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The Best Asset Protection Strategies

Posted on: May 17, 2019 at 8:06 pm, in

Best Asset Protection Strategies

Best Trust for asset protection strength

What are the best asset protection strategies money can buy?
We often get asked “What are the best asset protection strategies available?” Many people ask me to cut to the chase, especially those that are self-employed, wishing to safeguard their assets from bankruptcy, lawsuits, long-term care costs as well as many other financial pitfalls. Often these business people look to what is easy and on the surface. That which is easy and that one can do themselves is not always the best option.

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Gift Assets to Your Heirs Now

One of the first things people think of to preserve assets for their heirs is to just give it to them. The gift is already made, so the assets are safe, right? First you must wait for the 4-5 year lookback for gifts (it varies in every state). If one is within that timeframe, a creditor can convince a judge to order a clawback. Yes, a clawback is where the assets that would have been available for the creditor are forced back to the defendant in order to pay off that creditor. Assuming one get beyond the 4-5 year window, we will consider another pitfall with this strategy.
Many children are not quite as responsible as one might hope. Let’s say Mr. and Mrs. B have $500,000 sitting in an account and they don’t really need it to live. They don’t want to lose it to medical bills, so they decide to give it to their daughter. Their daughter is a graduate of a well known college and has a great job. Soon she is promoted, celebrates a little too much and smashes into an oncoming vehicle. Is that $500,000 safe now?

Best Asset Protection Strategies: Limited Liability Company?

Others think an LLC is the answer. They take what money they have, start an investment LLC and continue to run that LLC as if it were their own money. They think because they filed a piece of paper, that the assets are safe. Well, a good lawyer will “pierce the corporate veil.” This means they will prove to the court that the LLC is actually a front for the person who owns it. The attempt to safeguard the assets actually makes them not safeguarded. There are so many rules surrounding LLCs and other corporate hybrids, that it would be difficult not to run afoul of them and subject assets to outside creditors. Often times the owner is a single member or the owner does not follow the many rules to an LLC that provide the desired asset protection portion of the LLC, causing the LLC to be ineffective.

Revocable Trust

Next, people put assets into revocable trusts in order to bypass probate court upon their death and leave specific instructions for the distribution of those assets to their beneficiaries. They mistakenly believe that their assets are safe for the next generation. The truth is that aside from protecting against a few attorneys fees upon their death, they didn’t protect anything. The simple truth is that anything that one can get control over, a creditor may get control over. So the fact that a trust is revocable, meaning it can be tossed aside and the contents recovered means that there is absolutely no protection from creditors, the nursing home, Medicaid, etc.

Best Asset Protection Strategies: Irrevocable Trust

Lastly there is the irrevocable trust; specifically an irrevocable trust with an independent trustee. The irrevocable trust ranks at the top of asset protection in this group. One of the keys to good asset protection is the art of not owning anything. With an irrevocable trust, one can own nothing and still continue to enjoy assets as if they did; and the courts have supported this for 150 years – see some of the most important cases here.
An irrevocable trust has advantages of all of the above methods of asset protection with none of the pitfalls when properly drafted, executed, and funded. First, this asset protecting vehicle, like giving the assets to one’s children, gets the assets out of one’s name. After the assets are in the trust when properly drafted, executed, and funded, anybody suing cannot get at them, because the person that created the trust can’t even get at the assets. Furthermore, the children’s creditors don’t have access either. So the assets sit safely in trust waiting to be distributed to the beneficiaries (more on this later). Moreover, the assets in the trust won’t be seen by anyone trying to discover one’s personal wealth. This has the added bonus of privacy and discouraging would-be contingent fee lawyers from even taking on a case in the first place.
The irrevocable trust can also hold an LLC thereby doubling the LLC’s asset protection qualities. Now if a lawyer should try to pierce the LLC, they would only end up in the irrevocable trust. If the LLC is the only thing in the trust, then the creditor has nothing to collect. A separate irrevocable trust would hold the rest of the assets far away from the LLC and far away from creditors.
Like a revocable trust, an irrevocable trust can instruct the trustee who, what, when, if and how assets are distributed. Unlike the revocable trust, because the grantor can’t get to the assets, neither can anyone who wishes to collect from the grantor. These instructions are almost limitless and last long after the death of the grantor. Let’s say that a parent values education. They could put right in the trust that the trust will pay for education and if the child earns a college degree, then they get ½ of the assets at that time and ½ at age 35. Basically, the trust is flexible enough that a grantor could set up goals, objectives, or incentives just like if they were alive to see it.
There may be some more expensive ways to safeguard assets, but for the most bang for the buck, an irrevocable trust is the best asset protection for the average person. In fact, the irrevocable trust can be found in the estate plans of the super rich also. A good solid irrevocable trust can protect and provide for a family for years with the assets safely tucked away.

Asset Protection & Single Member LLC’s: Pros, Cons, & Real-World Cases

Posted on: March 17, 2017 at 8:04 pm, in

Courts have slowly eroded Asset Protection and Single Member LLC’s by allowing creditors to reach past the LLC to the owner or owners. An LLC, by itself is probably not enough protection for the average business owner.

