Asset Protection

Asset Protection

A number of techniques can be used to protect assets against estate taxes and the claims of creditors. This article reviews some of the techniques that should be considered. Asset protection strategies should be examined in light of your overall business, tax, and estate planning goals. In addition special care should be taken to avoid running afoul of fraudulent transfer laws.
Estate Planning

Unified gift and estate tax credit. This credit allows each taxpayer to shield up to $600,000 from estate and gift taxes. To make the most of the credit, married couples should consider transferring assets so that each spouse holds at least $600,000.

Annual gift tax exclusion. Taxpayers are permitted to make annual tax-free gifts of up to $10,000 per recipient ($20,000 for gifts made by a married couple). These gifts allow taxpayers to transfer large amounts of wealth to family members while reducing their taxable estates and placing the transferred assets beyond the reach of creditors.

Trust. Assets transferred to a spouse on death are generally free from estate taxes under the "marital deduction." Properly structured testamentary trust permit a couple to make the most of the marital deduction and to provide income for the surviving spouse, protect the assets against creditors' claims, and preserve the assets for their children.

Form of Ownership The manner in which title to properly is held can have a significant impact on the property's vulnerability to creditor claims. For example, property held by a husband and wife as joint tenants with rights of survivorship can generally be used to satisfy the debts of either spouse. But property held as tenants by the entireties can only be used to satisfy joint liabilities. If one spouse has greater liability exposure (e.g., a physician), it may be a good idea for the other spouse to hold title to the personal residence and other assets as separate property.

Note: The techniques available vary depending on the laws of the state in which the couple resides or in which the property is located.

Homestead property. In many states, a primary residence, or "homestead," is exempt from creditor claims. An effective asset protection strategy is to use nonexempt assets to pay down mortgage on an exempt residence.

Family Businesses Family limited partnerships. A family limited partnership allows senior family members to transfer a significant portion of a family business or property to younger family members without giving up control, while reducing estate taxes and providing limited protection against creditors.

Buy/sell agreements. Properly structured buy/sell arrangements among family business owners can often be used to establish the value of the business for estate tax purposes.

Estate freezes. Estate freeze techniques allow a business owner to shift the benefits of future appreciation to the younger generation (and to remove that appreciation in value from his or her estate) while retaining control of the business. The rules that apply to estate freezes are very complex, so careful planning is critical.

Qualified retirement plans. Qualified retirement plan accounts and benefits are generally exempt from the claims of creditors. IRAs offer some, but less, protection.

Non qualified deferred compensation. This is simply an agreement by the company to pay for an employee's services at a future date. If properly structured, these funds are not taxed until they are received and may be protested from creditors.

Life Insurance Trusts A properly structured irrevocable life insurance trust can be used to protect the policy and proceeds against creditor claims and remove the proceeds from the insured's taxable estate.

Offshore Trusts A foreign asset protection trust (APT), typically established in a foreign country that does not enforce U.S. judgments, may shield assets from litigation awards and offer some protection against creditors (but it can't be used to hide assets from current creditors). APTs are complex and expensive, and the grantor must be willing to place the trust assets beyond his or her reach for a significant amount of time. However, for people whose professions or other circumstances expose them to a high degree of risk, an APT may be worth a look.






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Kenneth Vercammen is the Managing Attorney at Kenneth Vercammen & Associates in Edison, NJ. He is a New Jersey trial attorney has devoted a substantial portion of his professional time to the preparation and trial of litigated matters. He has appears in Courts throughout New Jersey each week for litigation and contested Probate hearings.

Mr. Vercammen has published over 125 legal articles in national and New Jersey publications on elder law, probate and litigation topics. He is a highly regarded lecturer on litigation issues for the American Bar Association, NJ ICLE, New Jersey State Bar Association and Middlesex County Bar Association. His articles have been published in noted publications included New Jersey Law Journal, ABA Law Practice Management Magazine, and New Jersey Lawyer.

He is chair of the Elder Law Committee of the American Bar Association General Practice Division. He is also Editor of the ABA Estate Planning Probate Committee Newsletter and also the Criminal Law Committee newsletter. Mr. Vercammen is a recipient of the NJSBA- YLD Service to the Bar Award. And past Winner "General Practice Attorney of the Year" from the NJ State Bar Association. He is a 22 year active member of the American Bar Association. He is also a member of the ABA Real Property, Probate & Trust Section.

