An irrevocable trust is a part of most serious, asset protection strategies. In the business of estate planning and asset protection, there are countless categories of trusts. And they all sound very serious. When Lawyers create new categories of trusts, they often create names that are very similar, often using many of the same words, as trusts by a different name. There are a number of main features or characteristics that differentiate every trust or every category of trust, and one such characteristic is whether a trust is revocable or irrevocable. [Read more…] about Asset Protection Attorney Definitions: Irrevocable Trust
“What are the 5 pillars of estate planning?”
At a recent Estate Planning Workshop, a parent asked what I considered to be the 5 main pillars of estate planning. If one parent is asking, then I guessed that other parents are wondering, so here goes:
- Trustee or Personal Representative. This is choosing a person to manage your money and other assets. This person handles the distribution of your estate by serving as Trustee (if you have chosen to avoid probate) or as Personal Representative through the probate process. Most people choose a trusted friend or family member who is well-organized and responsible.
- Beneficiaries. Beneficiaries are the people or organizations you choose to inherit your estate. SO, by choosing beneficiaries, you are choosing who will receive your money and other assets when you die. You choose these beneficiaries in a last will or trust, or if you don’t have either of these documents, state law will determine who gets your stuff.
- Guardians. Choosing guardians to care for your children. If you are a parent to minor children you should nominate an individual or couple to serve as guardian/s (i.e., a person or a family to care for them in the way that you would want them to be cared for) in case you are incapacitated or die unexpectedly. It’s good practice to choose one or two alternate guardians after your first choice.
- Power of Attorney. Many people think that personal representative and power of attorney are the same, but they are not (see here). Financial Power of Attorney is choosing who will make financial decisions if you are incapacitated. This allows another person to make financial and legal decisions on your behalf if you are unable to speak for yourself. Choose wisely, my friends.
- Healthcare. Choosing who will make healthcare decisions if you are incapacitated. If you are unable to speak for yourself, for example while unconscious in surgery or after a car accident, you may designate a person to advise your doctors and make decisions for you.
Those are the top 5 for most people and families. Some close runners-up are 1) properly completing beneficiary designation forms, tax avoidance (capital gains or estate) and business succession planning.
Colin Ley is a Seattle estate planning attorney. He is also the co-founder of LayRoots along with his wife, Shreya.
Is Your Single Member LLC Safe From Outside Creditors?
Many solo-preneurs or spouse-owned businesses (“Single Member” Limited Liability Companies or business entities) think that simply registering their business as a Limited Liability Company (LLC) protects them and their families from lawsuits. You may be surprised, however, to learn that you might not be as safe as you think unless you take some additional steps. [Read more…] about Is Your Single Member LLC Safe From Outside Creditors?
What is a Confidential Letter of Exclusion?
Letter of Exclusion
Know somebody in your family who you’d never want raising your children if something happened to you? You should consider writing a confidential letter of exclusion. Check out the video below for what you should do about it.
Colin Ley is a Seattle estate planning attorney. He is also the co-founder of LayRoots along with his wife, Shreya.
Avoiding a Due-On-Sale Clause
In a previous post, I wrote about how to protect your investment property (and some reasons why you might want to). Let’s say that you have decided that you DO want to protect your investment or rental property by getting it out of your own name and into an LLC for liability protection. Great! Well, here are some issues that you may encounter along the way AND some ideas for how you might deal with those issues.
And if you’re not sure if this is right for you, you can always ask a trusted professional for their advice.
If you own the property outright, you could simply transfer the property into your newly minted LLC.
BUT if your property is mortgaged then by transferring the property into your business entity, you could risk triggering a “due-on-sale” clause from your lender. What that means: it’s a clause commonly found in mortgages to restrict transferring ownership of the property. If your lender finds out you have transferred ownership out of your name and into an LLC, your lender could call in payment for the entire remaining balance on the note. At this point, you could pay off your mortgage or you could refinance the mortgage (which incurs fees, hassle, and you probably won’t get the same terms as before). Many people find dealing with that to be a pain.
If you are ok with refinancing, then the prospect of triggering the due-on-sale clause might not bother you too much. On the other hand, if you have a great loan that you want to keep, or don’t want to go through the hassle of refinancing, then there is a neat way to avoid triggering the due-on-sale clause.
There are exceptions to the due-on-sale clause, including the transfer of the mortgaged property into an asset protection trust. This means if you transfer ownership from your name and into a trust, your lender will not be able to demand payment of the entire note.
Having your property in trust provides asset protection and additional privacy. When real estate is not owned directly in your name, attorneys looking to sue you won’t see the property in an asset search. If attorneys don’t think you have assets to take, you can avoid a lawsuit from even happening.
Colin Ley is a Seattle asset protection attorney and the creator of the PREP Trust® and Better LLC™. He is also the co-founder of LayRoots (along with with partner in life & business – Shreya Ley)
Being successful in America makes you a target for bogus lawsuits from shameless lawyers. We created an effective, asset protection solution, so you don’t have to worry anymore, happily knowing your family’s future is protected. Get started now by scheduling a free, 30-minute call at livemorecarefree.com.
Asset Protection Definitions: Inside & Outside Liability
When developing an asset protection plan, you’ll often hear about inside liability and outside liability. They are different and it’s important to plan for both scenarios.
Inside Liability vs. Outside Liability
Inside liability refers to claims that emerge from within an asset or business entity. For example, if you have a rental property held in an LLC and somebody is hurt on the property, that liability occurs inside of the LLC. Or in other words, the creditor claim is limited to what is inside of the LLC. The creditor could not go after the business owner’s personal assets. (Another example would be if a client or customer were somehow “injured” and sues you.) [Read more…] about Asset Protection Definitions: Inside & Outside Liability