Asset Protection and Single Member LLC’s are very rarely synonymous in the real world despite what one hears from marketers in theory. LLC’s are great for many things, but most business owners that think that paying a few hundred dollars to designate their business as an LLC, corporation, or LLP will adequately separate business assets from personal ones. They could be gravely mistaken. In fact, unless one follows the LLC rules to the letter, chances are that personal assets are on the table in the event of a lawsuit or bankruptcy; with a single-member LLC or even sometimes with a multi-member LLC. How many LLC owners log meeting minutes for every major business decision or never pay for personal items with the company checkbook? Either one of these can form a crack in the wall in which a good attorney can drive a wedge and allow the courts access to personal assets.
What can crack the walls of an LLC? Well, lets start out with the obvious. If a person were to set up an LLC for criminal, wrongful or fraudulent purposes, that person could be held liable for debts of the LLC. A little less obvious and more confusing is that courts have also looked passed LLC’s to personal assets by calling them “alter egos.” Basically, the court is saying that the LLC is just a business in name but actually just the owner in disguise. If the LLC is actually the owner, collecting debt from the LLC is also collecting debt from the person’s college fund for their children. Here’s one that perplexes. If the LLC is not adequately funded, then the court can go after personal assets. Most business owners start out with almost nothing and grow their business. Are the courts saying that someone is not protected while their business is growing? Maybe the courts are urging business owners not to protect their businesses with an LLC until they are larger? Either way, the current state doesn’t encourage startups or risk taking and the LLC doesn’t seem to be the answer, at least on its own.
If a business doesn’t hold up to a court’s scrutiny, the owner and the owner’s family could lose everything. In fact, here are some examples of just that:
In this case, young girl drowned in a public swimming pool owned by an LLC. The father of the deceased sued the LLC and asked the court to set aside the LLC for a judgment against the single-member of the LLC. The Supreme Court of California found a way around the LLC by determining that the LLC did not have enough assets to conduct a public swimming pool. The owner of the LLC, became personally responsible for the award in the lawsuit. Sometimes a horrible event happens like this and often courts will try to right the wrong, even when it takes a little bending of the law.
Another single-member LLC falls. Even after the LLC was essentially dissolved, the court could still go after the owner. In this case, Tradewinds group, a single-member LLC, contracted to have Martin construct an airplane hanger. Tradewinds eventually sued Martin for breach of contract and won. Martin appealed and the case was sent back to the court where the decision was reversed and Martin was awarded substantial litigation costs. Tradewinds had sold its assets to Freeman, the owner of Tradewinds. Martin went to court to disregard the LLC to collect from Freeman personally. The court found that Freeman was an “alter ego” of Tradewinds so they were one in the same. Freeman was held personally accountable for the judgment.
Even a multi-member LLC that fails could hide threats to one’s personal assets. Do you think personal assets are safe after an LLC files bankruptcy? This case involves a multi-member, closely held, LLC that declared Chapter 7 Bankruptcy. The trustee of the bankruptcy estate attempted to hold the members of the LLC personally responsible for debts. The court found that the members were personally responsible for several debts as they had “dealt with creditors personally” (How else would one do it?) and did not explicitly identify themselves as an agent of the LLC.
In this case, a single-member LLC entered into an agreement with the purchasers of a home to finish the home in certain amount of time. The LLC failed to do so. The purchasers successfully sued the LLC. The purchasers then targeted their sights on the assets of the owners. The court ruled that the LLC was intermingled with other entities and personal assets and is therefore to be disregarded and the owners were personally liable for any court awards. This illustrates that when the owner of an LLC neglects to follow the strict separation rules between personal and business assets, they can also endanger their personal assets.
In this case, an amateur softball association sued a single-member LLC over trademark infringement also naming the owner in the suit. The court ruled that the owner was personally liable because trademark infringement was simply enough to warrant it as a fraudulent act! This illustrates that sometimes courts will even make rulings that are so broad that one wonders why bother with an LLC at all.
In this case, a power company sued a single-member LLC. The power company attempted to collect from the owners of the LLC under a by piercing the veil of the LLC. The court found that since there was not enough funding, spaces were used for personal and business uses, they did not file annual reports, they did not file property records, or file tax returns, that the owners were liable for the award from the court. This illustrates that when an LLC is determined by the court to be “underfunded,” the court may find that that the LLC was just a front for the owner.
All of these cases illustrate a single powerful point. When something bad happens, an LLC by itself may not protect personal assets. A good lawyer will pour over all of the LLC documentation and generally will find something to start that crack in the wall. Even if they don’t succeed, they can use that crack to scare an owner or owners into a larger settlement. An LLC or LLP is a good thing, but, one wrapped in an UltraTrust can stop that crack before it even starts.

NJ Asset Protection: How to protect businesses and personal assets in New Jersey

Posted on: March 17, 2017 at 8:04 pm, in

A business in New Jersey, if organized correctly, can offer asset protection. A limited liability corporation (“LLC”) is ideal, but generally not considered complete asset protection. An LLC takes a business that is generally a sole proprietorship (owned and operated by one person) and, by filing with the New Jersey State Treasury, turns it into a corporation. The idea being that the corporation is now a separate entity from the person and as such, is responsible for its own debt, taxes and lawsuits. Shares of an LLC can be owned by one person or several, but a solely owned LLC may not share full asset protection.
The LLC that is owned by multiple partners gets its main asset protection advantage from what is known as “charging orders” [Title 42. Chapter 2C. Revised Uniform Limited Liability Company Act, 1-94 – C.42:2C-1 to 42:2C-94, (March 18, 2013). A single owner of an LLC may or may not take advantage of charging orders because they are meant to protect other owners from creditors attempting to liquidate the LLC. A charging order is a court order, in favor of a creditor of one of the LLCs members, stating that the stocks or shares of the LLC are responsible for the amount owed. This means that the creditor does not have any control over the LLC and can only collect from the distributions to that single debtor. In other words, it protects the other LLC partners from having to deal with a new partner. This allows the other partners not to be subject to any financial loss stemming from one partner’s financial distress.
Although this is a good method to protect a business and separate the business from one’s personal assets, it may fall short. There are many cases where an LLC officer is held personally liable for acts, such as consumer fraud [Root Jewelers v. JDR Contracting, 233 N.J. Super. 125 (App. Div. 1989)], misappropriation and conversion [Hirsch v. Philly, 4 N.J. 408, 416 (1950)], negligence [Duffy v. Bates, 91 N.J.L. 243 (E & A 1918)], negligence of omission [Francis v. United Jersey Bank, 87 N.J. 15 (1981)], and negligent contracting [Saltiel v. GSI Consultants, Inc., 170 N.J. 297 (2002)]. The best way to ensure that personal assets are separate from business assets are through the use of a well crafted irrevocable trust, such as the UltraTrust®.
The use of irrevocable trusts can be a two level shield against would be attackers. First, placing the LLC into a trust can add another layer of protection. Anyone trying to get through the protection of the LLC will run into the issue that a trust owns the business, not the individual. Also, when an owner is sued and the creditor attempts to attach a charging order against the business, they will likely be unsuccessful, as the trust owns the business, not the individual. A creditor cannot collect something that the debtor does not own. A well written trust, such as the UltraTrust®, includes language allowing the trustee to withhold funds in the event of a lawsuit. This trust, being irrevocable is out of the control of the debtor, so the creditor cannot force payment.
The second level of protection involves placing the bulk of one’s personal assets in an irrevocable trust. Again, when a creditor or successful lawsuit plaintiff attempts to collect, they will not be able to collect from the irrevocable trust. The assets and property in the trust will be safe and able to be used for the benefit of the family or other beneficiaries. A creditor cannot collect from someone who doesn’t own anything. This is the same strategy that can be used to protect assets from medicaid and nursing homes.
Putting all of or a significant amount of countable assets into an irrevocable trust more than five years before entering a nursing home, saves the assets from the astronomical cost of nursing home care. In New Jersey, a one may still retain the use of various assets, including $2000, a car, a home (if they intend to return) and various burial assets, among other minor assets. Any countable items or assets (those items or assets not carved out by medicaid as non-countable such as the one’s listed below) will be subject to a “spend down” until the person qualifies for medicaid.
So, if a person has $102,000 in countable assets when entering a nursing home, the nursing home will collect until there is only $2000 left (less than 1 year of nursing home care). These funds will be lost and not passed on to the family. In fact they can’t even be gifted. If one were to take that $102,000 and place it in an UltraTrust® more than five years before entering a nursing home, those assets would be owned solely by the trust and would not count towards the medicaid spend down. All $102,000 would be passed on to the beneficiaries.
Another method, which may work much closer to the time someone is to enter a nursing facility, is the purchase of an actuarially sound annuity. Although this method does not protect as many of the assets as an irrevocable trust, it will protect more than simply doing nothing. An annuity is a contract, bought and paid for, where the entity selling the agreement agrees to pay out sums of money as income over a period of time. New Jersey, in particular, makes an effort to make sure that the payment is actuarially sound, meaning that the payments are consistent with life expectancy. By making sure they are actuarially sound, New Jersey is attempting to thwart people from abusing these annuities solely to qualify for medicaid.
The methods outlined above, although relatively simple to explain, may be quite complicated. One should contact an expert in LLCs, irrevocable trusts and medicaid annuities, such as those at Estate Street Partners. If the annuities, LLC and/or irrevocable trusts do not contain the correct language, one may not be afforded the protection that they expect. Estate Street Partners and the UltraTrust® can help meet and exceed expectations for asset protection in New Jersey.

