Fiduciary Fiasco

Just as a plan of battle never survives first contact with the enemy, estate plans often fall apart in the crucible of the probate process.  Sometimes these meltdowns can be avoided by properly drafting legal documents, but there are times when it is not the plan, but the people, causing matters to go from bad to catastrophic.  A few years ago a client came to me because he was being sued for attorney fees amounting to six figures.

My client had seen me several years earlier when he and his siblings were butting heads over who would be in charge of the mother’s affairs.  He did not hire me then, but he was back because the matter had become a nasty affair in probate court.

My client’s mother was a widow with four children.  Two wanted the mother in a western state in an assisted-living facility.  The others wanted her in a nursing home in Michigan.  She had gone west for a visit and her son had settled her in an ALF and opened guardianship.  Two of the three Michigan siblings, a daughter and another son, went to the western state to contest the guardianship and bring her back to Michigan.  They were successful in moving the mother and her legal matter back to Michigan.

Since the siblings were at loggerheads, the Michigan judge appointed an attorney to act as guardian and conservator (a conservator is in charge of the person’s financial estate).  The siblings then started trying to get the attorney dislodged as fiduciary.  They blew over $300,000 on court costs and attorney’s fees.  The conservator and the court wanted my client to pay a large part of that.  He disagreed and hired me to contest the sanctions against him.  It was a sad situation for all of the family.  By the time the mother died, after years of legal wrangling, her estate had declined from around $850,000 to less than $400,000.

If the mother had foreseen the sibling conflict, she might have used a living trust and power of attorney to establish who would be in charge of her person and estate.  Although this may have discouraged other sons and her daughter from going to court to establish guardianship and conservatorship, some family conflicts cannot be resolved except by a judge.

John Payne, Attorney
1800 Grindley Park Street 6
Dearborn, Michigan 48124
Come visit me at: http://www.law-business.com
313.563.4900/fax 313.583.3100

Pittsburgh Office:
9853 Old Perry Highway
Wexford, Pennsylvania 15090
800.220.7200/fax 412.548.0022

Ryan Plan to Include “Life Panels”

House Republicans passed congressman Paul Ryan’s deficit-cutting budget plan on Thursday, March 29, 2012, potentially a crucial plank in their election-year campaign platform and a foil for Democratic attacks over the plan’s savings in health care. One little-noticed cost-saving provision establishes an additional hurdle for applicants for Medical Assistance, also known as Medicaid. Under the new requirement, adults must demonstrate a reason to live in order to qualify for Medicaid. Analysts estimate that this could eliminate up to 50% of current and potential adult Medicaid recipients. Savings in federal general fund dollars could exceed $687 billion over 10 years.

Under the proposed policy, individuals must demonstrate a reason to live, by clear and convincing evidence, to be eligible for Medicaid. Acceptable reasons include: a) Objectively measurable artistic ability, b) Ability to engage in aesthetically-pleasing musical, dramatic, or dance performance, c) Significant mathematic, scientific, rhetoric, inventive, religious, or political capacity, or d) Being held in high regard or loved by a significant number of unrelated individuals.

To establish objectively measurable artistic ability, applicants must present critical reviews by three recognized art critics, unless paid by the individual or family members. The reviews do not have to be positive. In the art world negative reviews are considered to be more desirable and reliable than positive reviews.

Ability to engage in aesthetically-pleasing musical, dramatic, or dance performance may be verified by YouTube ratings or participation in juried competition. The individual need not win a competition, but must survive at least first-round elimination for the competition to qualify as clear and convincing evidence of a reason to live. Hip-hop is not considered music under the bill and waiving a sparkler on the Fourth of July is not considered a “dance,” unless the individual is able to wave a flag at the same time, without setting the flag on fire.

To support a finding of a reason to live by reason of mathematic, scientific, rhetoric, or inventive capacity, the individual must demonstrate that he or she is as smart as, but not necessarily smarter than, a fifth-grader. Religious capacity may be shown by a healing or other miracle within the previous 12 months. The individual is considered to have political capacity if supportive of the TEA Party. Liberal political inclinations are automatically disqualifying.

Being held in high regard or loved by a significant number of unrelated individuals may be shown by notarized testimonials of unrelated third parties. Testimonials of relatives are not considered, as relatives are conclusively presumed to be biased in favor of the individual. Paid caregivers, treatment providers, and employees of the institutions where the individual resides are disqualified from attesting to the individual being held in high regard or loved.

