This document discusses strategies for protecting family assets in a struggling economy. It recommends identifying business and personal risks through proper insurance coverage and asset protection. Key tools include trusts, wills, beneficiary designations, and transferring assets to minimize taxes and expenses. The goal is providing for loved ones' financial security even if risks materialize.

1. Protecting the Family Jewels in a
Struggling Economy
Independent Jewelers Organization
Charlotte, North Carolina
July 18, 2009
Brian T. Whitlock CPA, JD, LLM

2. Overview
• Identify your Risks
– Business
– Personal
• Protect Yourself and Your Loved Ones
• How and When to Transfer Financial Assets
• Minimize Taxes and Administration Expenses

3. Identify your Business Risks
• Employee Theft
• Customer Theft
• Fire or Business interruption
• Economic

4. Protection from Business Risk
•Employee Theft
– Opportunity
– Incentive (Alcohol, Drugs, Infidelity, Gambling, Medical)
– Rationalization

5. Protection from Business Risk
• Business Insurance
– Theft
– Flood & Fire - Business Interruption
– Key Person Life/Disability Insurance
– Workman’s Compensation Insurance

6. Protection from Business Risk
• Shield from Business Liability (Creditors)
– Sole Proprietorship and General Partners
– Corporation vs. Limited Liability Company
– Limited Partnership

7. Protection from Business Risk
•Priority of Creditors
– Secured (Mortgage against Real Estate) (UCC against
assets)
– IRS and State Department of Revenue (Trust fund liability
for payroll taxes and sales taxes)
– Unsecured Creditors
– Personal Guarantee

8. Identify your Personal Risks
• Property
– Auto
– Fire
– Slander/Libel
• Personal
– Medical Health
– Death
– Disability
• Divorce

9. Personal Asset Protection
• Insurance
– Personal (Health, Disability, Life, Long Term Care)
– Property (Auto, Home, Umbrella)
• Statutorily Protected Assets
– Homestead Property (e.g., Florida, Texas)
– Tenants by the Entirety
– Qualified Plans (pension, IRA, ROTH IRA, etc.)
– Annuities and Life Insurance

10. Personal Asset Protection
• “They can’t take what you don’t have”
– When is it too late to transfer?
• Preferential payments in Bankruptcy can be unwound
• State Law – Generally transfers within 180 days
• Clawback provisions (“Madoff”)
• Courts can unwind transfers made to “Defraud Creditors”
– Before there is a problem
• Estate Planning Reasons

11. Personal Asset Protection
Self-Settled Irrevocable Trusts
(created by you for you)
• US Based Trusts
– Alaska
– Delaware
– South Dakota
• Foreign Trusts
– Cook Islands
– Nevus

12. Protecting Your Family - Death
Your Free Will - You Get What You Pay for!
• The “Family” Plan
• Guardianship for Minors
• Distribute at 18 Years of Age
• Second Marriage?
• Ignore Tax Saving Opportunities

13. What is Probate?
ANSWER: The Court Process for Collecting
and Administering Assets
• Persons Covered
– Deceased
– Subject to a Legal Disability
• Jurisdiction – Assets in that State
• Role of Court
– Identify and Collect Assets
– Identify and pay claims against the estate

14. Avoiding Probate
• Joint Tenancy with Rights of
Survivorship (JTWOS)
• Tenants by the Entirety
• Payable on Death (POD)
• Transfer on Death (TOD)
• Beneficiary Designation
• Trust

15. Federal Transfer Taxes
Estate Tax Gift Tax
• Applicable Exclusion • Annual Exclusion
– $3.5 million (2009) – $13,000 per person per
– Unlimited (2010) year
– $1 million (2011) – Spouse can double
• Marital Deduction • Applicable Exclusion
• Flat Tax Rate – $1 million (not currently
changing)
– 45%

16. What are your Objectives?
Remember
“You Ain’t Dead Yet!”
Irving L. Blackman CPA, JD

17. Health Care Directives
• Living Will • Durable Power of Attorney
Directive to Doctor for Health Care
regarding termination – Organ Donation
of life support – Access to Medical Records
(HIPPA)
– Right to Make Medical
Decisions
– Life Support or Termination
Choices
– Ability to name Successors

18. The Family Safety Net
• Revocable Living Trusts
– Minimize the Exposure to Probate
– Maximize use of Credit Shelter
• Pour-Over Wills
– Probate May be Necessary or Advisable
• Durable Power of Attorneys
for Health Care
• Irrevocable Life Insurance Trust

19. Transfer Tax Minimization Formula
Credit Shelter Trust Marital Deduction Trust
• Receives Applicable • Receives excess over
Exclusion amount Applicable Exclusion Amt
• Holds for benefit of • Holds for Benefit of
Spouse and children Spouse
• Not Subject to • Subject to Transfer Tax at
Transfer Tax at Spouse’s Death
Spouse’s Death

20. Irrevocable Life Insurance Trust
• Ironies of Insurance
– Large Dollar Value at Death
– Small Value During Life
• Death Benefit is Income Tax Free
• Death Benefit is Estate Tax Free
– Without “incidents of ownership”

21. Beyond the Basics
• Maximize Exclusions
– Lifetime Gifts
– Annual Exclusions
• Minimize Taxable Transfers
– Leverage Cash Flow
– Minimize Valuation
• Asset Protection – Trusts for others
– Control Access
– Protect Family Members
– Keep Potential Creditors Away
– “They can’t take what you never had”

22. Advanced Transfer Strategies
• Dynasty Trusts
• Intentionally Defective Income Only
Trusts (IDIOTs)
• Family Limited Partnerships
• Charitable Transfers
– Charitable Lead
– Charitable Remainder
– Private Foundation
– Donor Advised Funds