Asset Protection for Physicians and Medical Professionals

Posted on: March 17, 2017 at 8:03 pm, in

Asset protection for physicians and medical professionals should be taught in medical school. So many lawsuits are filed against physicians and the payouts are so high that name “medical malpractice” is synonymous big paydays and there are attorneys that only take these cases.
In fact, every year, physicians run about a 5% chance of being sued every year – so in a 20 year career you are guaranteed, on average, to be sued at least once (Medical Liability Claim Frequency: A 2007-2008 Snapshot of Physicians, Kane, 2010). That’s not even the scary part. These statistics only cover medical malpractice, but personal lawsuits also are ten times more likely for doctors because most people assume doctors are wealthy.
If you are physician reading this, chances are that you are being sued, expecting to get sued, and/or afraid of being sued. The medical profession has become almost more focused on litigation than medicine resulting in the birth of what people call “defensive medicine.” Some physicians reading this may believe that they won’t make a mistake or that their patients like them and would never sue them. These physicians would be wrong. Physicians make mistakes like everyone else. Here is the chilling part though… a physician need not make a mistake to be sued. People generally have the perception that physicians have deep pockets and that most cases are settled and everyone gets paid. In fact, 65% of cases are dropped, dismissed or withdrawn (Kane, 2010). That means that in 65% of the cases, there was probably not enough evidence of wrongdoing to move forward. 65% of cases may be frivolous lawsuits against unsuspecting physicians.
How about the cost? Well, even if the claims were dropped, physicians were subject to $22,000-100,000 in legal fees on average. That’s only if claims that were dropped!! The cost to a physician could go as high as $500,000 if a case goes to trial and the patient prevails. That number can go even higher in states that don’t have caps on the medical malpractice lawsuits. One can see why asset protection for physicians is a must!
Like any other business owner, the secret to protecting a physician’s assets is simply to not own them directly at all. Sure, carrying insurance is a must, but when insurance ends, no physician wants his or her personal assets at risk. So the best way for a physician to protect his or her personal assets is to not own them. A properly drafted, implemented, and funded irrevocable trust like the Ultra Trust can be a physician’s family’s best protection. The Ultra Trust can act as a safe deposit box for the physician’s personal property and assets. The protection stems from the fact that items in the trust are not owned by the physician, therefore someone suing the physician cannot attach these assets just like they couldn’t touch the assets of the physician’s friends.
A properly drafted, implemented, and funded irrevocable trust is specifically designed for all the protection to start immediately, assets can be placed out of harms way, but still benefit the people the physician wants them to benefit. Not only can the it move these assets out of harms way now, the trust will protect them for years to come, from such notorious asset reducers such as the children’s wild teens and 20’s, the children’s ex-spouses, bankruptcy, and finally frivolous and non-frivolous lawsuits.
The Ultra Trust includes language that protects against anyone that is not a beneficiary taking possession of the assets. It includes language that allows the physician to specify when, how, and why funds can be dispersed to children, long after they have passed. The Ultra Trust uses a trust protector who keeps a watchful eye on the manager of the trust to make sure the trust is administered the way the physician wants it administered. Lastly, and most importantly, the Ultra Trust gets the physicians personal savings, real estate, possessions and investments away from the hands of potential court orders. Don’t take our word for it, see what others have said:

Do Postnuptial’s work to protect assets?