He established the NJlaws website www.njlaws.com which includes many articles on Elder Law. Mr. Vercammen received his B.S., cum laude, from the University of Scranton and his J.D. from Widener/Delaware Law School, where he was the Case Note Editor of the Delaware Law Forum, a member of the Law Review and the winner of the Delaware Trial Competition.

RECENT SPEAKING ENGAGEMENTS ON WILLS, ELDER LAW, AND PROBATE

Edison Adult School -Wills, Elder Law & Probate- 2007, 2006, 2005, 2004, 2003, 2002 [inc Edison TV], 2001, 2000,1999,1998,1997
Nuts & Bolts of Elder Law - NJ Institute for Continuing Legal Education/ NJ State Bar ICLE/NJSBA 2007, 2006, 2005, 2004, 2003, 2002, 2000, 1999, 1996
Elder Law and Estate Planning- American Bar Association Miami 2007
Elder Law Practice, New Ethical Ideas to Improve Your Practice by Giving Clients What They Want and Need American Bar Association Hawaii 2006
South Plainfield Seniors- New Probate Law 2005, East Brunswick Seniors- New Probate Law 2005
Old Bridge AARP 2002; Guardian Angeles/ Edison 2002; St. Cecilia/ Woodbridge Seniors 2002;
East Brunswick/ Hall's Corner 2002;
Linden AARP 2002
Woodbridge Adult School -Wills and Estate Administration -2001, 2000, 1999, 1998, 1997, 1996
Woodbridge Housing 2001; Metuchen Seniors & Metuchen TV 2001; Frigidare/ Local 401 Edison 2001; Chelsea/ East Brunswick 2001, Village Court/ Edison 2001; Old Bridge Rotary 2001; Sacred Heart/ South Amboy 2001; Livingston Manor/ New Brunswick 2001; Sunrise East Brunswick 2001; Strawberry Hill/ Woodbridge 2001;
Wills and Elder Law - Metuchen Adult School 1999,1997,1996,1995,1994,1993
Clara Barton Senior Citizens- Wills & Elder Law-Edison 2002, 1995
AARP Participating Attorney in Legal Plan for NJ AARP members 1999-2005
Senior Legal Points University of Medicine & Dentistry UMDNJ & St. Peter's-2000, 1999,1998
East Brunswick AARP Wills 2001; -Iselin/ Woodbridge AARP Wills 2000
Metuchen Reformed Church; Franklin/ Somerset/ Quailbrook Seniors 2001
North Brunswick Senior Day 2001
Wills, Elder Law and Probate-South Brunswick Adult School & Channel 28 TV 1999, 1997,1993
Wills and Estate Planning-Old Bridge Adult School 1998,1997,1995
Senior Citizen Law-Perth Amboy YMHA 1995; Temple Beth Or 2002;
Wills, Living Wills and Probate-Spotswood Community School 1995,1994,1993
Wills and Probate-Sayreville Adult School 1997, 1996,1995,1994
Living Wills-New Jersey State Bar Foundation and St. Demetrius, Carteret 1994
Wills and Estate Planning-Edison Elks and Senior Citizens January 1994
"Legal Questions Clinic" Metuchen Adult School March 1995,1994,1993
Estate Planning to Protect Families-Metuchen Chamber of Commerce April 1993
BUSINESS AND AMERICAN BAR ASSOCIATION SPEAKING ENGAGEMENTS:
Improving Your Elder Law & Estate Practice San Francisco, CA 2007
Elder Law and Estate Planning- ABA Miami 2007
Elder Law Practice, New Ethical Ideas to Improve Your Practice by Giving Clients What They Want and Need ABA Hawaii 2006
Marketing Success Stories ABA Toronto 1998
Opening a Business-Sayreville Adult School 1997,1996,1995
Olympians of Marketing- ABA Annual Meeting-Orlando, Florida 1996

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The Law Office cannot provide legal advice or answer legal questions over the phone or by email. Please call the Law office and schedule a confidential "in office" consultation.