Michigan Asset Protection Lawyer Blog

IRS Reaches Assets of Irrevocable Trust to Pay Grantor's Taxes

Fri, 11 May 2012 13:22:53 -0500

Any practicing attorney engaged in asset protection planning is advised to read the latest decision in the Evseroff saga, U.S. v. Evseroff, No. 00-CV-06029 (E.D.N.Y., April 30, 2012). It is useful because it analyzes in some depth a variety of issues germane to the asset protection attorney. Evseroff is essentially a collection case. The U.S. Government is seeking to collect from a trust created by Jacob Evseroff some $700,000 of unpaid taxes. In finding that the assets of the trust can be seized by the Government to pay Jacob's taxes, the court addresses in considerable depth (i) fraudulent transfer law and the legal distinction between actual and constructive fraud, (ii) the concept of solvency in the context of a fraudulent transfer analysis, (iii) factors that demonstrate intent to hinder, delay or defraud creditors, (iv) burden of proof issues and (v) alter ego and nominee theories. The case is certainly instructive on what not to do.

Extremes To Which People Go In Order To Protect Assets

Wed, 22 Feb 2012 15:53:44 -0500

This blog generally contains serious reviews of various asset protection topics, including recent developments in the laws of Michigan and other states that are applicable to asset protection and strategies that debtors might consider to shield assets from their creditors. However, every once in awhile I will come upon an unusual, and in this case, a deeply disturbing story, which has little practical effect but which is very telling about the lengths people will go in order to protect their assets. Enter John Goodman, founder of the International Polo Club of Palm Beach.

Shocking Court Decision Makes Borrowers Liable on Nonrecourse Indebtedness

Mon, 16 Jan 2012 10:42:26 -0500

An extraordinary decision by the Michigan Court of Appeals should place asset protection planning at the forefront on the minds of all individuals who have outstanding nonrecourse guarantees of commercial loans. As a result of the decision handed down by the Court in the case of Wells Fargo Bank v. Cherryland Mall Limited Partnership, David Schostak and Schostak Brothers & Co. (December 27, 2011), real estate investors/developers employing nonrecourse commercial mortgage-backed securities ("CMBS") loans now find themselves personally liable for any deficiency if the loan defaults. You are undoubtedly wondering: if these are nonrecourse loans how can the loan guarantors become liable for the unpaid debt?

CAN A DISCLAIMER BE A FRAUDULENT TRANSFER?

Mon, 12 Dec 2011 15:42:00 -0500

Clients frequently seek advice as to whether they can disclaim an inheritance in order to avoid the inherited property being reached by their creditors. The issue faced by the asset protection planner is whether a disclaimer, made with the intent to hinder, delay or defraud creditors, can be viewed as a fraudulent transfer.

ASSET PROTECTION PLANNING CAN PROVIDE LEVERAGE IN SETTLEMENT AND WORKOUT NEGOTIATIONS

Fri, 11 Nov 2011 14:19:06 -0500

I recently began settlement and workout negotiations with a bank for a client where the debt on a piece of commercial real estate is $4million and the current value is $2million. The client was referred to me by another attorney who was aware of my asset protection planning experience and wanted to learn if there was still time to implement any asset protection planning in order to minimize the client's exposure to the bank. The client is married, and the specific nature of his situation enabled me to position his assets in a way that makes them unreachable by the bank. After this initial phase of the client's planning, I was asked to conduct the settlement and workout negotiations. As it turned out, the asset protection planning, as the initial phase in the process, provided my client with very valuable leverage in our negotiations with the bank. Despite the bank pressuring my client to access funds which the bank could not reach, with the objective of my client using those funds to pay a discounted lump sum settlement, we were able to negotiate a much steeper discount because of the structure we had implemented for the client.

DOMESTIC ASSET PROTECTION TRUSTS DON'T MERELY SURVIVE BUT THRIVE DESPITE MORTENSEN

Thu, 03 Nov 2011 10:53:02 -0500

The Bloggers are having a heyday. The first case to test Section 548(e) of the Bankruptcy Code, In re Thomas William Mortensen, was decided in an Alaskan Bankruptcy court on May 26, 2011. The court held that Mr. Mortensen's transfer to an Alaskan asset protection trust in 2005, while Mr. Mortensen was solvent, which occurred within the statutory 10 year period prior to the filing of his bankruptcy petition, was made with actual intent to hinder, delay or defraud his future creditors. The Judge concluded that a settlor's expressed intention to protect assets placed into a self-settled trust from a beneficiary's potential future creditors can be evidence of an intent to defraud. On this basis he allowed Mortensen's creditors to reach the assets of the trust. Commentators are weighing in on the effect of this decision on Domestic Asset Protection Trusts. Some are predicting that the decision may be the death warrant for this planning strategy. This author believes that the decision should have only a minor effect on the continued use of DAPT's.

