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This Preventive Law Alert was written by: John Goodson, Colleen Manley and Christine Goodson Forakis.
Wealth Preservation and Preventive Law Special Alerts are patterned after an annual publication to all mountain climbers called "Accidents in North American Mountaineering" which writes up all mountaineering accidents describing the accident, what caused it, how it may have been prevented so that further mountain climbing catastrophes may be avoided. Wealth Preservation and Preventive Law Special Alerts are the equivalent of "Legal Accidents in North American Law" – a description of the legal catastrophe and how it may be avoided using preventive law techniques.
Jim and Susan had a multi-million dollar estate and were very proud of it. They wanted to be sure their children and grandchildren inherited their assets after they both died and not lose them to death taxes and certainly not lose them to unexpected lawsuits. Jim was a very careful and conservative business leader with – he thought – no chance of lawsuits and in the event he had a car accident he always had at least $3,000,000 of protective umbrella liability insurance. Being young, there was no rush to pay an estate planning lawyer to arrange for tax free gifts to sequester life insurance and other assets to Irrevocable Trusts for their children. This move would have reduced the size of their estate to avoid death taxes and secure a financially healthy future for their children and grandchildren. Then, the legal accident happened! One of the commercial buildings that Jim owned and leased out was ready for refinancing. The bank began the process and reappraised the property as part of the loan due diligence. Lo and behold the building was upside down, it was now worth less than the balance owed on the mortgage. The bank refused the refinance and threatened to foreclose. If they did, this would subject Jim and Susan to a very significant deficiency judgment
Unfortunately, Jim and Susan could not gift at this time when they were exposed to a deficiency lawsuit because they would be prohibited by a committing a fraudulent conveyance violation. Until the mortgage default is resolved and the exposure to the deficiency judgment is no longer a threat, Jim and Susan cannot start the gifting program for their progeny – thus leaving all of their wealth still exposed to lawsuit levies and estate taxes.
Another legal accident worse than the above: Don Jones's wonderful bank went under and the government took it over and sold Don's $200,000 unpaid equity line of credit – to a knee breaker who is now demanding full payment of the entire balance, which exposes all of his assets to sheriff's levies to collect the debt – too late to implement asset protection gifting now!
Now is the best time in the last 25 years to make tax free gifts.
The German general, Von Klausvitz, said in his famous book about war, "When you have a disadvantage on the battlefield, cock your head to the side and you will see an advantage."
Bad news! Property values are down!
Good news! Now is the time you may gift assets to your children's very safe Irrevocable Trust with a minimum payment of gift tax or a reduction of your gift tax exemption. When you put some of your money and assets into a children's Irrevocable Trust it is equivalent to putting them into a safety deposit box, which is protected from lawsuits and death taxes. It also ensures the continuation of your family's education and your children's new family start-up money.
A qualified estate planning attorney will show you additional gifting moves while asset values are down where you may further maximize your gifting by:
These more complex legal creatures allow you to get "more bang for the gifting buck."
All this at a time you are crying in your beer about property values being down.
Email jgoodson@gmdlaw.com or call John Goodson (602 252-5110) to schedule a meeting to discuss how you may use your discounted property values to maximize your tax free gifting and accomplish this before a sudden debt appearance prevents this beneficial process for your family.
Email jgoodson@gmdlaw.com or call John Goodson (602 252-5110) with the names and email addresses of (1) family members, (2) friends, (3) colleagues, (4) business associates and personnel, (5) organizations/clubs, (6) customers or clients, (7) parents in your schools, or (8) anyone else who you think cares about this topic that you want to receive our Preventive Law Alerts. We will send the previous alerts and include your referrals on our email list to receive future alerts as they are published. You can also contact Colleen Manley at colleen@manleylaw.net or Christine Forakis at christinef@forakislaw.com.
We help prevent legal accidents in North America!!
For additional information, please call (602) 252-5110.
The content of this report is general in nature and is meant to be used for informational purposes only. Due to possible changes in the law and interpretations of the law, in addition to the uniqueness of each individual's situation, this report should not be relied upon as an expression of legal advice. Before any action is taken by the reader, it is imperative that legal counsel or professional advisors be consulted.
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