solution? – If you have a credit line that you know you are going to need or cannot risk losing – draw the money out now and look at the interest cost like an insurance premium; you may not want to pay it but if you need the “insurance” of having that money available it will not be available at any cost, certainly not in any short term scenario.

There are services out there that we have referred friends and clients to with great results. For an investment of a few hundred dollars many negative or inaccurate items can be removed in a short period of time increasing your credit score by dozens of points.