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Bubbles & Boxes Business Planning

by with One Comment Uncategorized

Over the last 25 years of dealing with the buying and selling of small businesses, I have become accustomed to lawyers and clients believing that creating an LLC or a corporation is the best way to protect their assets. While this is an effective start, creating an LLC or a corporation is far from effective in protecting your assets.

I always use the example of John’s Backhoe Service. John is a small contractor who bought a backhoe to install plumbing and other underground improvements. John starts small and, little by little, his business grows. The advice he is quick to receive from his lawyer and anyone else with an opinion is, “John, you’d better incorporate or do an LLC.” They assure John that creating an LLC or corporation will protect him from the liability of that business. If John owns the business himself, and is using the backhoe and hurts a little boy who is standing nearby watching him, John will be personally liable and all of his assets will be at risk to any lawsuit that comes from his actions in the business.


Bigstock-Transparent-multicolored-soap--99744665Creating an LLC or a corporation ensures that the liability for John’s actions will be limited to the assets of the LLC or corporation. At LWP we call LLCs and corporations a bubble; so if John’s backhoe suddenly becomes John’s Backhoe Service, LLC or Inc., then the only thing at risk of being lost if John were to hurt someone with the backhoe would be those things that are owned “inside the bubble.” Assets owned inside the LLC typically would consist of the backhoe and any cash accounts or other business assets. Unfortunately, that is not complete protection; it is only protection from the inside out!

Having an LLC or corporation protects John’s personal assets from all liabilities created by his business – and that’s where most people end, which is a mistake. Although an LLC or corporation protects John’s personal assets from the liabilities of his business, John’s business itself and his other assets are not protected from John’s personal liability. At Lawyers with Purpose, we say John’s assets, while protected from the inside out, are not protected from the outside in! If John buys his 16‑year-old child a new car and they go out and kill someone with it, John can be sued. Since John owns an LLC or the corporation, it can be taken from him as a general asset. Although some states provide protections from creditors getting inside the assets of an LLC, it is not always so. Many states require that there be more than one owner of the LLC for it to be protected. Others, while not allowing access even as a single-member LLC to the company assets, consider John’s interest in the company itself to be an asset that is subject to risk from third-party creditors and predators.

Perhaps the greatest creditor and predator to John is in fact not a lawsuit at all, but rather a nursing home or other long-term care costs. If John were to enter a nursing home, the full value of his business and all of the income it produces would be considered available in determining his eligibility for Medicaid or other needs-based benefits. This could be catastrophic, since small businesses rarely produce enough income to support the monthly cost of a nursing home stay. That’s why it’s absolutely essential: If John wants to protect his assets from the inside out and outside in, he needs to utilize an IPUG® protection trust. IPUG trusts ensure not only that John’s assets are protected from the inside out – that is, his personal assets will be protected from the liabilities of the business – but also that his assets will be protected from the outside in – John’s business and other assets will not be within reach of general creditors and predators (i.e. the kid’s car accident or a nursing home pay out).

So get really clear on how to protect people. That’s what we do at Lawyers with Purpose. Contact Lawyers with Purpose now to see how you can be effective at utilizing IPUG protection trusts to ensure asset protection for all of your client’s assets.  If you want to learn more about becoming a Lawyers With Purpose member, consider joining our FREE Webinar "Four Essentials For A Profitable Practice" on April 21st at 8 EST.  

This is a FREE training webinar designed for attorneys who wish to add Estate Planning, Asset Protection, Medicaid, or VA Planning to their practice, or signifcantly improve on their existing business using our PROVEN and paint-by-number strategies for:

  • Attracting higher quality clients who insist on working only with your firm (…and demanding their friends and family do the same!)
  • Generating countless referrals from respected professionals and colleagues in the community.
  • Automating and systematizing your practice in such a way that allows for higher volume…without work falling through the cracks, balls dropping, or having to work 80 hours a week just to keep up!

Click here to register now.

David J. Zumpano, Co-founder – Lawyers With Purpose

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The ILIT / TAP Distinction

by with One Comment Asset ProtectionDavid J. ZumpanoEstate Planning Drafting Software

Many people commonly use Irrevocable Life Insurance Trusts (ILIT) to ensure that life insurance owned by an individual is not included in their taxable estate at death. While an ILIT is a useful trust, you could accomplish far more with a TAP™ trust. So let's review an ILIT and distinguish how a TAP enhances the benefits often sought by ILITs. An ILIT is an irrevocable trust wherein the grantor retains no rights to modify the trust, benefit from the trust or control the trust. Retention of any of these rights will trigger estate tax inclusion under Internal Revenue Code Sections 2036 through 2042. An Irrevocable Life Insurance Trust may be a non-grantor trust or grantor trust, depending upon the attorney's drafting choice.