The bill would establish a “Life Panel” in each of the 57 states. These life panels would determine whether indigent adults have sufficient reason to live to be granted medical care. According to House Speaker John Boehner, the “life panels” are “totally opposite” to the “death panels” established by Obabamacare. The Speaker stated, “It’s as different as putting your pants on one leg at a time is from putting your legs in your pants one leg at a time. It’s as different as putting your hat on your head is from putting your head in your hat. They are as different as a Xerox machine and a copier.”

Minority Leader Nancy Pelosi responded, “Life panels and death panels are the same thing. The Republicans are imitating us. We call on the President to make them stop imitating us. If they won’t stop imitating us, we will start imitating them. We’ll see how they like it!”

John Payne, Attorney
1800 Grindley Park Street 6
Dearborn, Michigan 48124
Come visit me at: http://www.law-business.com
313.563.4900/fax 313.583.3100

Pittsburgh Office:
9853 Old Perry Highway
Wexford, Pennsylvania 15090
800.220.7200/fax 412.548.0022

Gift Tax? Hakuna Matata

In government benefits planning, relatively large amounts are often transferred between between generations.  A common response is, “But if I make a gift of more than $10,000 I have to pay gift tax.”  I have this conversation so often I could do it in my sleep, but the lesson in a nutshell is, don’t worry about it.

 First off, the exemption is $13,000 in 2012, not $10,000.  The exemption has been adjusted for inflation over the last decade.  If a financial planner or adviser talks about “the $10,000 exemption,” that is a clue that he or she is lost in time or financially illiterate.

Secondly, the exemption is per person, per person, per year, and can be split between spouses.  The redundancy in the last sentence was intentional.  One person can give one person $13,000 per year, without any obligation to file a gift tax return.  One person can give two people $13,000, each, or $26,000, per year.  Usually the gifts are to family members, but not necessarily.  Sylvia Gotrocks can give her hairdresser, her psychic, her daughter, her uncle, her incarcerated penpal, her masseur, and her best worst frenemy an annual $13,000 gift, each.  If Sylvia is married, she can give each of the above seven donees $26,000.  That would be $182,000 in gifts, with no gift tax return needed.  If all of the above donees are married, the gifts can be doubled again, to $364,000.

Furthermore, none of the above donees needs to report the gift to the IRS.  Gifts are not income to the recipient.  The only tax consequences to the recipient are when the property generates income or is sold for more than the donor’s tax basis.

For example, if Sylvia and her husband give Stymie Grimes, her feng sui consultant, and his wife $52,000 worth of Trojan Corporation stock, there is no gift tax consequence.  However, dividends would be taxable to Stymie and he would pay capital gains tax based on Sylvia’s tax basis when the stock is sold.

If gift taxes are still a concern because a donor wants to give a donee an amount that would exceed the exemption amount, there is a $5.12 million estate and gift tax-free estate in 2012.  The tax-free amount may drop to $1 million in 2013, but that is still a lot of money.  Very few people have to worry about hitting the gift tax threshold.

To explain the tax-free estate a little better, assume that Sylvia gives Fermi Strokes, her dog’s canine chiropractor, $52,000.  Sylvia is married, but Fermi is not.  This is a $26,000 taxable gift.  However, Sylvia can apply the taxable gift against the $5.12 million tax-free estate, reducing it to $5,094,000.  Until Sylvia’s gifts exceed the tax-free estate, she does not need to pay gift tax.  However, Sylvia’s her tax-free decedent’s estate will be reduced by her taxable gifts when she dies.

This is a simplified explanation of a complex topic that comes back to the original message:  Do not worry about it unless you are uncommonly wealthy.  A married person, can give a married son or daughter $52,000 per year with no – repeat no — gift tax consequences.  Over the annual per person, per person exclusion, a gift tax return is necessary.  But there would be no negative tax consequences unless the donor is worried about exceeding the $5.12 million limit ($1 million after 2012 if Congress does not act) on the tax-free estate for Federal Estate and Gift Tax.