Posted on: March 17, 2017 at 8:03 pm, in

Even when postnuptial’s work, they don’t work: Here’s another lengthy court battle over an agreement that cost both parties in legal fees and court costs. Sarah Lugg appealed the denying of her claim to set aside a postnuptial agreement entered into during the marriage between her and her husband Allan Lugg, Jr.. Sarah claimed that Allan did not disclose all of the assets of the marriage, that the agreement was signed under duress and that the agreement was unconscionable. The couple had discussions concerning the agreement culminating in Alan’s attorney drawing up a contract. Sarah took the contract to her lawyer who did not approve and ordered all negotiations to go through him. Alan instead continually and persistently contacted his Sarah to sign the agreement and she negotiated directly with Alan. The final agreement was prepared by a law firm consisting of Alan’s father and brother-in-law. One year later Alan filed for divorce. Sarah asked the court to set aside the agreement, but the lower court, instead, upheld the agreement. Sarah appealed. The appeals court state that post-nuptial agreements are reviewed under the same principals as pre-nuptial agreements. The appeals court rejected Sarah’s arguments for setting aside of the postnuptial agreement and the agreement stood.
2013 PA Super 67
ALLAN W. LUGG JR. Appellee
SARAH A. LUGG Appellant
No. 883 MDA 2012
Superior Court of Pennsylvania
April 1, 2013
Appeal from the Order Entered November 4, 2011 In the Court of Common Pleas of Clinton County Civil Division at No(s): 54-11
Sarah A. Lugg appeals from the order entered on November 4, 2011 in the Court of Common Pleas of Clinton County denying her counter-claim to set aside the December 30, 2010 post-nuptial agreement between her and Appellee, Allan W. Lugg, Jr. Lugg claims the trial court erred in enforcing the agreement because, (1) there was a lack of disclosure of assets on the part of Allan Lugg, Jr., (2) the agreement was signed under duress, and (3) the agreement is unconscionable. After a thorough review of the submissions by the parties, official record, and relevant law, we affirm.[1]
The Honorable Pamela A. Ruest set forth the factual and procedural history in her Pa.R.A.P. 1925(a) opinion:
Plaintiff (hereinafter “Husband”) and Defendant (hereinafter “Wife”) were married on October 11, 1997, and are the parents of three minor children. In or about August of 2010, in contemplation of divorce, Wife signed an agreement to purchase a house. Thereafter, Husband and Wife began negotiating terms of a postnuptial agreement. On or about October 3, 2010, Wife prepared a letter to Husband in which Wife proposed a number of requests and stated, inter alia, “In return, I will not seek Full Disclosure or Child Support.”[2] The parties handwrote additional negotiations on the October 3rd letter and, on October 24, 2010, Wife prepared a second letter in which Wife again stated she would not seek full disclosure or child support.
On November 3, 2010, counsel for Husband, Stuart L. Hall, Esquire, prepared a draft of the postnuptial agreement. Husband gave Wife a copy of the draft, which Wife took to her attorney, Lee H. Roberts, Esquire. Upon review of the proposed agreement, Attorney Roberts sent a letter to Attorney Hall on November 12, 2010, in which Attorney Roberts criticized the agreement and stated all negotiations with Wife should be made through him, Wife would need several months to settle into her new home before negotiations could begin, and an agreement should not be entered until after negotiations. Although Attorney Hall informed Husband of the contents of Attorney Roberts’ letter, Husband continually and persistently contacted Wife to request she sign the agreement. Wife expressed resistance to entering the agreement but continued to negotiate directly with Husband and, on or about November 16, 2010, submitted written proposed changes to Husband.
A final agreement was prepared by employees of the law firm of Lugg & Lugg, Husband’s father and brother’s law firm. Husband and Wife arranged to meet on December 30, 2010, to execute the final agreement, although the parties disagree over whether the meeting was intended to take place in Wife’s home or the home of Mary Stringfellow, a long-time secretary of Lugg & Lugg. On December 30, 2010, Wife and her friend, Maryann Winklemann, were present at Wife’s home when Husband and Mary Stringfellow arrived to execute the agreement. Prior to the arrival of Husband and Ms. Stringfellow, Wife informed Ms. Winklemann she had decided not to sign the agreement. Nonetheless, after spending approximately one and one half hours reviewing the agreement with Husband, Wife and Husband signed the agreement. Wife additionally signed a deed to the parties’ marital residence, after Ms. Stringfellow informed Wife the document was a deed to the residence. Ms. Winklemann witnessed the execution and the agreement was notarized by Ms. Stringfellow.
After executing the postnuptial agreement, Wife and Husband went to a car dealer and transferred the titles of two vehicles into Wife’s name. Husband gave wife a check for $10, 000.00, which Wife subsequently cashed. In January, 2011, Husband filed a Complaint in Divorce and, after service was rejected by Attorney Roberts, Husband served the Complaint on Wife. Husband then gave Wife a second check for $10, 000.00, in accordance with the terms of the agreement, which Wife accepted and cashed. In May of 2011, Wife filed for child support. Husband subsequently filed the present Motion to Enforce Post-Nuptial Agreement and for Contempt and Award of Counsel Fees on the ground Wife has breached the parties’ postnuptial agreement by failing to sign documents necessary to finalize the parties’ divorce. Wife filed a counter-motion to Husband’s motion requesting the Court invalidate the parties’ agreement and order Husband to execute a deed re-conveying the marital residence to Husband and Wife.
Trial Court Opinion, 11/1/11 at 1-3.
Lugg’s first claim is that the trial court erred in failing to invalidate the agreement due to lack of full disclosure. This argument is based on considerable case law that provides full and fair economic disclosure is mandatory in order to uphold either a pre- or post-nuptial agreement. See, Stoner v. Stoner, 819 A.2d 529 (Pa. 2003); Simeone v. Simeone, 581 A.2d 162 (Pa. 1990). Further, Lugg argues that she cannot waive a right without knowing what is being waived. Therefore, there can be no effective waiver of economic disclosure because one would never know what was being waived. Lugg completes her argument by asserting where there was no economic disclosure, the burden should shift to the person seeking to enforce the agreement to demonstrate the agreement is fair and reasonable. See Appellant’s brief at 24-25.
We believe these arguments are unavailing. Initially, we note that post-nuptial agreements are to be reviewed under the same principles as pre-nuptial. See Stoner, supra; In re Ratony’s Estate, 277 A.2d 791 (Pa. 1971). Case law further demonstrates that a pre-nuptial agreement is a contract and, therefore, is to be evaluated under the same criteria as other contracts; absent fraud, misrepresentation or duress, spouses should be held to the terms of their agreements. See Simeone, 581 A.2d at 165. Commenting on Simeone, our Supreme Court in Stoner stated,
We expressly rejected an approach which would allow the court to inquire into the reasonableness of the bargain, or the parties understanding of the rights they were relinquishing. We decline to resurrect to paternalistic approaches to evaluating marriage contracts by requiring Husband to explain to Wife the statutory rights that she may be surrendering. Such an approach assumes that Wife lacks the intelligence or ability to protect her own rights. Instead, we endorse the parties’ rights to freely contract, and thus decline to impose the additional inquiry as to whether the parties were sufficiently advised of their statutory rights.
Stoner, 819 A.2d at 533.[3]