Triggering a provision of Internal Revenue Code Sections 671 through 679 will cause the inclusion of all income from the ILIT to be included in the personal income tax return of the grantor. While the grantor retains no rights to modify, control, or benefit from the trust, the grantor may be taxed on its income if a grantor trust provision is triggered. The most common of these grantor trust provisions is to allow the grantor to substitute assets of equal value, or make loans to the grantor without adequate security. By choosing grantor trust status, it essentially serves as an additional gift without having to utilize the annual gift tax exclusion, because the income taxes are paid from the grantor, rather than the trust. As a result, those additional sums are retained in the trust, thus providing additional assets to the intended beneficiaries that otherwise would have been used to pay the taxes.


Bigstock-Red-Pencil-Standing-Out-From-C-104390930One of the core elements of an ILIT is ensuring the use of Crummey powers. Crummey powers are based on the landmark case Crummey v. the Commissioner wherein the U.S. Tax Court held that granting someone the right to withdraw money funded to a trust immediately but limited to a short period of time (i.e. 30 days) was sufficient timing to deem the contribution a "present interest" and thereby trigger the annual gift tax exclusion for the contribution. A Crummey power is essential to ensure that the annual gift tax exclusions are utilized so as not to reduce the grantor's overall lifetime estate and gift tax exemption. One critical restriction under the current power, however, is that Section of the Internal Revenue Code limits the annual exclusion made to trusts to the greater of 5 percent of trust assets or $5,000. Therefore, it is essential to have a "hanging power" to ensure any contributions in excess of $5,000 or 5 percent are not deemed to be taxable gifts.

These hanging powers allow the Crummey beneficiary to continue to have the right to withdraw this excess amount, even beyond the 30-day period. For example, if a grantor contributes $42,000 to a trust for three Crummey beneficiaries and the $42,000 is the only asset of the trust and it was utilized to pay the insurance premium, then 5 percent of the trust assets only equals $2,000. Obviously, $5,000 would be greater, so $5,000 of each $14,000 contribution would be deemed to be a present interest gift and $9,000 of the contribution would "hang" until no contributions are made in a given year. At that time, an additional allocation of the annual gift would occur based on the $5,000 or 5 percent trust value limitation. Obviously, this could be problematic if these powers hang and one of your Crummey beneficiaries becomes subject to lawsuits, divorce or long-term care costs.

Another consideration with the Crummey power is to have straw Crummey beneficiaries. This is typically done by adding beneficiaries to the lifetime trust, which operates during the grantor's lifetime and provides the names of people who are not residuary beneficiaries. For example, one straw Crummey beneficiary might include spouses or other remote relatives who are willing to be a Crummey beneficiary, understanding that they are not likely to be an ultimate beneficiary. This allows additional payments each year to be contributed within the annual exclusion limit. Both ILITs and TAP trusts have Crummey provisions with hanging powers.

Neither ILITs nor TAPs are user friendly to individuals with estates less than $5,450,000, or $10,900,000 if married. These excessive restrictions need not be applied in circumstances where the total estate of the grantor plus the life insurance benefits does not exceed the estate tax limit. Obviously, the only other consideration would be if your state had an estate tax at a lower limit. If estate tax is a concern, a primary benefit of the TAP trust over the ILIT is that a TAP trust stands for Tax All Purpose trust, which means its intended benefit is far beyond the holding of life insurance. The TAP trust will typically hold life insurance policies, stocks, bonds, and other assets and/or business interests that the grantor would like to get passed on to the trust beneficiaries after death. This is especially helpful, as it will ensure that there are other assets in the trust other than the life insurance policy to accumulate assets of more than $280,000 to ensure that the entire Crummey contribution can be utilized each year with no hanging powers. In addition, the TAP trust has extensive provisions for lifetime and residuary trusts to the individuals or classes of people.

