High-Level Strategies to Protect Your Wealth

As we approach the “next normal’ and begin to plan re-entry into a more traditional work and lifestyle with more social interaction, there are many aspects of business and personal lives that need to be planned and reconsidered.

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It’s difficult — if not impossible — to determine the long-term effects of the coronavirus lockdown on our economy, and we’re all feeling a loss of control over this lingering uncertainty. So, let’s take some uncertainty off the table. Let’s ask, “What can I do to ensure my long-term financial health and well-being? How can I apply those lessons to my family and my company? How I can keep at bay the ‘wolf at the door?’”

Although we don’t possess a crystal ball to predict the future, there are strategies we can implement to prepare for it. The following list outlines some smart, high-level strategies in risk mitigation and asset protection planning. To learn more about each, please download your free white paper, The Wolf at the Door.

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Foreign Asset Protection Trust (FAPT)

This establishes a foreign trust in countries with strict and protective trust laws to protect your nest egg from creditors and predators more so than establishing the trust in any of the United States.

HYCET™ Trust (“Have Your Cake and Eat it Too”) ®

Conventional irrevocable gift trusts typically do not allow the donor to reclaim gifted assets once made; however, the HYCET Trust can help you make the gift tax exemption so that if you later have donor’s remorse — or need or want to recapture all or part of the gifted assets — your trustee can accommodate you — This is Why You Get to Have Your Cake and Eat it Too!

Preferred Partnership Freeze

The Preferred Partnership Freeze (PPF) takes advantage of income tax laws to achieve a basis step up at death while "freezing" the value of your appreciating assets.

Premium Financed Life Insurance

To conserve cash flow, consider financing your life insurance premiums by borrowing the premiums from a lender who specializes in financing life insurance premiums. Financing your premiums can reduce your cash outlay by as much as 60%, allowing you to conserve your cash for emergencies.

Wealthy Families Have a Rare Opportunity to Avoid Estate Taxes

IRA Rescue Strategy

If you live in a state that does not provide a significant creditor exemption to individual retirement accounts (IRAs), one may use our IRA rescue strategy to place the IRA assets into a foreign LLC owned by the IRA and managed by a foreign managing director.

Conserve Cash

A little cushion can go a long way in the midst of disaster, and lengthening your runway can help you deal more effectively with unexpected bad news. To accomplish this, perform an asset protection stress test to help determine what assets would be protected from creditors. Spend what is exposed and save what is protected, and cut your spending by reconsidering housing investments, selling your toys and re-evaluating leveraged investment real estate.

Protect What’s Owed

Don’t leave any money on the table. Ensure all outstanding accounts receivable are paid and file proper liens on debts. Take advantage of new federal and state programs designed to relieve your economic burden during this crisis. Be aware of and apply for the new programs afforded by the CARES Act and the Families First Coronavirus Response Act.

Mitigate Risk

In addition to the above legal strategies, risk mitigation (from unforeseen lawsuits) is a prudent strategy to prepare for and lessen the effects of threats when faced with financial ruinous lawsuit. Identify potential risks, perform a risk assessment (Lawsuit Exposure and Privacy Test), determine the likelihood of occurrence, and plan to mitigate each risk.

Smart Bankruptcy Planning

In the worst-case scenario, you may have to consider bankruptcy. Bankruptcy provides an honest but overburdened debtor with a “fresh start,” provides for the equal treatment of creditors, and preserves the going-concern value of companies in financial distress by reorganizing rather than liquidating. There are several different types of bankruptcy, and understanding the language and strategies relating to bankruptcy is an important step in protecting your assets.

While our future in this time of crisis feels uncertain, it’s comforting to understand the steps we can take to protect our health and our financial well-being. To help you prepare for the worst, but hope for the best, please read our white paper.

Keeping “the wolves” at bay isn’t easy, but armed with the right tools and advisers, you may just have a fighting chance.

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Disclaimer

This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

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Jeffrey M. Verdon, Esq. is the lead asset protection and tax partner at the national full-service law firm of Falcon Rappaport & Berkman. With more than 30 years of experience in designing and implementing integrated estate planning and asset protection structures, Mr. Verdon serves affluent families and successful business owners in solving their most complex and vexing estate tax, income tax, and asset protection goals and objectives. Over the past four years, he has contributed 25 articles to the Kiplinger Building Wealth online platform.