It is evident our Supreme Court has already rejected Lugg’s proposed standard that this court delve into whether the agreement was fair and reasonable, absent any showing of fraud, misrepresentation or duress. Similarly, we must reject the assertion that economic disclosure cannot be waived because the party waiving disclosure does not know the extent of what is being waived. We note, too, that the legislature adopted the Simeone approach in 23 Pa.C.S. § 3106, by allowing, in relevant part, a party to waive economic disclosure in terms of a prenuptial agreement, as long as the waiver is voluntary and in writing. See 23 Pa.C.S. § 3106(a)(2)(ii) and comment.[4] There are no statutory regulations addressing post-nuptial agreements. Because pre- and post-nuptial agreements are to be similarly viewed, and because waiver of economic disclosure is allowed in a pre-nuptial agreement, absent a compelling reason to treat pre- and postnuptial agreements differently for this purpose, we believe full economic disclosure is waiveable in a post-nuptial agreement.[5]
Concluding there is no prohibition against the waiver of economic disclosure, we agree with the trial court that as long as there is no showing of fraud, misrepresentation or duress, the waiver is valid and enforceable. Here, the trial court stated,
Accordingly, where a spouse enters an agreement mistakenly believing they are sufficiently informed of the other party’s financial resources, the spouse may assert a lack of disclosure or misrepresentation of assets constituted fraud or misrepresentation in the inducement.
In the present matter, Wife argues that due to the lack of full disclosure, “an agreement based on this fraud and misrepresentation” should be invalidated. Wife does not articulate, however, how the lack of disclosure could constitute fraud or misrepresentation when Wife was aware there was no such disclosure. In expressly waiving her right to full disclosure, Wife specifically acknowledged Husband had not engaged in full disclosure. Where there is no allegation Husband misrepresented his financial resources and, at the time Wife signed the agreement, Wife was aware Husband had not disclosed his resources, the Court cannot find Wife was induced to enter the agreement through fraud or misrepresentation.
Trial Court Opinion, at 5-6.
We find there to be no abuse of discretion or error of law in this analysis.
Lugg next claims the post-nuptial agreement should have been set aside because she signed the agreement under duress. This duress consisted of daily pressure to sign the agreement and on the day the agreement was signed, “one and one-half hours of continual pressure and negotiations” caused Lugg to “cave in” and sign the agreement. Also, Lugg claims there was an “actual or tacit conspiracy” between Husband, Al Lugg, Sr. (husband’s father and an attorney), Stuart L. Hall, Esq. (Husband’s attorney), and Mary Stringfellow (longtime paralegal for Lugg, Sr.) to get Lugg to sign the agreement without review or contact by her counsel.
These arguments fail. Regarding duress, the trial court has correctly noted duress is defined as:
That degree of restraint or danger, either actually inflicted or threatened and impending, which is sufficient in severity or apprehension to overcome the mind of a person of ordinary firmness. … Moreover, in the absence of threats of actual harm there can be no duress where the contracting party is free to consult with counsel.
Adams v. Adams, 607 A.2d 1116, 1119 (Pa. Super. 1992).
We are again compelled to agree with the trial court’s analysis. Daily badgering and one and one-half hours of “pressure and negotiations” does not rise to the level of coercion necessary to find duress. Lugg never claimed she was subject to any level of force or threat of force. Her claim of a conspiracy, actual or tacit, to keep her from her attorney is belied by the fact she contacted her attorney. There is nothing in the record to show Husband threatened her in any way to prevent her from contacting her lawyer. The note from Husband to Lugg scheduling the meeting to sign the agreement contemplates Lugg showing the proposed agreement to her lawyer.[6] Lugg’s claim of a conspiracy to deprive her of counsel is devoid of substance. There was no duress.
Lugg’s claim of legal misconduct is also groundless. Lugg cites Pennsylvania Rules of Professional Conduct 4.2 and 5.3 in an effort to show misconduct. Rule 4.2 states a lawyer may not communicate with a client that lawyer knows to be represented without proper authorization. Rule 5.3 requires a lawyer responsible for the conduct of a non-layer to ensure the employee follows the rules of professional conduct. Lugg claims Stringfellow’s participation in signing the agreement violated the Rules of Professional Conduct. There are multiple problems with this argument.
Husband’s counsel, Anthony Hall, was contacted by Lugg’s counsel and told not to contact Lugg directly. Hall did not. Stringfellow is not employed by Hall and Hall has no supervisory responsibility over Stringfellow. While Lugg claimed “it strains one’s imagination”, see Appellant’s Brief at 30, to believe Husband’s father and brother (both lawyers) took no part in the negotiations, Lugg has presented no evidence to support the argument. The record has no proof that Lugg & Lugg had any responsibility in the matter or even any particular knowledge of the matter. The evidence shows that the firm of Lugg & Lugg allowed Stringfellow and an unnamed secretary to act as scriveners, typing up the agreement in its various forms, and permitted Stringfellow, over her lunch hour, to act as notary. There is no evidence that there were any ethical breaches. Finally, even assuming the validity of this claim, Lugg has presented no legal authority that her remedy would be to renounce the agreement. Therefore, this claim must also fail.
Because the official record supports the trial court’s determinations, we find no abuse of discretion and because there are no errors of law, we affirm the order granting Husband’s motion to enforce the postnuptial agreement, denying Husband’s motion for contempt and attorney’s fees, and denying Lugg’s counter-motion to declare post-nuptial agreement invalid.
Order affirmed.
[1] “The determination of marital property rights through prenuptial, postnuptial and settlement agreements has long been permitted, and even encouraged.” Sabad [v. Fessenden], 825 A.2d [682, ] 686 [(Pa. Super. 2003)] (quoting Laudig v. Laudig, 425 Pa.Super. 228, 624 A.2d 651, 653 (1993)). Both prenuptial and post-nuptial agreements are contracts and are governed by contract law. Laudig, supra. Moreover, a court’s order upholding the agreement in divorce proceedings is subject to an abuse of discretion or error of law standard of review. See Busch v. Busch, 732 A.2d 1274, 1276 (Pa. Super. 1999), appeal denied, 563 Pa. 681, 760 A.2d 850 (2000) (citing Laudig, supra). An abuse of discretion is not lightly found, as it requires clear and convincing evidence that
the trial court misapplied the law or failed to follow proper legal procedures. Paulone v. Paulone, 437 Pa. Super. 130, 649 A.2d 691 (1994). We will not usurp the trial court’s factfinding function. Laudig, supra.
Paroly v. Paroly, 876 A.2d 1061, 1063 (Pa. Super. 2005).
[2] The issue of child support is not before us. We were informed at argument that any child support issues have been resolved and are addressed by separate order.
[3] In Stoner, the wife sought to avoid the application of a post-nuptial agreement because although the agreement provided full disclosure, it did not advise wife of her statutory rights to equitable distribution, alimony or alimony pendente lite. Nonetheless, wife was held to terms of the agreement.
[4] In relevant part, Section 3106, addressing Premarital agreements states:
(a) The burden of proof to set aside a premarital agreement shall be upon the party alleging the agreement to be unenforceable. A premarital agree shall not be enforceable if the party seeking to set aside the agreement proves, by clear and convincing evidence, that:
. . . .
(2) the party, before execution of the agreement:
. . . .
(ii) did not voluntarily and expressly waive, in writing, any right to disclosure of the property or financial obligations of the other party beyond the disclosure provided.
The Comment states: “Subsection (a) is modeled after section 6(a) of the Uniform Premarital Agreement Act and encompasses the approach of Simeone.”
23 Pa.C.S. § 3106 and Comment.
[5] Other than noting that Lugg was under stress from, in part, voluntarily moving into her own home, there has been no explanation why a postnuptial agreement should be treated any differently from a pre-nuptial agreement. This argument appears to invite a return to the “paternalistic” approach rejected by our Supreme Court.
[6] “If you take to Lee [Roberts, Lugg’s attorney] save original draft I’ll need to make 4-copies. Lee will say the same thing he did before and charge. The agreement has not changed that much from the one he looked at.” Defense Exhibit 1.