For example, sometimes a grantor will create a family-type trust that takes effect after death for the benefit of the surviving spouse and children, and upon the death of the surviving spouse, it provides separate residuary trusts for each child. Other times, clients may want to create a benefit for a class of their children for their lifetime, and at the death of the last child the balance is allocated to their then-surviving children in separate share trusts. TAP trusts are extremely flexible and powerful in ensuring that whatever assets are passed through them (life insurance, stocks, bonds, business interests, etc.) are passed on to their loved ones fully asset-protected in separate asset protection trusts or common trusts, depending on the client's goal. One of the critical distinctions in asset protection trusts after death is to ensure that the trustee is an independent trustee under Internal Revenue Code Section 672(c). One distinction to resolve the concern of naming the child beneficiary as the trustee without violating Section 672(c) is to ensure that you name a co-trustee who is adverse, a strategy far too few lawyers utilize. For example, after the death of a grantor, the surviving spouse can be the trustee with a co-trustee of one of their children. While this would be considered under the family attribution rules to be a controlled trustee, the adverse party interest ensures that the Internal Revenue Code distinctions are met. For example, if a child was a co-trustee with the spouse and approved a payment to the spouse during a family trust administration, that would be adverse to the child's residuary interest and thus satisfy the restrictions within 672(c).

The other exciting element of a TAP trust is the allowance of the spouse or trust protector to have a power of appointment to modify the beneficiaries within a class of people identified by the grantor. This can ensure that the family is able to adjust for changing circumstances after the death of the grantor to cover his or her overall planning intentions. One of the key distinctions of a TAP trust is also specific language that authorizes the accumulation of income but specifically requires the trustee to account separately for income that is accumulated and converted to principal, so as to ensure no portion of that is utilized to pay insurance premiums on the grantor. While the trust ensures that all the proper legal language is included, to be legally proper it is incumbent upon the attorney to educate the client to understand how to properly administer a trust so as not to violate that provision.

So, as you look at the distinctions between an ILIT and a TAP, it's important to note that everything an ILIT is is included in the TAP trust, but not everything in a TAP trust is included in an ILIT, so a TAP is a far more expansive trust that allows much more flexibility and use by a client. If you want to learn more about becoming a Lawyers with Purpose member to discover how the TAP trust can benefit you in your practice and, more importantly, benefit your clients consider joining our FREE webinar "The Four Essentials For A Profitable Practice" on Thursday, April 21st at 8EST. Click here to register now.

This is a FREE training webinar designed for attorneys who wish to add Estate Planning, Asset Protection, Medicaid, or VA Planning to their practice, or significantly improve on their existing business using our PROVEN and paint-by-number strategies. Reserve your spot now!

 David J. Zumpano, Co-founder – Lawyers With Purpose, Founder and Senior Partner of Estate Planning Law Center 

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Advising Trustees of Special Needs Trusts on Spending Issues

by with No Comment Estate Planning Drafting SoftwareLegal Technical

Special Needs Trusts are often created with funds received from legal settlements or inheritances. Special Needs Trusts are important documents when established for people who are receiving government benefits. However, as practitioners we must remember that a Special Needs Trust must not only be effectively drafted for those receiving public benefits, the trustee must also make distributions in accordance with the guidelines of the trust so as not to risk loss of Supplemental Security Income (SSI) or Medicaid benefits for the beneficiary.

The first place a trustee should look when making a distribution from an SNT is the four corners of the document. Even though the state code may allow a distribution, if the trust instrument itself does not, the trustee must abide by the language of the trust. For example, most states will allow SNT funds to be used to pay for vacations, but if the trust instrument itself states it is not to be used for “travel expenses,” the trustee is now limited beyond what the state code might allow. However, once the trustee is familiar with the limitations of the trust document, he should look to the state code and what programs the beneficiary is on for any other limitations on disbursement.


Bigstock-School-Kids-on-a-Chalkboard-14563127Special Needs Trust payments are designed for “supplemental” or luxury needs not provided for by government benefits. SNT funds are not intended to be used for basic shelter or food, as those needs are provided for by the government benefits. Any money from the trust spent on food or shelter on a regular basis, or given directly to the beneficiary, can count as income for government benefit purposes.