Abusive Tax Schemes Often Cause Confusion in the Asset Protection Planning Arena

Mon, 24 Oct 2011 14:14:34 -0500

When clients come to see me for asset protection planning, it is clear that the client has preconceived notions about offshore trusts that are integral to some type of abusive tax shelters or other nefarious activity. This is not surprising. The media recently reported about a man from Niagara Falls, NY who was sentenced to 36 months in prison for selling and promoting an abusive tax shelter scheme that involved offshore trusts and domestic trusts. It is stories like this one that confuse many clients and give them unnecessary concerns about what asset protection planning is all about. As I always tell my clients, the asset protection planning we do for our clients is not designed to shelter income or avoid the payment of income taxes; instead it utilizes legitimate structures with the simple goal of helping these clients legally position their assets in a way which makes them less vulnerable to creditors.

Compare and Contrast: Michigan LLC Laws vs. Florida LLC Laws

Mon, 03 Oct 2011 11:43:27 -0500

I have previously discussed in several blogs the powerful asset protection benefits of the current Michigan law which provides that a charging order is the exclusive remedy for judgment creditors of LLC members, even in cases where the LLC has only one member. In 2011, the Florida Legislature amended the Florida LLC Act and enacted legislation intended to address concerns over the Olmstead case, in which a judgment creditor was allowed to execute against a Member's interest in a single member LLC. So the simple question is this: Does the new Florida law provide the same protections as those offered in Michigan?

Michigan Asset Protection Planning as a Countermeasure to the Rise of Federal Asset Seizures

Thu, 25 Aug 2011 10:45:12 -0500

An article on the front page of the August 22, 2011, Wall Street Journal describes the government's expanding rights to seize a person's assets. The article is replete with examples of how innocent parties are destroyed if they are simply in the wrong place at the wrong time. Some 400 federal statutes empower the government to take assets from convicted criminals as well as people never charged with a crime.

Are Client Files in the Possession of Asset Protection Planning Lawyers Subject to Discovery?

Fri, 19 Aug 2011 15:23:57 -0500

Clients visit Michigan asset protection planning attorneys for a variety of reasons. Some have no creditor issues whatsoever but wish to be prophylactic regarding future unknown creditors. Others are enmeshed in severe financial distress and are desperate to find ways to salvage assets. Most of my clients are honest and reputable persons with legitimate legal inquiries. However, on occasion, a crook will show up seeking information regarding not only how to shield assets from creditors but how to hide assets. Regardless of the circumstances, the client expects that communications between client and attorney will be confidential and protected from forced disclosure. Indeed, the attorney-client privilege is one of the oldest of the privileges for confidential communications.

Are Michigan Joint Accounts Free From Creditor Claims Upon Death?

Wed, 03 Aug 2011 14:03:07 -0500

I recently met with a client whose husband passed away while owing substantial credit card and student loan debts. At the time of her husband's death, my client and her husband had a moderate amount of cash and securities, all of which were held jointly. In Michigan, joint ownership of these types of assets by a husband and wife creates a tenancy by the entireties. The simple question my client had for me was this, "Am I responsible for paying the separate debts of my husband with this property?"

Short Sales and Deficiencies

Fri, 01 Jul 2011 13:44:31 -0500

It is not much of a stretch to understand why a Michigan asset protection lawyer would be contacted by a prospective client about a possible short sale. The concern of the homeowner, of course, is whether the lender will agree to accept the proceeds from the short sale in full satisfaction of the debt. The opportunity to have a debt discharged for less than its balance is a goal typical of the asset protection planner and thus a short sale can be an excellent strategy to reduce debt for which an individual has personal liability. However there are significant issues that need to be considered.

Using the $5million Gift Exemption to Create Creditor Protected Safety Net

Tue, 12 Apr 2011 14:46:29 -0500

Commentators are coming up with all sorts of clever ways to take advantage of the new $5million gift exemption that was part of the TRA 2010 legislation. Indeed, those of us who practice extensively in the asset protection planning arena have our own preferences and, not surprisingly, they involve the use of domestic asset protection trusts.

When the State Attacks a Discretionary Trust

Thu, 24 Feb 2011 10:31:14 -0500

An enormous opportunity for asset protection planning in Michigan and other states involves using trusts. It is quite common that a settlor of a trust will establish a trust with the goal that creditors of the trust's beneficiaries cannot reach trust assets to satisfy their claims. Occasionally the government is the creditor. In a recent Michigan case the State Treasurer sought reimbursement from a trust for the costs of incarcerating a trust beneficiary.

Asset Protection for Bank Directors: Most Have Little Appreciation for the Risks They Face

Mon, 17 Jan 2011 11:54:21 -0500

In Michigan, as well as other states, all corporate directors face risks. As fiduciaries of their corporations they have numerous obligations and assume a myriad of duties they are required to carry out. However, due to the regulatory environment under which they operate, bank directors have significantly greater exposure than directors of non-financial institutions. But there is one thing all directors have in common, personal liability for breach of their duties. Accordingly, bank directors should consult an asset protection planning attorney and complete and implement a plan for asset protection, along with confirming the adequacy of their director's and officer's liability insurance coverage, before agreeing to serve on the board.