John Payne, Attorney

Garrison LawHouse, PC

1800 Grindley Park Street, Suite 6

Dearborn, Michigan 48124

Come visit me at: http://www.law-business.com

313.563.4900/fax 313.583.3100

 

Pennsylvania Office:

9853 Old Perry Highway.

Wexford, Pennsylvania  15090

800.220.7200/fax 412.548.0022

ALFs, LTCFs & SNFs — Decripting the Alphabet Soup

There are many different types of facilities for people who are unable to remain in their own homes or apartments – assisted living facilities, homes for the elderly, foster care homes, nursing homes, and personal-care homes, to name a few. For persons who are not in the elder and disabled care business, the variety can be confusing. Three of the most important general types of facilities are assisted living facilities, long-term care facilities, and skilled nursing facilities.

The information at is helpful in comparing “nursing homes” and “assisted living facilities” (ALFs). The chart is easy to understand and presents a coherent picture of both types of care.

Skillednursingfacilities.org is one of a set of websites cataloging different organizations that provide care to persons with disabilities. The other websites are assistedlivingfacilities.org, homehealthcareagencies.org, and adultdaycare.org. The nursing home versus assisted-living facility chart was compiled by the publishers of skillednursingfacilities.org and assistedlivingfacilities.org.

The “SNF” website provides comprehensive and generally accurate information about nursing homes, but it attempts to erase the distinction between nursing homes and skilled nursing facilities. A decision was made in creating the websites and chart to refer to nursing homes as skilled nursing facilities. A possible reason is that the term “skilled nursing facility” has a more positive connotation than “nursing home.” This is a re-branding decision that sows confusion where greater clarity is needed. People often use the term “skilled care facility” (SNF) to mean “nursing home” or “long-term care facility” (LTCF) and vice versa. This article and the accompanying table will sort out the differences between LTCFs and SNFs.

Re-labeling LTCFs as SNFs is like re-labeling pickup trucks as sport-utility vehicles because SUVs are considered to be more classy than pickups. However, confusing the LTCF/SNF distinction is more pernicious because some SNFs are also LTCFs and the difference is not apparent to the general public. Nursing care, also called basic care, is not the same as skilled care. The distinction is apparent in that persons in LTCFs are usually called “residents,” while persons in SNFs are “patients.”

Nursing care, or basic care, is provided by aides or Certified Nursing Assistants (CNAs) to residents who need medical and non-medical care due to chronic illness or disability. To qualify for care in an LTCF, the resident must need help with two or more activities of daily living (ADLs): dressing, bathing, transferring (moving from bed to wheelchair or chair), eating, and toileting; or must require 24/7 supervision due to mental incapacity.

Skilled care is health care provided when the patient needs skilled nursing or rehabilitation staff to manage, observe, and evaluate care. Skilled care might involve intravenous injections and drips, nutrition or fluids through tubes, wound care, ventilator management, or various types of therapy. Skilled care requires the involvement of skilled nursing or rehabilitative staff in order to be given safely and effectively.

The following table contrasts SNFs and LTCFs:

long term care v skilled care

Risky Business

This is the fifth of five columns describing strategies to protect the financial security of married persons whose spouses are in nursing care. This final column explains the pros and cons of investing in a small business, how it works, and in what states it is available.

We have been exploring alternatives for a couple named Sam and Hazel. Sam recently became a nursing home resident and will not be returning home. His monthly nursing home bill is $8,000, far above their combined income. They have a homestead worth $200,000 (even at today’s depressed home values) and $200,000 in savings. This puts Sam and Hazel well above median household net worth of around $180,000, but spending $8,000 a month just for Sam’s care will deplete their investments rapidly.

The Medicaid agency tells Hazel that their home is not counted and Sam could be eligible for Medicaid when half of their savings has been expended on his care. Hazel would like to know if there is an alternative plan that would allow her to keep more of their savings.

The objective is to make the excess assets, here approximately $100,000, non-countable or exempt. Giving the money away is a possibility, but tricky. Medicaid would make Sam ineligible for Medicaid nursing care payments for a period determined by dividing the gift by the average cost of nursing care, as determined by the state. This period of ineligibility would not start until Sam is in need of Medicaid because he is in a nursing facility and financially eligible. These gift strategies are complicated and difficult to implement. Fortunately, there are ways that make the excess assets unavailable while Sam qualifies for Medicaid, without permanently depriving Hazel of the financial security those assets represent. We have previously considered investment in the home, immediate annuities and sole-benefit trusts. The fourth strategy involves investment in a small business.