If a beneficiary is receiving SSI benefits, the trustee should be cautious not to make payments directly to the beneficiary, payments to restaurants or grocery stores, mortgage or rent payments, or tax payments on the home. Some jurisdictions also frown on disbursements to basic utility companies, stating that those payments are covered by the SSI payment. Most of these types of payments will result in a 1/3 loss of SSI income. So, while they are discouraged disbursements, there may be some cases in which the trustee determines that the benefit of making the payment outweighs the loss of SSI income. For example, if the beneficiary is unable to pay the tax notice on his home, the trustee may decide to pay the taxes and let that money count as income for the beneficiary the month it was paid.   In this scenario, the loss of the 1/3 income is far outweighed by keeping the home taxes up to date, assuring that the beneficiary has a place to live.

When institutionalized clients come to us with a Special Needs Trust, we must be cautious with distributions as well. However, there are plenty of supplemental needs the money can pay for. Nursing home patients can use the money in an SNT to pay the additional fee for a private room, a television, eye glasses and tooth care not provided for by Medicaid, the travel expenses and mileage of the sponsor to come and check on the patient, and caregiver expenses. Oftentimes, nursing homes are happy to hear that a patient has a Special Needs Trust to pay for additional expenses that arise, and some homes will look more favorably upon Medicaid and Medicaid-pending patients who have such funds to “supplement” care costs.

The LWPCCS software allows us to create both first-party and third-party Special Needs Trusts that conform with the federal and state requirements and allow the greatest discretion possible to your trustees. It is, of course, important that the trustee understand what distributions he can make and that he contacts an attorney with disbursements he is unsure of. This type of trustee guidance is a great opportunity for us to provide our clients with our understanding and counsel through a maintenance plan.

If you are interested in seeing our estate planning drafting software first hand, just click here and schedule your live complementary demo.

Kimberly M. Brannon, Esq., Legal-Technical and Software Trainer

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The Death of Ascertainable Standards

by with No Comment Asset ProtectionDavid J. ZumpanoEstate Planning Drafting Software

The recent Pfannenstiehl v. Pfannenstiehl case in Massachusetts is a pretty good indication that the use of ascertainable standards in asset protection planning is dangerous. While this may be news to you, the Lawyers with Purpose legal community has known this for some time and has changed its recommended planning strategy more than seven years ago on how to ensure asset protection is maintained.

Bigstock-Question-mark-heap-on-table-co-86579810When creating an irrevocable trust, some of the most important legal determinations made are the discretion granted to the trustee to make distributions to the beneficiaries. The two most common are "wholly discretionary" and "ascertainable standards." What is the difference? Traditionally when a trustee is allowed to make distributions pursuant to the health, education, maintenance and support of the beneficiary, that is traditionally identified as ascertainable standards, otherwise known as HEMS.

This standard was predominantly created through tax law cases where the question became whether the trustee garnered too much control or authority so as to include the assets of the trust in the taxable estate. The court cases resolved that as long as there were ascertainable standards, it would provide sufficient discretion so as not to have the adverse tax impact. So HEMS became the standard of discretion for trustees. Once again, it was a case of the tail wagging the dog. While estate tax planning was a concern in generations past, since 2001 with the passage of EGTRRA and the massive expansion of the estate tax exemption, the HEMS standard for estate tax purposes only applies to less than two out of 1,000 Americans. Why is it, then, that most lawyers still draft their trust for everyone according to the restrictions required for the two-tenths of 1 percent of Americans? The typical answer is, because that's the way they always did it.

At Lawyers with Purpose, we are absolutely present and future-oriented and always looking at the current laws, but more importantly, we consider the relevance of the laws to the needs of the clients. For example, I remember particularly a case where I drafted an irrevocable life insurance trust and granted powers to the spouse that could deem it to be includable in her estate. While this was not the best tax planning strategy for the client, I clearly reviewed all the rules with the client, explained the adverse consequences and the client's response was "I don't care about the tax impacts; I want my wife to have it." In such a case, I had the client sign an acknowledgment that he was made aware of the adverse consequence, but to any third party reviewing the trust, they were confident I committed malpractice. That's the challenge today: Lawyers want to impose their ways on clients. Our job is not to tell clients what to do; our job is to tell clients what they can do, the pros and the cons of each approach, and to let them make the decisions that best suit the needs of their family. Such is true with ascertainable standards.