Art of Asset Protection

Posted on: March 17, 2017 at 8:03 pm, in

There is an art to protecting your assets. It’s simple – really. The secret is to not own your assets that you want protected. Once one understands this principle then it’s an easy decision to set up an irrevocable trust with the Ultra Trust® after that.

The art of asset protection is a delicate balance of control, non-ownership and tax strategies that, like a fine painting, allows for a certain amount of anxiety reduction and enjoyment. The first question one should ask is, “From what am I protecting assets?” Well, there are a variety of enemies to wealth out there including things like frivolous lawsuits, bankruptcy, torts, debtors, economic downturn, medical bills, and nursing home bills, among others. With all of these predators trying to take personal and business assets and the laws tilted in their favor, the path to asset protection is formed by a soft brush, not the heavy mallet of the courts.
The basic premise behind any asset protection plan is the art of not owning anything. It doesn’t matter if it is a business, a house, a sports car or a dog, you shouldn’t own it. A dog? Yes, a dog. A dog is legally a possession, so a dog has to be possessed by someone and that makes the owner liable for the dog. For example, a bunch of dogs are sitting around playing poker when a person comes in the door. One dog lunges and scars the person for life. Does the dog get sued or the owner? Can one avoid being sued as the owner? The short answer is, “no.” So, don’t own the dog. Give the dog to someone else and then just enjoy the dog. Won’t the other person be sued? Well, only if the other person is a person.
This is where the art makes an appearance. They way to protect something owned is to give it to an Ultra Trust®. The Ultra Trust® is a finely balanced instrument that allows one to have control without having ownership. Whether one is protecting personal assets, business assets or both, the Ultra Trust® provides a superior level of protection. Combine it with an LLC and the protection becomes twice as strong because there are two barriers between different assets.
There are other advantages. When it comes to estate tax and gift tax, the item placed in the trust is valued at the time it was put in the trust. This means that a small company, when placed in an Ultra Trust® can grow astronomically and never trigger the estate tax or gift tax when the trustee finally passes it on to the beneficiaries. Oh yeah, one more thing; With all of the assets placed in the Ultra Trust® years ahead of time, one can qualify for medicaid and not pay the outrageous nursing home bills that ruin estates every day.
An Ultra Trust® is a sophisticated placeholder for assets which specifies instructions on what the trustee (the person managing the trust) can and must do with those assets. The Ultra Trust® can designate who will get what assets and under what circumstances, such as in the event of marriage, college attendance, and or refraining from drugs and alcohol. It can also designate who doesn’t get anything, such as spouses of the beneficiaries, creditors and unrelated persons. The Ultra Trust® allows a grantor (the person giving to the trust) to have all of the control of the assets possible (such as the enjoyment of the dog) while leaving no ties to the assets that predators can use to take those assets. The artful construct of the Ultra Trust®, personally drafted for each client, allows for all of the benefits and the most protection.
Let’s take the dog example. One can easily place a dog in a trust by declaring the dog in the trust and possibly registering the dog as owned by the trust. Now the dog bites someone. The person the dog is living with doesn’t own it; the trustee doesn’t own it; but the trust does. So, the scarred person sues the trust and doesn’t get very much even if they win the costly lawsuit. In the meantime, the grantor enjoys the dog but not the risk.
A trust with a dog in it sounds like a silly thing, but the story illustrates how the Ultra Trust® can shield assets from an individual and from other assets. At Estate Street Partners, LLC a representative will artfully take your information and ascertain what you want your Ultra Trust® to do. Once the fortress is set up, the grantor can simply run his or her business and life without the worry of losing everything at any given time and enjoy the art that is all around them.

Asset Protection for Business Owners

Posted on: March 17, 2017 at 8:01 pm, in

Don’t get caught holding your business when things go bad. Use the powerful Ultra Trust® to insulate from creditors and frivolous lawsuits.

