ASSET PROTECTION PLANNING & STRATEGIES FOR LAWYERS ACCOUNTANTS, FINANCIAL PLANNING AND INVESTMENT PROFESSIONALS

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1 EPC Diablo Valley September 21, 2016 ASSET PROTECTION PLANNING & STRATEGIES FOR LAWYERS ACCOUNTANTS, FINANCIAL PLANNING AND INVESTMENT PROFESSIONALS Presented by Jeffrey M. Verdon, Esq. Managing Partner Jeffrey M. Verdon Law Group, LLP Newport Beach, CA

2 95% of world s lawsuits are filed in the U.S.

3 It s Not What You Do, It s What You Own!

4 Atty/CPA/Accountant Malpractice Liability Goes Beyond Insurance Limits Liable for your negligent acts and those you supervise.

5 Successful Professional Practice? It won t matter if you lose it all to a malpractice lawsuit When does your exposure expire?

6 Lawsuit Exposure & Privacy Test

7 TWO QUESTIONS FOR YOU.

8 Questions for You 1. ARE YOU OR YOUR CLIENTS CONFIDENT THAT THEY WILL NEVER BE SUED? 2. ARE YOU OR YOUR CLIENTS CONFIDENT THAT IF THEY ARE SUED, OUR LEGAL SYSTEM WILL FAIRLY TREAT YOU?

9 Two Reasons Most Litigants Settle 1. Doubt as to Liability 2. Doubt as to Collectability

10 Does Asset Protection Work? $58,000,000 Judgment successfully resolved for $7M $34,000,000 Malpractice suit settled for less than $1M $5,000,000 Judgment settled for $125,000 $32,000,000 Bank loan dispute settled for $2.5M $2,000,000 Personal guarantee settled for $250,000 $75,000,000 Personal loan settled for $5M paid over 5 years Depends on definition of work. Achieve an early and favorable settlement.

11 Best Asset Protection Plan No One Has Heard of The CA Private Retirement Trust CCP

12 View video again at 12

13 Best Asset Protection Plan No One Has Heard of CA Private Retirement Trust CCP (b): fully exempts assets placed in trust to fund retirement Any asset Business profits, A/R, Bonds, Stocks, Savings, Gold, Real Estate, Notes and Private Business Interests CCP (d): fully exempts distributions from the PRT Non-ERISA Qualified: May set up just for owners 13

14 Asset Protection Trust A TRUST WILL BE THE CORNERSTONE OF ANY EFFECTIVE ASSET & LIFESTYLE PROTECTION SOLUTION

15 Trusts Have Been Used Since the Crusades to Protect Assets

16 WHY WOULDN T I WANT TO SET UP MY TRUST IN THE U.S? UNFORTUNATELY...

17 OVER THE PAST SEVERAL HUNDRED YEARS LIMITATIONS ON THE PROTECTIVE USE OF TRUSTS FOR SELF-SETTLED TRUSTS (AS BENEFICIARIES) HAVE EVOLVED: Retained Controls Maximum Potential Property Interest CPC (b) Self-Settled Spendthrift Trusts CPC Section (a)

18 Comparisons Domestic Asset Protection Trust VS. Offshore Asset Protection Trust

19 Domestic APT Jurisdictions WEST VIRGINIA 2016 MISSISSIPPI 2014 OHIO 2013 VIRGINIA 2012 HAWAII 2010 NEW HAMPSHIRE 2009 TENNESSEE 2007 WYOMING 2007 MISSOURI 2005 SOUTH DAKOTA 2005 OKLAHOMA 2004 UTAH 2003 NEVADA 1999 RHODE ISLAND 1999 DELAWARE 1997 ALASKA 1997

20 Domestic Asset Protection Trust (Potential Problems) Constitutional Issues: Full Faith & Credit Clause Conflicts of Laws Contract Clause Supremacy Clause Wait Until the U.S. Supreme Court Decides

21 What s the Newest Problem? 2005 Bankruptcy Act s [Sec. 548(e)(1)] The Ten Year Set Aside Rule

22 10-Year Set Aside Rule 548(e)(1) the [bankruptcy] trustee may avoid any transfer of an interest of the debtor in property that was made on or within 10 years before the date of the filing of the petition, if - (A) such transfer was made to a self-settled trust or similar device; (B) such transfer was by the debtor; (C) the debtor is a beneficiary of such trust or similar device; and (D) the debtor made such transfer with actual intent to hinder, delay, or defraud any entity to which the debtor was or became, on or after the date that such transfer was made, indebted. SEE: In re: Mortensen, Debtor, Case No. A DMD In Re Huber, 201 B.R. 685 (Bankr. W.D. WA May 17, 2013).

23 WHAT S THE SOLUTION? ESTABLISH THE TRUST IN A PLACE WHERE THE LAWS WILL NOT PERMIT A CREDITOR TO REACH TRUST ASSETS UNDER THE GENERAL RULES - Forum Shopping - Lack of Comity

24 Situs Selection Factors Legal System: Common law trusts date back 1000 years Protective Legislation (BIG3) Repudiation of Certain Rules Statute of Elizabeth (no SOL) No self settled trust protection for settlor Maximum potential interest rule (creditor can reach entire trust corpus) Favorable Fraudulent transfer rules Lack of Comity Economic Health Political /social stability Language Track Record

25 IN ORDER TO UNDERSTAND HOW A PROTECTIVE TRUST WORKS. WE MUST FIRST UNDERSTAND HOW CLAIMANTS NORMALLY REACH TRUST ASSETS