It is LWP’s recommendation – and has been for many years – wholly discretionary powers are typically worded as that a wholly discretionary standard be used rather than ascertainable standards, “the trustee shall make distributions to any beneficiary in their sole and absolute discretion….” This assures that discretion is held wholly within the trustee and there is less risk of the trust being invaded by outside sources to ensure for the health, education, maintenance and support of the beneficiary. Can you imagine a court looking at a trust that a senior residing in a nursing home was the beneficiary of and the trust provided that that senior was the beneficiary and the trustee can make distributions for health, education, maintenance and support? How can the trustee not deem a distribution for the cost of that nursing home to be for their health or maintenance or support? It's an accident waiting to happen. In fact some states like Ohio have gone as far as to say that any trust that has ascertainable standards can be pierced to make medical payments in accordance with the health, education, maintenance and support provisions. Don't wait. Stop using ascertainable standards now and protect your clients from any undue risk of having their asset protection trust invaded.

If you would like to learn more about our estate planning drafting software and how it can support you in your estate or elder law practice, schedule a live software demo at: https://www.lawyerswithpurpose.com/Estate-Planning-Drafting-Software.php.  Learn how you can (1) regain lost hours (2) train your team so you spend less time drafting (3) effective document prep for 99% of your estate planning clients (4) and much, much more….

David J. Zumpano, Co-founder – Lawyers With Purpose, Founder and Senior Partner of Estate Planning Law Center 

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Utilizing the New LWP-CCS Personal Services Agreement

by with No Comment Estate Planning Drafting SoftwareLegal Technical

Personal service agreements, or personal care agreements, are typically agreements between a family member providing care and another needing care. These agreements act as a legal contract between the two parties regarding the range of care one party is providing to the other. As a Medicaid and/or VA planning tool, a personal service agreements may act as a method of spend-down while making sure your elderly client is provided the services needed and is appropriately compensating a family member who is making personal and professional sacrifices to provide the services.

We are excited to share that the LWP Client-Centered Software is now providing a comprehensive Personal Services Agreement that thoroughly addresses the many issues that Medicaid will consider when analyzing a care plan. The care plan also offers the language you will need if a client starts receiving VA benefits and plans to pay those to a child or family member to provide care.

Bigstock-Legal-Law-Rules-Community-Just-94090013First, the software incorporates all parties involved in the plan and requires that all parties sign the plan.

Medicaid wants to make sure that the compensation offered to the caregiver is reasonable in the area of the country where the services are provided. The LWPCCS incorporates the hourly rates of court-appointed guardians, geriatric-care professionals and general-service providers to justify the hourly rate paid to the caregiver. If you opt to do so, the software can calculate the hourly rate of the caregiver as the average of the rates provided for the professionals mentioned above.

Medicaid will want to know where the care is provided. This can be especially important if the child is moving in with the parent to provide care in lieu of nursing care, as they may later qualify for the child caregiver exemption. The software assumes the care is at the home of the person needing care. However, with the click of a button you can choose another place of care, be it in the child’s home, an assisted living facility, an independent living facility or a nursing home.

The terms of the agreement are an important part of creating a valid contract and meeting Medicaid requirements. The LWPCCS allows you to determine the start date of the agreement, the term of the agreement (lifetime, term of years or term of weeks), how often the caregiver will be paid, and the hourly rate the caregiver receives. Another important note: When the caregiver agreement is produced, it defines the caregiver’s role as that of a general contractor and eliminates any tax liability for the person receiving care, providing additional protections for your client.

The feature of the software that allows you to specify which activities of daily living (ADLs) the person needs assistance with can help with Medicaid guidelines and VA guidelines as well.

Finally, alternate caregivers are named for any time periods during which the caregiver is unable to perform the tasks, due to personal illness, vacation, other employment or any other reason.

You can find the new personal services agreement in the LWPCCS under the Medicaid Qualification folder, since we see it as a critical part of Medicaid planning. Incorporating the new LWP Personal Care Agreement into your practice is yet another layer of solid legal planning and documentation we provide for our clients as LWP attorneys.

If you want to learn more about adding medicaid to your estate or elder law practice register for our FREE WEBINAR "Simplifying Medicaid Eligibility & Qualified Transfers" on Tuesday, March 15th at 2 EST. Click here to reserve your spot now.

Here's just some of what you'll discover…

  • Understanding the 12 Key terms of Medicaid
  • Learn the Qualification Standards: Does Client Meet Needs Tests?
  • Learn the Medicaid Terms of Art
  • Learn the Snap Shot, Look Back/Look Forward Distinction: And how to put it all together
  • At the end of the event receive an ALL STATES Medicaid Planning Resource Guide
  • …and much, much more!

