Asset & Tax Protection

Asset Protection

More and more people are using the legal system to deprive others of their life’s work.   Over 19 million new lawsuits are filed in the United States every year, many of which are frivolous or settled for sums greater than the actual liability.

Business owners, professionals such as doctors, dentists, lawyers and accountants, and property owners in particular should be aware of the risks associated with conducting their business, practicing in their respective fields, and taking responsibility for others.

Without a massive overhaul of our legal system, the risk and potential liability is not going to decline. In fact it has steadily increased over the last few decades.  Assets can be at risk due to a number of vulnerabilities, including:

Professional malpractice liability
Personal liability of corporate officers and directors
Lawsuits by former business partners
Personal injury suffered on your premises
Personal injury resulting form a motor vehicle accident
Liability as guarantor for the debts of another
Liability arising from misconduct
Asset Protection is not about giving in to fear.  It is about empowering yourself in the face of it. Our firm will work with clients to implement proven, legally-sound strategies that will help preserve their wealth and safeguard their assets.

We represent professionals, small business owners, property owners, and other clients with the goal of protecting their assets against potential litigation, judgments, liens, and fraud.

Insurance alone does not always adequately protect against all of these threats.  We help clients protect their wealth using a variety of strategies including the use of special trusts, business entities and other legal arrangements.

Shielding Assets from Creditors
Our firm has expertise in assisting clients to arrange their finances, real property and other assets in a manner that minimizes their exposure to potential creditors.  We are well versed in establishing trusts, determining insurance needs, creating estate plans and organizing investments and business entities so that our clients are able to enjoy the highest level of confidence in terms of the security of their accumulated assets.

A creditor who initiates litigation against a person who has placed his or her assets into a trust, a foundation, or other entity may find that there are very few collectible assets actually owned by the person they wish to sue. Assets owned by a properly structured trust, foundation, or other entity are generally not subject to claims against their beneficiaries. In addition, placing assets into an asset protection entity may have the additional benefit of removing those assets from a person’s taxable estate.

We know how to evaluate current client holdings and work with our clients to identify the best ways to legally protect those holdings from a variety of creditors, whether through civil suits involving negligence or malpractice.

Our firm has a solid working knowledge of:

Domestic and offshore trusts;
Domestic and offshore and domestic business entity formation;
Exempt asset protections under state law; and
Negotiation and preparation of pre and post-marital agreements
The exact strategies employed by our firm may vary depending on the client, the nature of the assets, the country of origin, and the tax regulations that apply to those assets. The ultimate goal is to protect the status of current assets in a manner that is effective, legal and ethical.

Charitable Tax Planning

Charitable giving may help you minimize taxes while also supporting the causes that are meaningful to you.

You can give to a charity, such as a church, college, or other qualified charitable organization in your will or during your lifetime. It’s important to balance your income needs and the needs of your beneficiaries with the tax benefits of giving now, as well as the ability to enjoy the act of giving during your lifetime.

Before you choose a way to give, it’s important to understand the tax implications of your decisions. Giving as much as you want to charity during your lifetime and after you’re gone may help to reduce federal estate and gift taxes significantly.

Gifts made to charities, specifically, are exempt from gift tax.

Lifetime giving
Generally speaking, lifetime gifts to charities can result in an income tax deduction for you. But before you make a sizable gift, be sure to seek tax advice. You’re eligible for itemized deductions for charitable contributions up to a certain percentage of your adjusted gross income for cash contributions. Another limit applies for contributions of appreciated securities or property in any one year. You may be able to carry forward amounts that exceed the limit and deduct them over the next five years.

Highly appreciated securities may be good candidates to give to charity during your lifetime; in addition to the income tax deduction, you bypass the capital gains tax that would be owed if you cashed them in yourself.

Specialized options for charitable giving
Whether you choose to give during your lifetime or in your will, donor-advised funds are charitable giving programs, generally run by public charities or financial institutions, such as Fidelity. They allow you to give on a basis intended to maximize your income tax situation and help meet the needs of the causes that are meaningful to you.

If you have the means and desire to play an active role in philanthropy, you might also consider establishing a private foundation. Foundation managers retain control over the investment of their foundation assets, as well as which charities will receive grants from the foundation. In addition to charities, foundation grants can be used to support individuals for hardship reasons and even scholarship programs. Along with this flexibility, however, is a significant amount of administration.

Trusts
A charity can be the beneficiary of a relatively simple revocable trust or irrevocable trust. Other giving strategies using charitable trusts can provide benefits to charity as well as to your family or yourself.

charitable lead trust lets you provide a payout to a charitable cause during your lifetime (or a term of years) and preserve assets for other beneficiaries, such as children or grandchildren. The value of the remainder gifted to your descendants will be a taxable gift if the trust is funded during your lifetime, or subject to estate tax, if the trust is funded at your death.

If you have substantially appreciated assets (such as real estate or stocks), you can reduce current capital gains tax on the assets by contributing the assets to a charitable remainder trust. You can also give a portion of the current value of your assets to charity, and generate a payout from the trust to yourself or someone else during your lifetime, or for a specific term.

Ensure your beneficiaries are up to date on other assets that have provisions for naming them, including investment and bank accounts with transfer on death (TOD) designations. This is especially important for beneficiaries outside your immediate family, as assets don’t usually go to such beneficiaries by default or outside of the probate process if they are not named properly.

Retirement accounts
Retirement assets may be good candidates for charitable bequests because they can be among the highest taxed assets in any estate. Leaving your retirement assets to a charity has two distinct advantages:

  • Increasing the impact of your bequest. The charity would not have to pay income taxes on your donation when it receives assets from your retirement account.
  • Decrease the estate tax burden for your family. Your assets would pass directly to the charitable organization, so your estate would be eligible for a federal estate tax charitable deduction on the account’s value.
    As always, make sure your beneficiary designations are up to date; with missing or incorrect designations, your assets may not be distributed as you intend or your charitable beneficiaries may have to wait to take ownership and incur costs due to probate.

The rules for 401(k)s and other qualified retirement plans are similar to those for IRAs. If you are married and you want to designate beneficiaries other than your spouse, you may need written consent from your spouse.

Otherwise, such plans follow roughly the same guidelines for what is taxable, but other features will vary from plan to plan. Contact the plan’s administrator for specific rules governing yours.

Attorney and Estate Planning specialist Anthony G. Celaya assists clients throughout Napa, Yountville, St. Helena, Calistoga, Sonoma, Vallejo, Benicia, Fairfield, Suisun City, and Vacaville in Napa County and Solano County, but also in Sonoma County, Contra Costa County, Alameda County, Marin County, Santa Clara County, San Mateo County, San Francisco County, Sacramento County, and other Northern and Southern California areas.