Asset protection for business owners is rarely a major consideration when someone starts a business. There are many ways to own a business, but owners probably shouldn’t own it directly at all. A business owner can be a sole practitioner, own the business through shares of an LLC, LLP, or LFP or even own a corporation by merely acting as if they own it. All of these methods among others have one thing in common: a connection to the owner. If a business is sued and the plaintiff’s lawyer is worth their fee, they will certainly try to attach the owner’s personal assets to the case.
Lawyers have gotten smart regarding piercing the corporate veil. All they have to show is that the business isn’t separate from the owner. The poor owner could have used the business checking a few times to take his children out to the movies or regularly used the business vehicle to drive around in or simply not financed the business properly [see; Kinney Shoe Corp. v. Polan 939 F.2d 209 (4th Cir. 1991); Ridge Clearing & Outsourcing Solutions, Inc., v. Khashoggi, No. 07 Civ. 6611(RJH), (2011) ]. Many things connect the business to the personal assets of the owner… in fact, probably too many to keep track of and too many pitfalls not to find oneself stuck in one. Here are some common examples:
  1. commingling of funds and other assets
  2. the treatment by an individual of the assets of the corporation as his own, [see; Ted Harrison Oil Co. v. Dokka, 617 N.E.2d 898, 901 (Ill. App. Ct. 1993)]
  3. the failure to maintain minutes or adequate corporate records
  4. the use of the same office or business location, employment of the same employees and/or attorney
  5. the failure to adequately capitalize a corporation, and
  6. the use of a corporation for a single venture.
  7. fraud, [see; Colandrea v. Colandrea, 42 Md. App. 421, (1979)]
Using these same theories, a business doesn’t have to have a lawsuit filed by an injured party or a damaged party either. The business could be sued for debt. Many people lost their businesses during the recent recession. Many debtors and bankruptcy trustees went after the personal assets of the business owners to satisfy the debts. Not only did people lose their business and income, but they may have lost their personal savings and possessions too. These issues probably make one think twice about going into business again or starting a business in the first place.
Instead of thinking twice, they should start a business they don’t own. Why, would anyone want to start a business they don’t own? Well, for starters, it keeps the lawsuits out of one’s personal bank accounts. If a person doesn’t own the business, then they can’t get sued with the business. How does one run a business one doesn’t own? They do it with one of the greatest asset protection tools in the toolbox: the Ultra Trust®. This is how it works. You take a startup business, worth virtually nothing, form an LLC and place it in an UltraTrust®.
The Ultra Trust® owns the company and the Ultra Trust® is managed by an independent trustee (one who is not related by blood). The trust and the LLC need someone to run the business, so they hire the creator of the business. The person who created the business receives a salary and the business grows inside the trust. Now, when it comes time to pass the multi-million dollar business on to their children it passes estate and/or gift tax free, because the gift was already made to the trust when the business was about worthless.
Ok, now back to asset protection. If the same lawyer mentioned earlier comes after the business in the Ultra Trust® and tries to go after personal assets, the court takes one look at the Ultra Trust® documents and sees that the trust owns the company, and throws out the attack on the personal assets. The Ultra Trust® has insulated personal assets against the attack. The Ultra Trust® also works in reverse! If one is sued personally, the business is safe because it is owned by the Ultra Trust®.
The Ultra Trust® is specifically designed to stop creditors and people filing frivolous lawsuits from gaining access to personal assets. The Ultra Trust® allows for the most protection with the largest amount of flexibility. Each one is tailored to the grantor’s needs. The Ultra Trust® is a powerful tool to protect families from financial attack.
Call us today at 888.938.5872 to learn how you can protect your business assets.

How an irrevocable trust, UltraTrust, can protect your assets?

Posted on: March 17, 2017 at 8:01 pm, in

How does a corporation, Sub “S,: or LLC protect your assets and where does an irrevocable trust such as the superior UltraTrust fit in to your asset protection plan? Is the LLC, Sub “S,” or corporation enough to protect your assets or do you absolutely need an irrevocable trust UltraTrust? My lawyer suggests creating a revocable trust rather than an irrevocable trust so I can control my assets. Is this the best plan for me and will it protect my assets when it comes time to go to court? Can I elect myself as the trustee and what are the consequences?

Single shareholder corporations, single shareholders of Sub “S,” and single member LLCs can provide the owner with protection against liabilities arising from “the conduct of the LLC” but not the owner of the LLC membership shares. In other words, if the LLC does something wrong, the owner is not necessarily responsible. To reach the owner’s personal assets, a plaintiff would have to “pierce the veil” of the entity showing that:
  1. The LLC, the corporation, or the Sub “S” was undercapitalized for it’s intended business purpose or
  2. Formalities were not followed or
  3. The owner used the LLC, Corporation or Sub “S” mostly for personal purposes or
  4. It did not serve a “bona fide” commercial purpose or
  5. It lacked in economic substance and was merely an alter ego of the owner whose sole intention is to frustrate the creditor(s) and many other reasons.
A single member LLC (one owner), Corporation, or Sub “S” will not protect the owner or his or her assets because the charging order protection that is highly regarded is based on protecting the “innocent” non-debtor. Only an irrevocable trust such as the UltraTrust with an independent trustee will protect your assets from a past, present, and potential future creditor.
How does the UltraTrust protect your assets? The house you live in, the car you drive, the investments you own are actually owned by an LLC and the LLC, in turn, is owned by the UltraTrust. The irrevocable UltraTrust is a superior irrevocable trust which has stood its test of time. The irrevocable trust, UltraTrust, has seen many legal battles and like a skilled warrior with swift accuracy and litigious force it protected its owner and its owner’s assets.
So what do you need for a superior irrevocable trust to be implemented? Be prepared ahead of time. “Preparation, preparation, preparation.” Just like when you buy a house they say, “Location, location, location.” Asset protection is about reducing the risk, not only from outside creditors, but you need to worry more about the inside creditors such as your spouse, your brother-in-law, damages caused by your minor children, your dog, and your business partners.
A revocable trust is not worth the paper it’s written on since you have the power to void or amend the trust. A trust essentially is nothing more than a contract. If you can void any section of the contract, you have the power to void the whole contract which is what a revocable trust allows you to do. The root word is “revocable.” It’s like allowing a party in a contract to change the contract at will without the other’s consent. Now what is the point of the contract in the first place if the contract or trust can be amended?
Your lawyer most likely suggested the revocable trust because he or she knows that you will need his or her services when you have a revocable trust. It’s not only that you will be able to revoke your trust but your trust will be revoked in court as well! Why would you pay for this insurance of protecting your assets when it will not function as its intended purpose?
Another common mistake in creating trusts is the election of self in a revocable or even an irrevocable trust. Most estate planning lawyers will tell you, that you can write an irrevocable contract, even if you are at the center of the agreement by electing yourself to be the trustee. These lawyers just went to law school to warm up the seats. If you run into one of these lawyers who instruct you to do be a self-elected trustee you should run and don’t walk because their incompetence is going to cost you plenty. If you elect yourself the trustee then you have, in essence, defeated the purpose of assigning your assets to another entity. If you defeat the purpose of assigning and allocating your assets to another entity it means that you, technically and legally, still own the assets. The purpose is not to own the assets so others who are or will be suing cannot access your assets in the first place because you, technically and legally, do not own the assets. Make sense? You can trust the UltraTrust since this irrevocable trust was designed from the ground up with this sole purpose in mind and was designed to protect your assets from attorneys who will try and find a security hole in the trust contract.
Let me say it clearly, unequivocally and without recourse. The power of a trust contract vests with the power of the independent trustee. Period. Your trustee must be independent of you. He or she cannot be related to you by blood or marriage. The greater the independence of your trustee is the stronger your asset protection plan. When you are into court, even by your siblings, spouse, best friend, partner or some other person who wants to garner your funds, you can look at the judge straight in the eye without a smirk on you face and calmly state, “Your Honor, I don’t have any assets.”