Just register here to reserve your seat… it's 100% FREE!

Kimberly M. Brannon, Esq., Legal-Technical & Software Trainer, Lawyers With Purpose

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Who Should Be Trustee?

by with No Comment Asset ProtectionDavid J. ZumpanoEstate Planning Drafting SoftwareLegal Technical

There's a constant battle between lawyers as to who should be trustee of an irrevocable asset protection trust. The primary school of thought is that it should never be the grantor, and some schools of thought believe it should never be the beneficiary. At Lawyers with Purpose, we disagree with both of those positions, but we recognize the concerns and rely on sound principles of asset protection law in making the final determinations.

Bigstock-Who--4420521Let's first discuss the question of whether the grantor should be trustee. Many practitioners believe that allowing the grantor to be trustee makes the assets of an irrevocable trust available to the grantor's creditors. Such a proposition is ludicrous. The challenge with most lawyers is that they do not allow the grantor to be trustee of his or her irrevocable trust. When pushed to explain why, they typically assume that's the way it was always done. Few dig further to see why it was done that way. So let's examine why grantors were not traditionally named trustee. The most adverse impact is that, if the grantor is trustee, they're deemed to retain enough control to have the assets of the trust included in their taxable estate when they die. For many generations, this was the death knell? of an asset protection trust. But in the last 15 years it's become irrelevant because of the rise of the estate tax exemption. Today only two in a thousand Americans have a taxable estate, so preventing the grantor from being trustee because of a potential inclusion of the trust asset in the estate of the grantor is not relevant to 99.8 percent of Americans. So why hold them to that standard?

The next major argument is a theory that if the grantor has control of the trust, then he could direct it back to himself. Well, that depends. What does the trust say? If the trust says that the grantor is not a beneficiary, or similarly the grantor is not a principal beneficiary but is entitled to the income, does that mean that the grantor as trustee all of a sudden gains a super power to violate the terms of the trust and give himself the principal when it's not allowed for? Hardly. In fact, there is consistent case law throughout all of the states, including cases that lead all the way up to the Supreme Court, that supports the notion that a grantor as trustee has all of the same fiduciary obligations as any other trustee and by no means has authority to act outside the powers granted to trustee. I specifically refer you to my Law Review article, "The Irrevocable Pure Grantor Trust: The Estate Planning Landscape Has Changed" in the Syracuse Law Review. In this article, I go through in‑depth review of all of the case law nationwide, and I'm excited to say that it is sound law that a grantor can be a trustee without risking the assets to the creditors of the grantor. One caveat, however, is if the grantor does retain the right to the income, then absolutely the income will be available to the creditors of the grantor.

So are there circumstances when the grantor as trustee's trust is invaded? Absolutely, but in every single case the invasion was not due to the grantor being the trustee, but rather was due to the pattern of behavior by a grantor trustee who violated regularly the terms of the trust in favor of themselves, and the trust was thereafter deemed a sham. In such cases, I concur with any court that makes that decision based on people who try to defraud the system. Irrevocable trusts must be managed in an arm's length manner, and as lawyers we do not plan for someone to become fraudulent. They are fraudulent to their own peril. But a properly drawn trust when the trustee is the grantor in no way, shape or form creates any risk of loss of asset protection if the terms of the trust are followed, as they are required to be in every case whether the grantor is trustee or not.

So at Lawyers with Purpose we encourage our members to do good legal work based on sound law, not fear, conjecture or because that's the way it's always been done. In the end, the client wins. It is silly to deny thousands of clients that we serve the ability to manage and control their own assets for the benefit of their families, just because some rogue case in some rogue state from some vile fact pattern allowed the court to invade against the intentions of the grantor. Protect your clients. Teach your clients. Share with your clients how these work. They are very safe and a great planning tool.

If you want to learn more about Lawyers With Purpose you can find all the information about becoming a member by clicking here to download our Membership Brochure.