We have previously considered ways to incorporate countable funds in an excempt investment, such as the home, or to convert an asset into an income stream as an irrevocable trust or an immediate annuity. Small business investment is a way to make funds unavailable because the investor cannot easily take the money back.

Publicly-traded stocks are easily bought and sold. Putting money into the stock market provides no advantage in trying to qualify for Medicaid assistance with nursing home bills. However, investing in what are called close or small corporations may make the money unavailable because the stock is unmarketable or legally nontransferable.

Buying into a small corporation, partnership or limited liability company can be difficult. There are many regulatory hurdles to public sales of securities. Small, nonpublic offerings have many restrictions to protect the investing public. An investor usually must know the entrepreneur personally to learn about an investing opportunity.

The principals or major shareholders of a small business must work closely together. They may worry about one of the owners selling out to a competitor or undesirable business associate. Ojai Foods in the recent television series “Brothers and Sisters” provides a case study of why small business owners need to be wary of who becomes an owner. Nora Walker and her family are saddled with the mistress of Nora’s late husband, Holly Harper, as an owner and executive. The conflict that this causes is one of the continuing plot themes. Small business owners often place limits on when their interests can be sold and who can buy into the company to avoid this type of conflict. These limits are called buy-sell agreements.

Investments in small businesses are generally considered risky. For this reason, the liquidation value of $100,000 sunk into a small business might be $50,000 or less, even without a buy-sell agreement or other limitation on stock transfers. This immediate shrinkage of the value of the capital contribution is not a gift. Although this is the natural result of buying into a company, the expectation is that the investment will become greater or will generate in an income stream as the business prospers. Business investments are riskier than putting money in CDs or T-bills, but they have the potential to be much more profitable.

When Sam goes into a nursing home, Hazel could tie her excess assets up by investing in a small business. This would be a possibility if she has a trusted friend or family member with a business that could use an influx of cash.

Protecting assets by tying them up in a small business investment is not simple or easy. The interest in the business could not have a liquidation value that would allow it to be a countable asset for Medicaid purposes. At the same time, Hazel will have to show the Medicaid agency that the interest was worth what she paid for it. Furthermore, the agency will be predisposed to classify the investment as a disguised gift to other owners of the business. Despite the difficulties, such a business investment might be the only realistic alternative in some states.

Federal Medicaid law permits Medicaid applicants and recipients to purchase investments at fair market value at any time, even if the transaction converts a countable asset into one that is noncountable. Furthermore, most states have Medicaid rules that exempt assets used in a trade or business. The difficulty is in convincing the local Medicaid office that a asset-protection strategy they have not seen before is consistent with Medicaid rules.

For more information about these Medicaid devices, or for a referral to an Elder Law attorney in your state, please call either of the numbers below or visit my website and click on the “contact” button.

John Payne, Attorney
1800 Grindley Park Street 6
Dearborn, Michigan 48124
Come visit me at: http://www.law-business.com
313.563.4900/fax 313.583.3100

Pittsburgh Office:
9853 Old Perry Highway
Wexford, Pennsylvania 15090
800.220.7200/fax 412.548.0022

Trust Me, But Not in the Third Circuit

This is the fourth of five columns describing strategies to protect the financial security of married persons whose spouses are in nursing care.  This column and the other three each explain the pros and cons of one plan, how it works, and in what states it is available. This column discusses irrevocable sole-benefit trusts.

In the first post, we met Sam and Hazel.  Sam recently became a nursing home resident and will not be returning home.  His monthly nursing home bill is $8,000, far above their combined income.  They have a homestead worth $200,000 (even at today’s depressed home values) and $200,000 in savings.  This puts Sam and Hazel well above median household net worth of around $180,000, but spending $8,000 a month just for Sam’s care will deplete their savings rapidly.

The Medicaid agency tells Hazel that their home is not counted and Sam could be eligible for Medicaid when half of their savings has been expended on his care.  Hazel would like to know if there is an alternative plan that would allow her to keep more of their savings.