Land Trust Lies

Posted on: March 17, 2017 at 8:00 pm, in

What is a land trust? Many people have the misconception that land trusts will give them real estate asset protection in the case of a lawsuit. The following article discusses the myths surrounding land trusts and offers some information that will help individuals understand land trusts.

Asset Protection Myths: Asset Protection and Land Trusts

Last wills and testament with a revocable living trust
Asset protection with land trusts are an area that many do not have enough information about. To clear up some common myths and misconceptions, we will begin by discussing what a land trust is and how it can be used effectively by you.
The overwhelming majority of land trusts we see are revocable living trusts. While a land trust does have some different features in regards to making the owner of the property more difficult to find, the land trust does not protect the asset in any way. As a side note, it is possible, but it is rarely the case, for a land trust to be an irrevocable trust as well which would make it an excellent asset protection tool since the individual would no longer remain the owner of the property, however we rarely see this. The majority of people will choose to use a land trust to retain their property without taking it irrevocably out of their estate.
It is not suggested to try to “hide” their assets in order to protect them. Since 9/11 and the Patriot Act, there is no such thing as secrecy in the United States. There is no legal way for any advisor to claim of doing such a thing. The best way to hide is in plain daylight with a properly drafted irrevocable trust, like the Ultra Trust®, and exchanging the assets into the irrevocable trust to avoid fraudulent conveyance.
Seeing as the topic of asset protection is a main concern for many individuals, discussing various asset protection tools will allow property owners to have choices as well as the information they need to make educated decisions. Unfortunately, many people, as well as advisors will often learn that these land trusts can be asset protection tools and they do not take the time to learn about the details before jumping right in – don’t be one of those people.

Land Trust Disadvantages

As mentioned, land trusts are usually revocable trusts and in all cases, a revocable trust should be avoided when looking for asset protection. To highlight this point, let’s say that Mr. Merker hosts a party at his home in which alcohol is being served. A guest at the party drinks a bit too much and drives home, getting into an accident on the way. Three people in another vehicle were killed. The end result is that the party host will be sued because he was the one serving the alcohol. What happens now? Basically, any assets that are in his name, including assets that are in a revocable trust, yes, including a land trust, will be considered in the lawsuit.

Land Trusts sold to Hide Assets

Those selling these trusts will try to convince people that all real estate should be placed into a land trust. This is done so that if there is a lawsuit in the future, these assets will not be “found” and the land will be protected. This is because the land trust will temporarily hide these assets from creditors. For example, if an individual is in an accident and is being sued for a total of $2,800,000 and had his real estate placed into a land trust, the lawyer for the plaintiff would not be able to locate these assets with a cursory search. In this case, the lawyer may settle for the amount that the insurance will pay and not pursue going after the rest of the individual’s assets, namely because none were found with an initial cursory search, but with one extra step the owner is found fully exposed with no protection.

The Act of Hiding Assets

When using a land trust, the assets in the trust will be hidden temporarily. This is so that if there is a personal injury lawsuit, the lawyer will have a difficult time finding any assets. However, in the case mentioned above, after a little detective work and digging, those assets will be found and will be considered in the lawsuit. In a real type of case example, typically, a lawyer (personal injury one) can file a lawsuit against, say, Mr. Merker, in the case above, and while in the deposition where the oral testimony is given, the truth of any and all assets within a revocable trust or a land trust must be disclosed or a charge of perjury or withholding evidence could turn a civil case into a criminal one.
It may be true that a land trust is better than not having any asset protection at all. However, these trusts should only be used if they are combined with other forms of asset protection, including Family Limited Partnerships or Irrevocable Trusts. Many land trusts are offered to people on the premise that the trust will protect the assets, yet people are unaware that this is seldom the case when the land trust is the only form of asset protection being used.
When there is a lawsuit of any significance, you can be assured that lawyers will dig until they find something. With a land trust, the assets are hidden in the beginning, but they can be located. In the end, the defendant will be required to disclose all assets and these will all be taken into account during the lawsuit. It cannot be stressed enough that there is no legal way to “hide” assets in this manner.
In terms of asset protection, land trusts are not effective. If an individual does choose to take this path, they should make sure their assets will be transferred into a trust that is irrevocable, meaning it is owned by a separate entity.
Please contact us at Estate Street Partners at (888) 938-5872 to find out more about land trusts and how you can protect your assets.

Protect Assets IRS

Posted on: March 17, 2017 at 7:57 pm, in

Protecting assets from the IRS is often overlooked. For many taxpayers, the IRS has claimed they owed more taxes than they actually did. This is especially true for any policy holders of an insurance policy from a company that has demutualized. Policy holders were being taxed on the full amount of their shares instead of the amount of the gains when shares were sold. The following article discusses how one taxpayer took on a battle with the IRS regarding this issue and won.

Asset Protection Reminder: Always Remember that the IRS is a Creditor!

Asset protection goes much further than simply protecting assets from the possibility of a frivolous lawsuit. There are many other reasons for people to take asset protection action to protect their assets and, of course, the attack of creditors is one of the most important reasons. However, don’t forget about the IRS. That agency that will nickel and dime you every chance they get. So, asset protection will protect assets from a lawsuit, but will also from creditors like the IRS.
To every person in the country, the IRS poses a threat as a creditor. It is possible that clients will never encounter a lawsuit, but they will always be at risk of being attacked by the IRS. This is why asset protection is so important. Most people want to know how this can be done, so we will address some tools that can be used to protect assets from the IRS.

How to Protect Assets from the IRS:

Read more on IRS Demutualization