David J. Zumpano, Esq, CPA, Co-founder Lawyers With Purpose, Founder and Senior Partner of Estate Planning Law Center

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Are You Abundant?

by with No Comment Coaching & ImplementationDavid J. Zumpano

On January 24, 25 and 26, I had the opportunity to attend my second Abundance 360 event. For those of you who are unfamiliar with the Abundance community, it is led by Peter Diamandis, an amazing entrepreneur who has identified his goal to transform and improve the world. Peter's first book, “Abundance: The Future is Better Than You Think,” written with Steven Kotler, was an immediate insight into a world of abundance that is approaching. His second book, “BOLD: How to Go Big, Create Wealth and Impact the World,” which was recently released, has changed the game for entrepreneurs from simple business owners to world transformers. Peter also has a great blog, which I recommend you sign up for just to be aware of what's going on in the world around you.

Quote-the-day-before-something-is-a-breakthrough-it-s-a-crazy-idea-peter-diamandis-75-56-81In the three‑day conference, we were exposed to the amazing advancements of artificial intelligence, robotics, returns, sensors, augmented reality, material successes, and the impact of each on medical advancement. The fundamental element of the future of entrepreneurialism centers around the six D’s of exponential growth. First among those is to digitize. That is, to put into technology what is capable of being delegated to it.   Second is the deceptive stage, where things are happening and no one is aware, but they are happening nonetheless. Third is the disruptive stage, when people begin to become aware of what has been digitized and has been unknown, and it begins to disrupt the way we look at what we do. Uber is a perfect example of something that was digitized, deceptive, and has become disruptive. The final three D's relate to dematerialization; that is, to eliminate the necessity of materialism – for example, how a cellphone has eliminated the need for flashlights, cameras, recording devices, calculators, and myriad other elements we typically relied on in the past. The fifth D is to demonetize. That is, to take the cost out of the technology, as we have seen with the cost of computers, cellphones and the like that have come down dramatically since they were first introduced. And the final D is democratization, to ensure availability globally as easy as locally.

Entrepreneurs of Abundance are now working under these core concepts, so they are no longer just ideas. There are myriad entrepreneurs who have focused their future vision on transforming the world, not just their local marketplace. These are what Dan Sullivan, of Strategic Coach, has called game changers. I encourage you to click on this video to watch the Emmy Award-winning short film on Peter Diamandis (but hurry because they are offering a Free Online Pre-Screening that will expire February 20th).  It will cause you to identify a new world of abundance that may be deceptive to you currently, but just getting in the conversations will help you find your place within it.

If you want to learn more about our Cloud Based Work Flow System join our live demo on Friday, February 26th at 2EST. Just click here to reserve your spot now!

David J. Zumpano, Co-Founder, Lawyers With Purpose

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Is Asset Protection Dead? Pfannenstiehl v. Pfannenstiehl

by with No Comment Asset ProtectionDavid J. Zumpano

A recent Massachusetts case throws into question whether long-term asset protection is safe. This particular case was disturbing because the defendant in a divorce proceeding's share in an irrevocable trust from his parents was deemed to be a marital asset and had to be distributed to his ex‑wife. This was a third-party trust, created by the parents for the benefit of their son, that had specific spendthrift provisions to prohibit such an attack. The Massachusetts court deemed otherwise.

So is asset protection planning on its way out? Absolutely not, in light of the fact that the case had several significant factors – and as always, the devil is in the details. First, Massachusetts has a very strong statute regarding marital property interests. Second, the trust had a specific termination date wherein the son was going to get the rest, residue and remainder of his share at a specific date. Third, payments from the trust were made regularly and consistently and stopped on the “eve” of the divorce. And fourth, the trustee had ascertainable distribution standards of health, education, maintenance and support. Finally, it had the ideal plaintiff: the wife who shared two special-needs children with the defendant. Put all of that together and judges will find a way to pierce the trust. So what is one to do?

Bigstock-Breaking-The-Bank-4881450While this case was shocking to many, decisions like this are not a surprise in the Lawyers with Purpose community, which is why we have been recommending certain strategies to safeguard against even the pickiest judges and fact patterns. For example, when traditionally drafting a trust and leaving it to beneficiaries in asset protection trusts, we believe the strongest protection comes from having separate share trusts for each beneficiary, with provisions specific to the needs of the individual beneficiary. Second – and this is the most important part – we believe there should not be ascertainable standards, but rather pure discretionary rights to the trustee. Finally, whenever possible the beneficiary should not be an individual, but rather a class of people. For example, in this case, instead of naming just the son as beneficiary, we would recommend naming the son and his issue as beneficiaries, thereby opening up the class of beneficiaries and enhancing the asset protection. One may be fearful of naming the issue. Well, therein lies the trick. Who is named beneficiary is not ultimately the determining factor of who benefits, but rather who the trustee determines who benefits. Create a class of people the trustee can sprinkle income and/or principal among as they deem appropriate in their absolute discretion (not ascertainable standards).

