Liability Insurance: The Strongest Pillar in an Asset Protection Plan
Chicago Daily Law Bulletin
"Asset protection" has remained a hot, though oftentimes mysterious, term in the legal field for some time now. Many times, it carries with it a dirty connotation (e.g. a texting driver blows a red light doing 80mph in his Aston Martin, causing a fatal accident in Chicago, then two days later, transfers all of his assets to his brother in California as "a gift").
With the increased use of intervivos trusts, it is now less common to have ancillary administration in Illinois in estates of nonresident decedents. Attorneys representing nonresidents of the State of Illinois should counsel clients to use a revocable “living” trust for Illinois assets so the delay and expense of administration in Illinois, as an ancillary jurisdiction, will be eliminated.
For our clients' businesses in the partnership format, the interplay of income tax planning and estate planning will continue to present sophisticated challenges. This is particularly demonstrated by questions regarding the 3.8-percent tax on net investment income under Code Sec. 1411 (c), and whether material participation by the trustees avoids passive income for a trust that receives trade or business income from an operating partnership.
Donor advised funds (DAFs)1 and private foundations (PFs)2 are often compared and con- trasted. Those making the comparisons often quickly conclude that a DAF is the better choice. More and more it seems that DAFs are becoming the reflexive recommendation of many advisors. Almost before a client describes her charitable desires—or how large the —the advisor enthusiastically decrees, “The DAF is the right choice for you!”
Many of us are familiar with the English wedding rhyme that describes what a bride should wear on her wedding day for good luck: Something old, Something new, Something borrowed, Something blue, And a silver sixpence in her shoe. As cohabitation before marriage in continues to rise, now, more than ever, a bride’s something new may be her pregnancy.
In 2014 and going forward, income tax planning in estate planning will be parallel in importance to estate tax planning. For estate planners, planning for the step-up in basis (until that too is repealed) is a critical step. And in the partnership context, that step becomes critical. Typically, discounts for estate tax purposes reduce the potential step-up in basis and are therefore costly from an income tax perspective. That increased income tax burden will become apparent when a partner exits from the partnership.
A married couple travels to their attorney’s office to sign their wills. The husband reads his will, signs it and leaves without reading his wife’s will but assumes they are reciprocal. The attorney then prepares a deed transferring the husband’s residence to his wife – to equalize their estates.
When spouses seek advice from their attorney in implementing an estate plan, they likely expect that their attorney will represent each of their interests. The Model Rules of Professional Conduct (the Rules) prohibit an attorney from representing two clients if their interests are directly adverse.1 As the Bible proclaims (in a different context): No man can serve two masters.2
Cyber criminals, based overseas and concentrated in Nigeria, send scam emails to law firms on a daily basis in an effort to fraudulently extract IOLTA funds and enrich themselves. Because of the increasing prevalence of these ventures, attorneys need to understand how such cons work and to protect themselves against fraud.
Percolating out there in estate planning since 1984 has been the concern about retitling assets to allow the funding of the credit shelter trust at the first spouse’s passing. With the estate tax exclusion reaching $600,000 in 1984, planning often required a retitling of assets from one spouse to another to ensure that when the first spouse passed away, there would be sufficient assets to fund that spouse’s credit shelter trust.