This afternoon, I will be the guest speaker at Valic’s monthly meeting of life insurance and financial advising professionals. The purpose of this blog post is not to invite everyone to attend but rather to inform my readers as to the topics I will be covering.
As we begin 2011, there is much uncertainty in the areas of both estate planning and asset protection. For much of 2010, we expected 2011 to greet us with a 55 percent estate tax on all assets over $1 million. Toward the end of 2010, President Obama gave in to Republican demands of a reprieve on this exorbitantly high death tax and agreed to reduce the estate tax for 2011 and 2012 to 35 percent, with a $5 million exemption amount. If you plan on dying in the next two years, you may be relieved. However, if you plan on living well past 2012, uncertainty still remains. As of today, the estate tax rate for 2013 will revert to 55 percent, with only a $1 million exemption amount. We will hope for the best but must plan for the worst, which is why we recommend that our clients set up Irrevocable Life Insurance Trusts for all life insurance policies over $250,000 and Bypass trusts for all marital estates over $2 million. As the estate laws change, we will continue to update you so that you may better serve your clients and protect yourself and your family.
The world of asset protection was turned slightly on its head as well in 2010. On June 24, 2010, the Florida Supreme Court issued its long-awaited opinion in the case of Shaun Olmstead, et al., v. The Federal Trade Commission and raised the question as to whether Florida limited liability companies (LLCs) will continue to have charging order protection. A charging order is a remedy that a creditor of a member in an LLC can receive from a court that instructs the entity to give the creditor any distributions that would otherwise be paid to the partner or member from the entity. Generally, a creditor who receives a charging order with respect to a member’s interest in the entity does not have any authority to mandate distributions from the entity or to participate in the management and affairs of the entity, nor are they able to access the assets of the company.
Charging orders are governed by state law, and in many states, a charging order is the exclusive remedy for a creditor with respect to a debtor’s LLC membership. However, the Olmstead ruling allowed the creditor to “pierce the corporate veil” of the LLC and access the actual assets of the LLC. While the LLC at issue in Olmstead was a single-member LLC, many attorneys are concerned about the slippery slope that would allow the piercing of multiple-member LLC’s as well. It is definitely something that we will keep an eye on in the coming months.
If you have any questions about anything above, or anything regarding estate planning, asset protection, or probate in general, please feel free to contact me directly at 954-944-2855 or via email at mwild@wfplaw.com. It’s a Wild world! Are you protected?