Keeping "the wolves" at bay

The Wolf at the Door

Dear Clients, Colleagues, and Friends,

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.

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we don’t possess a crystal ball to predict the future, we need only look back to the 2009 Great Recession for a historical reference.  Thus, “chance favors the prepared mind” so there are strategies we can implement to prepare for it. The following list outlines some smart, high-level strategies in comprehensive estate planning with risk mitigation strategies to prepare for the “what if’s.” To learn more about each, please click the below button to download your free white paper The Wolf at the Door.

Foreign Asset Protection Trust (FAPT)

This establishes a foreign trust in countries that lack comity with the U.S., can protect your “nest egg” and discourages creditors from pursuing your hard-earned funds.

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 use your current $5.580M gift tax exemption before it sunsets, 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!  Moreover, the decline in asset values presents a one in a generation legacy transfer opportunity of your wealth.

Preferred Partnership Freeze (PPF)

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.

IRA Rescue Strategy 

If you live in a state that does not provide a significant creditor exemption to Individual Retirement Accounts (IRA’s), 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 reevaluating 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 is a strategy to prepare for and lessen the effects of threats when faced with disaster. Identify potential risks, perform a risk assessment, 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 and reach out to us for a consultation.

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

Jeffrey M. Verdon, Esq.

For more information about any of the information discussed in this Client Alert, or any other income or estate tax planning or asset protection planning assistance, please contact the: Jeffrey M. Verdon Law Group, LLP at or 949-333-8143.
Posted in Client Alert.