A way to preserve more assets is to convert liquid assets into an income stream.  If money is put into an irrevocable trust, it may be unavailable to the person creating and funding the trust depending on the terms of the trust.  By locking the money up in a properly-drafted trust and giving the community spouse only a monthly payment, the excess assets become an income stream.  Federal Medicaid law protects the community spouse’s income, so that the excess assets become a protected income stream.

This works because of the “sole-benefit” rule.  Assets transferred to the individual’s spouse or to another – such as a trustee – for the sole benefit of the individual’s spouse do not make the institutionalized spouse ineligible for benefits.  42 USCA § 1396p(c)(2)(B).  Furthermore, the income of the community spouse is not counted as available to the spouse in the nursing home.  42 USCA § 1396r-5(b)(1).

Since sole-benefit trusts are enshrined in federal law, they can be used to protect assets in many states.  The states covered by the U.S. Third Circuit Court of Appeals are a notable exception.  According to that court, “Once the community spouse receives [irrevocable trust] payments, there is nothing preventing her or him from sharing them with the institutionalized spouse as well.”  Johnson v. Guhl, 357 F.3d 403, 408 (3d Cir. 2004).  Therefore, sole-benefit trusts cannot be used in Pennsylvania, New Jersey, Delaware and the Virgin Islands.

Surprisingly, the same court laid down contradictory law in 2008.  In James v. Richman, the court stated that requiring the community spouse to share would undermine the rule that “no income of the community spouse shall be deemed available to the institutionalized spouse.” James v. Richman, 547 F.3d 214, 219 (3rd Cir. 2008).

For more information about these Medicaid devices, or for a referral to an Elder Law attorney in your state, please call either of the numbers below or visit my website and click on the “contact” button.

John Payne, Attorney
1800 Grindley Park Street 6
Dearborn, Michigan 48124
Come visit me at: http://www.law-business.com
313.563.4900/fax 313.583.3100

Pittsburgh Office:
9853 Old Perry Highway
Wexford, Pennsylvania 15090
800.220.7200/fax 412.548.0022

Home Sweet Home Investment

This is the second of five columns describing strategies to protect the financial security of married persons whose spouses are in nursing care.  The first column explained why divorce is not a good plan for preserving assets for a spouse when the other spouse is in a nursing home.  It explained that there are four better ways to protect the “community spouse.”  This column and the next three each explain the pros and cons of one plan, how it works, and in what states it is available.  This column discusses home investment as a way to shelter assets.

My last post introduced Sam and Hazel.  Sam recently became a nursing home resident and will not be returning home.  His monthly nursing home bill is $8,000, far above their combined income.  They have a homestead worth $200,000 (even at today’s depressed home values) and $200,000 in savings.  This puts Sam and Hazel well above median household net worth of around $180,000, but spending $8,000 a month just for Sam’s care will deplete their savings rapidly.

The Medicaid agency tells Hazel that their home is not counted and Sam could be eligible for Medicaid when half of their savings has been expended on his care.  Hazel would like to know if there is an alternative plan that would allow her to keep more of their savings.

Before she came to my office, Hazel asked for advice from her usual counselors.  Her hairdresser told her to empty out all of the bank accounts and bury the cash in the yard.  The bank teller told her just to put her bank accounts in her children’s names and the Medicaid agency will never find the money.  Her income tax preparer said that there is a five-year look-back, so it is too late to do anything.  Finally, an insurance salesman at a seminar tried to get her to buy an annuity that he said would protect all of her assets against creditors, tax collectors, probate, nursing home costs, inflation, deflation, recession, depression, revolution, fire, flood, hurricane, and an asteroid strike.  Fortunately, she did not act on all of this bogus advice.

There are several ways that Hazel could take advantage of the Medicaid homestead exemption to protect her financial security through home expansion, improvement, or purchase.  There is no limit on the homestead exemption for a community spouse.  Furthermore, all adjoining property owned by the community spouse is considered part of the homestead.

A farmer in Michigan named MacDonald was concerned because his wife Elsie went into a nursing home.  I advised him to purchase an additional 40-acre parcel adjoining his farm to use up excess funds.  As soon as he purchased that parcel, Elsie became eligible for Medicaid.

The house next door to Hazel was up for sale for $130,000.  I advised Hazel to offer $110,000 for this home as soon as Sam became a nursing home resident.  The seller was under pressure to sell, so Hazel got a bargain.  Because the two lots were adjoining, the second house became a part of Hazel’s homestead and was exempt.