In the Massachusetts case, this could have solved the problem. How? During the marriage, it is likely most of the regular payments provided to the son were actually used in the marriage for the children or items that the husband and wife benefited from jointly. By opening up the class of people, the trustee could have made distributions directly to the children to provide support for the children that the husband was using the money for anyway. By doing this, it surely indicates the assets were not assets of the husband's, but were truly a third-party trust that, at the discretion of the trustee, was distributed to various members in the class, thereby not making it a marital asset. The defendant could have continued to use proceeds from the trust for the benefit of his special-needs children even after the divorce; in fact, most fathers would not penalize their children for divorcing from their spouse. But the key distinction would be that the husband would have remained in control of the assets rather than having to surrender them to a former spouse, wherein there would be no control.

The challenge today is that too many lawyers are on autopilot when they're drafting trusts – or worse, their trust drafting software system doesn’t allow the customizations and protections that the Lawyers with Purpose client-centered software does. Our client-centered software advises the attorneys and allows them to custom tailor each and every option. In addition, LWP™ attorneys are trained to think like the worst court you can imagine and identify how to create provisions that are not specifically targeted at a particular goal but rather strategically drafted to accommodate multiple objectives.

Click here now to see how our trust drafting software will keep your client's needs always in the front of your planning. 

David J. Zumpano, Esq, CPA, Co-founder Lawyers With Purpose, Founder and Senior Partner of Estate Planning Law Center

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Why You Might Be A Trust Mill

by with No Comment Asset ProtectionDavid J. ZumpanoEstate Planning Drafting Software

Having practiced in the estate planning field for almost 23 years, I'm amazed when I review many trust plans done by lawyers that are still "boilerplate," with nothing distinguishing them other than the names of the client and beneficiaries. Interestingly, even when reviewing trusts created by software systems from well-known organizations in the estate planning industry, I am perplexed about the over-complexity, but also the under-simplicity, of how they work. Most trust systems in the estate planning industry have many options to designate different legal technical phrases and provisions to enter into the trust document. Unfortunately, once an attorney chooses the "standard provisions," nothing else changes in the document but the client names. So while they believe they have a very comprehensive estate planning trust system, they really have a glorified trust mill system (a better mouse trap?).


Bigstock-Legal-Law-Rules-Community-Just-94090013The Lawyers with Purpose client centered document creation system is unparalleled in the industry. It is the only software in the industry that was reverse-engineered. Rather than identifying the specific legal provisions required, it instead identifies the particular needs and goals of the client. Once those goals and needs are determined, the software then allows you to custom tailor every single core element of the trust to accomplish those client objectives. As you complete the client needs and their particular customizations, the software automatically inserts the necessary legal provisions and clauses to accomplish the client goals. No two LWP drafted trusts are ever the same. There are over 5,000 combinations of choices, and that's not even including the customization element in each of the decision levels.

While it sounds scary, the systemization of it makes it quite easy. In fact, it is the only document creation system in the industry that is integrated into a complete estate planning practice module. What does that mean? The marketing, legal technical training, workshop presentation, and client design are all integrated to facilitate and work with each other. Each one supports the other. For example, the initial client educational workshop helps identify the various issues that can be addressed in planning – which flows into the vision meeting, where, based on a series of questions – the client is able to self-select one of five different plans that will accomplish the specific goals the client identified. Next, the design meeting is tailored to focus on the specific plan (legal documents) chosen by the client. Then, the most exciting part: the attorney can customize every single aspect of the general plan to meet the client’s individual needs.

The cherry atop all of this is that the attorney designs the custom plan using specific design templates that permit others in the office to actually draft the trust (the software follows the template, including all customizations). Don't be a trust mill – learn how to put the client first. Client-centered document creation software is the first key. Click here to discover how the Lawyers with Purpose Client Centered Software can transform a mere practice, and discover the impact you can have on your client. Reserve a day and time that works for you now.

David J. Zumpano, Esq, CPA, Co-founder Lawyers With Purpose, Founder and Senior Partner of Estate Planning Law Center