26 THERE ARE ONLY TWO WAYS... The claimant brings his/her case in a court which has: JURISDICTION OVER THE TRUSTEE OR JURISDICTION OVER TRUST ASSETS

27 How Does an Offshore Trust Work? FIRST: AT THE CRITICAL TIME: AND WE DEFINE THAT TO BE WHEN SOMEONE IS TRYING TO GET AT THE TRUST ASSETS

28 How Does an Offshore Trust Work? (Cont d) FIRST: AT THE CRITICAL TIME: THERE WILL BE A COMPLETE LACK OF US COURT JURISDICTION OVER THE TRUSTEE & THE TRUST ASSETS

29 How Does an Offshore Trust Work? THE U.S. COURT: (Cont d) THAT MEANS THERE WILL BE NO POWER IN ANY U.S. COURT TO REACH THE TRUST CAN T FORCE THE TRUSTEE TO DO ANYTHING CAN T SEIZE TRUST ASSETS

30 How Does an Offshore Trust Work? (Cont d) SO WHERE DOES THAT LEAVE THE JUDGMENT CREDITOR? TRYING TO HAVE THE JUDGMENT ENFORCED IN THE TRUST SITUS JURISDICTION REMEMBER LACK OF COMITY??? HOW WELL IS THAT GOING TO WORK?

31 How Does an Offshore Trust Work? (Cont d) WHAT ARE THE IMPLICATIONS OF LACK OF COMITY? Commence litigation De Novo Utilize unfamiliar lawyer Most local law firms are conflicted out No Contingency Fee Bond & Loser Pays Rules Basis of Litigation? A FRAUDULENT TRANSFER ASSERTION

32 How Does an Offshore Trust Work? (Cont d) LET S COMPARE THE TWO MAJOR FACTORS OF THE FRAUDULENT TRANSFER RULES U.S. vs. OFFSHORE 1. 4yrs/10yrs vs. ZERO to 2yrs 2. CIVIL PREPONDERANCE STD vs. BEYOND REASONABLE DOUBT

33 How Does an Offshore Trust Work? (Cont d) WE VE SEEN HOW THE LAWS OF AN APPROPRIATE OFFSHORE JURISDICTION PROVIDES PROTECTION FOR OUR CLIENTS TRUSTS WE ENHANCE THAT PROTECTION WITH DRAFTING TECHNIQUES

34 How Does an Offshore Trust Work? TYPICAL PROTECTIVE CLAUSES: Trust Protector Flight Clause Duress Clause Jones Clause What about contempt? (Cont d) Legal Impossibility: complete defense to contempt Unites States v. Grant (2008): No contempt of court for a US person who lawfully establishes a foreign trust and could not Branch Banking & Trust Co. v. Hamilton Greens, LLC, 2014 WL (S.D. Fla. Mar. 24, 2014)

35 WHAT CONCERN DO CLIENTS MOST OFTEN EXPRESS? I DON T WANT TO LOSE CONTROL... SO HOW DO WE ADDRESS THAT CONCERN?

36 Loss of Control Concerns WE USE HOLDING ENTITIES: FOR PROTECTION OF LIQUID ASSETS (CASH AND PUBLICLY TRADED SECURITIES) SETTLOR MAY SERVE AS INVESTMENT ADVISOR

37 OFFSHORE TRUST / LLC COMBINATION STRUCTURE YOU = LLC MANAGER = DIRECT SIGNATURE CONTROL OFFSHORE LIMITED LIABILITY COMPANY INVESTMENTS OFFSHORE OR US BANK IMPLEMENTATION OPERATION CRISIS TRUST PROTECTOR (INDEPENDENT COMPANY) CONTROL OVER TRUSTEE OFFSHORE ASSET PROTECTION TRUST ASSETS TYPICALLY HELD: LLC MEMBER INTEREST; S- CORPORATION STOCK; OFFSHORE ACCOUNTS US TRUSTEE FOREIGN TRUSTEE YOUR BROKER Stocks & Bonds VAULT TRUST = LLC MEMBER 100% (May Be Co-Manager) DISCRETIONARY BENEFICIARIES YOU FAMILY OTHERS

38 THE ASSETS ARE STILL IN THE U.S.. WHAT HAPPENS?

39 2009 Jeffrey M. Verdon Law Group, LLP (INDEPENDENT COMPANY)

40 GREAT! THE ASSETS ARE PROTECTED, BUT MY CLIENT NEEDS THE INCOME AND/OR PRINCIPAL TO LIVE ON

41 OFFSHORE TRUST OFFSHORE LLC COMBINATION STRUCTURE TRUST PROTECTOR (INDEPENDENT COMPANY) CONTROL OVER TRUSTEE Client s or faxes bills and other expenses to offshore trustee for payment = lifestyle protection OFFSHORE ASSET PROTECTION TRUST ASSETS TYPICALLY HELD: LLC MEMBER INTEREST; S- CORPORATION STOCK; OFFSHORE ACCOUNTS TRUST = LLC MEMBER 100% (May Be Co-Manager) DISCRETIONARY BENEFICIARIES YOU FAMILY OTHERS

42 Questions?

43 Newsletter

44 Strategic Client Alliance Program

45 Example: Your feedback is important to me

ASSET PROTECTION PLANNING WITH OFFSHORE TRUSTS

ASSET PROTECTION PLANNING WITH OFFSHORE TRUSTS PRESENTED BY HOWARD ROSEN, ATTORNEY, CPA 2016, by DONLEVY-ROSEN & ROSEN, P.A. Coral Gables, Florida (305) 447-0061 WEB SITE: PROTECTYOU.COM HOWARD ROSEN is