After Sam became eligible for Medicaid, Hazel would be free to sell the house.  A community spouse has no asset limit after the institutionalized spouse becomes eligible for Medicaid, so the fact that the money might come back to her would not be a problem regarding Sam’s Medicaid eligibility.  Because it is based on Federal Medicaid regulations, this strategy will work in almost every state.  One notable exception is Pennsylvania, which does not exempt a second residence on homestead property.  However, even in Pennsylvania additional vacant land adjoining the home would be exempt.

A Pennsylvania client named Pansie who did not own a home used $350,000 of excess funds to buy a half interest in her daughter’s $700,000 residence, and moved in with her.  Because she lived with her daughter, her interest in the house was exempt.  Pansie’s husband Phil was approved for Medicaid without a problem.  Two years later, when Pansie wanted to move, her daughter bought back Pansie’s interest.

There are many ways that the homestead exemption can be used to protect the financial security of the community spouse.  The simplest ways are home improvement projects.  Putting a new roof on the house or updating the kitchen are ways to put excess funds to good use.  Purchasing and moving into a more expensive home can also result in a more comfortable environment, eliminating stairs and other aspects of the former home that could become problematic if the community spouse becomes less mobile and able to maintain house and yard.

As noted above, the community spouse’s homestead is an exempt asset in all 46 states, the four commonwealths, the district, and the territories. The details vary, most states exempt the home, itself, and all adjoining land owned by the Medicaid applicant or recipient.  For more information about these Medicaid devices, or for a referral to an Elder Law attorney in your state, commonwealth, district, or territory, please call either of the numbers below or visit my website and click on the “contact” button.

John Payne, Attorney
1800 Grindley Park Street 6
Dearborn, Michigan 48124
Come visit me at: http://www.law-business.com
313.563.4900/fax 313.583.3100

Pittsburgh Office:
9853 Old Perry Highway
Wexford, Pennsylvania 15090
800.220.7200/fax 412.548.0022

It’s About Time for CALM

The government is finally doing something about loud television commercials. Congress passed the Commercial Advertisement Loudness Mitigation Act (CALM) last year and the Federal Communications Commission just issued the regulations against blasting viewers off their couches during commercial breaks. The regulations go into effect in December 2012.

Sometimes the government gets a good idea. After all, some commercials are 20 dB or more louder than the shows. The public hates it when they fall asleep to the boring susurrus of a Leno monologue only to be startled awake by a commercial for Requip or another medication for an imaginary illness. We wouldn’t need so damned much Lipitor and Ambien if we could get a decent night’s sleep. Waking us up after a segment of Leno should have been recognized as a public health problem years ago. People turn on the “Tonight” show because they want to sleep. If they wanted excitement, C-Span or HGTV would be more fun to watch.

A Harris poll last year found that loud television commercials aggravated 86% of Americans surveyed, which indicates that 14% of us either do not watch television or have serious hearing problems. FCC Chairman Julius Genachowski boasted, “It is a problem that thousands of viewers have complained about, and we are doing something about it.” He has plenty to crow about. Congress and the FCC took the bull by the horns on this one, and it only took 60 years! I guess they were waiting for the bull to get so old and weak that they wouldn’t have to worry about being gored.

The subject of noisy commercials cannot omit mention of Billy Mays. As sad as his death was for his family, it is fortunate that he did not live to see a law against commercials that are louder than the surrounding programs. He would have been devastated.

John Payne, Attorney
1800 Grindley Park Street 6
Dearborn, Michigan 48124
Come visit me at: http://www.law-business.com
313.563.4900/fax 313.583.3100

Pittsburgh Office:
9853 Old Perry Highway
Wexford, Pennsylvania 15090
800.220.7200/fax 412.548.0022

Pennsylvania Commonwealth Bureaucracy

Pennsylvania Commonwealth bureaucracy is truly amazing. The Department of Revenue just issued a regulation on the application of realty transfer taxes found at http://www.irrc.state.pa.us//regulation_details.aspx?IRRCNo=2924. Among other changes, the regulation provides clarification that a transfer to a revocable living trust for estate-planning purposes is generally not taxed, which was essentially true before the regulation was issued. No big change, then.

