the attorney alliance strategies for keeping what you have gary altman [email protected]...

The Attorney Alliance

Strategies for Keeping What You Have

Gary Altman [email protected]

301/468-3220Howard L. Sosnik

[email protected]/745-0066

Blooma [email protected]

312/755-3152

Genworth Financial National ConventionMay 4-6, 2008

© Copyright 2008 Aronberg Goldgehn Davis & Garmisa

mailto:[email protected]



I. Available Tools

• Estate planning• Business entity planning• Liability Insurance• Domestic self-settled spendthrift trusts• Foreign (offshore) spendthrift trusts• Deficit Reduction Act and Medicaid• Testamentary Planning


2 The Attorney Alliance

II. Estate Planning Tools

• Estate Planning– Revocable living trusts – offer no protection– Tenancy by the entireties– Gifts– Irrevocable trusts



III. Irrevocable Trusts

• Trusts Created by the Debtor for the Debtor’s Benefit

• Trusts Created by Another Person for the Benefit of the Debtor

• Trusts Created by the Debtor for the Benefit of Another Person



IV. Exempt Assets

• Homestead exemption• Retirement plans• Public benefits (social security, unemployment

compensation, etc.)• Life insurance (but not for Medicaid)• Annuities (but not for Medicaid)



V. BUSINESS ENTITIES: Limited Partnerships,Limited Liability Companies and Corporations

• Shielding Personal Assets from Business Liabilities

• Shielding Business Assets from Personal Liabilities

• Using Multiple Business Entities to Shield Assets



VI. Business Entities

• Limited Partnerships – creditor can get a charging order

• Corporations – Corporate formalities– The “alter-ego” theory– The “culpable” employee



VII. Fraudulent Transfer Laws

• Beware of Fraudulent Transfer Laws• Is the Client Solvent?• Actual or Constructive Fraud• State and Federal Statutes of Limitations• Insolvency is the Key Factor



VIII. Domestic Asset Protection Trust

• Settlor May Retain Right to Income and Principal Distributions From Trust

• Where can I set up a Domestic Asset Protection Trust?

• Alaska• Delaware• Nevada• Rhode Island• Missouri• Utah



IX. Requirements of a Domestic Asset Protection Trust

• Trustee in State• §548(e) of Bankruptcy Code – 10 year statute for

transfers meant to hinder, delay or defraud creditors

• No evidence it will protect out of state residents• Full faith and credit between states



X. Foreign Situs Trusts

• Benefits:

– Self-settled trusts are permissible

– Chilling effect of offshore trusts

– Unambiguous fraudulent conveyances statutes



• Risks:– U.S. judgments enforced except in Cook Islands and

Nevis– Unclear if U.S. courts will recognize such foreign trusts– Settlor of trust could face contempt rulings and

incarceration– Assets can be discovered in bankruptcy proceedings– Settlor of trust could be denied discharge from all his

debts



XI. Deficit Reduction Act of 2005 (DRA) and Medicaid

• Effective Date: 2/8/2006• Expands look-back period from 36 months to 60 months• Period of ineligibility begins upon admission to nursing

home and would otherwise be eligible for Medicaid, not on date of transfer

• Individuals with home equity in excess of $500,000 (states may raise that up to $750,000) disqualified unless a spouse or minor or disabled child is living in the home

• Half a loaf strategy will probably not work anymore• Illinois has not yet adopted DRA – any opportunities?



• Annuities will be treated as disposable assets unless State is named as first remainder beneficiary (or as second beneficiary if surviving spouse or minor or disabled child) and reimbursed for amounts paid by State. Spouse or minor or disabled child cannot dispose of remaining annuity for less than fair market value.

• Annuity must be actuarially sound• No deferral or balloon payments • Must be paid in equal amounts during term of annuity



Gary Altman [email protected]

301/468-3220

Howard L. [email protected]

516/745-0066

Blooma [email protected]

312/755-3152


The Attorney Alliance

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the attorney alliance strategies for keeping what you have gary altman [email protected]...

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