The prefatory material to this 67-page regulation include the following queries and responses:

Q – If data is the basis for this regulation, please provide a description of the data.

R – No scientific data, studies or references are used to justify this regulation.

Q – Describe who and how many people will be adversely affected by the regulation.

R – No parties should be adversely affected by the regulation.

Q – List the persons, groups or entities that will be required to comply with the regulation.

R – Any entity transferring an interest in real property will be required to comply with the regulation.

Q – Approximate the number of people who will be required to comply.

R – The approximate number of people is indeterminable.

Q – Provide a specific estimate of the costs and/or savings to the regulated community associated with compliance, including any legal, accounting or consulting procedures which may be required.

R – This regulation does not increase costs or savings to the regulated community. No legal, accounting or consulting procedures are required by this regulation.

Q – Provide a specific estimate of the costs and/or savings to local governments associated with
compliance.

R – This regulation does not increase costs or savings to the local governments. No legal, accounting or consulting procedures are required by this regulation.

Q – Provide a specific estimate of the costs and/or savings to state government associated with the implementation of the regulation.

R – This regulation does not increase costs or savings to state government. No legal, accounting or consulting procedures are required by this regulation.

According to the Department of Revenue, who should know, the regulation is not based on any scientific or data analysis. It affects anyone who transfers real estate, but no one is adversely affected. It costs nothing and provides no fiscal benefit.

Assuming that all of the above is true, what is the point of promulgating the regulation? It is a lot of work to create a regulation that has no effect on anything. This is a bureaucratic masterpiece. If there were a Nobel Prize for government official self abuse, the author of this regulation would get the award.

John Payne, Attorney
1800 Grindley Park Street 6
Dearborn, Michigan 48124
Come visit me at: http://www.law-business.com
313.563.4900/fax 313.583.3100

Pittsburgh Office:
9853 Old Perry Highway
Wexford, Pennsylvania 15090
800.220.7200/fax 412.548.0022

Do Not Get Suckered by the Asset Protection Racket

Clients frequently ask about “asset protection” strategies. These plans may include offshore trusts, Nevada or Alaska trusts, irrevocable trusts or various insurance products. Many of the clients expressing concern about exposure to tort or business liability are reacting to investment pamphlets or seminar presentations trying to scare people into signing up for services. Except for obstetricians and drill-rig operators, asset protection should not be a major goal in estate planning. Companies promoting asset protection products are generally trying to take advantage of their targets’ fears and insecurities.
When clients start talking about asset protection from law suits, the first question should be whether the client has a significant risk of being sued for a large uninsured liability. Some doctors and other professionals in high-risk activities could be sued for millions, but that risk is too small for most clients to make it a planning objective. A truck driver has a high risk of being involved in an accident that could leave one or more others dead or severely injured. However, adequate insurance is a better way to address that risk than trying to high assets.
An offshore trust is often touted as a way to safeguard assets from attachment after a lawsuit. Although assets held by a trustee in the Caymen Islands or on Nauru would be difficult for a creditor to grab, they might also be difficult for the owner who put them there to retrieve. The question the client has to consider is how much trust he or she wants to put in a stranger in a strange land. Furthermore, a U.S. judge may not have jurisdiction over assets in the Caymens, but the judgment debtor who put them there would be under the judge’s control. The debtor who ignores the judge’s order to repatriate and pay over the assets will be held in contempt and might even be put in jail.
Trusts in debtor-friendly states are subject to the same limitations. They may be hard to get at, but if the debtor is subjected to questioning under oath by the creditor, it would be unwise to commit perjury or refuse to answer questions about what happened to significant property.
The best asset protection does not involve exotic vehicles or foreign bankers. Revocable living trusts, powers of attorney, and wills are highly cost-effective and can be used to transfer wealth from generation to generation efficiently and with conformity to the testator’s desires. Minimizing court supervision and tax burden can be achieved very reliably and at reasonable expense. What is important is to choose a competent, experienced attorney with a good reputation.

John Payne, Attorney
1800 Grindley Park Street 6
Dearborn, Michigan 48124
Come visit me at: http://www.law-business.com
313.563.4900/fax 313.583.3100

Pittsburgh Office:
9853 Old Perry Highway
Wexford, Pennsylvania 15090
800.220.7200/fax 412.548.0022