EXECUTORS & TRUSTEES: WHAT YOU OUGHT TO KNOW THE DIFFERENCE BETWEEN AN EXECUTOR AND A TRUSTEE An Executor is the person named in a Will and appointed by the court to be in charge of probating the Will and settling the estate under the court’s supervision. In order to be appointed by the court, a petition for probate must be filed with the court, and if the nominated Executor agrees to serve and no one objects, the court will issue “letters testamentary” which authorize the Executor to gather up the estate assets, open an estate bank account, sell assets, pay creditors, and ultimately, upon court authorization, distribute the estate assets (after debts, taxes and administration expenses are paid) to the heirs in accordance with the terms of the Will. A Trustee is the person in charge of the assets held in a trust, and is normally named as trustee in the trust. If the trust is a living trust, probate will be avoided for the assets held in the trust, and court supervision is usually not necessary. In such a case, the Trustee may perform many of the same tasks that the Executor would otherwise handle, except without the burden of probate. If the trust is created in the deceased person’s Will, it is a testamentary trust and it will be subject to the supervision of the Probate Court. In either case, the Trustee is responsible for managing and distributing the trust assets to or for the benefit of the beneficiaries of the trust in accordance with the terms of the trust. SELECTING A TRUSTEE OR AN EXECUTOR The choice of a trustee or executor is a decision that should not be made lightly. Serving as a trustee or executor is not just an "honorary" role -- it requires someone who is: honest and trustworthy conscientious able to do the work available willing to serve organized savvy about investments and taxes neutral & unbiased a good listener and communicator attentive to details able to handle & resolve conflicts careful about keeping records Most often, people name a spouse or adult child as executor/trustee, but this is not always the best choice. Consider the above qualities – if your family member doesn’t measure up, pick someone else. You don’t have to name a family member. It may be better to name a friend, your accountant, a professional fiduciary, or a bank or trust company. WHAT DOES AN EXECUTOR OR TRUSTEE HAVE TO DO? The responsibilities of Executors and Trustees are very similar (see The Primary Responsibilities of the Executor and Duties of a Successor Trustee . . .*), but there are some important differences. Executors must deal with probate; trustees of revocable living trusts normally do not. Once probate is concluded, the executor’s job is done; a trustee may have ongoing trust administration responsibilities for a period of years if the trust assets are not distributed right away. Executors must account to the court for the assets of the estate; trustees may or may not have to account to the court (but they must account to the beneficiaries). * Note: The checklist of Duties of a Successor Trustee is very generalized, and should not be construed to address everything the successor trustee may have to do. The “Duties” checklists are somewhat different for surviving spouses who are the trustee for simple spousal trusts or A-B trusts. Both Executors and Trustees can have a lot of work to do in administering the estate, and it is not a task to be taken lightly. If someone does the job badly, it can create major problems for the heirs. HOW MUCH TIME WILL IT TAKE? That all depends. A simple probate in California may take 9 to 12 months (sometimes more) to complete. The settling of an estate where assets pass by revocable living trust, joint titling, and/or beneficiary designations can be completed in much less time if there are no tax issues involved. If the estate is a taxable estate, it may take up to 15 months (or longer) to settle, whether or not probate is involved. If there are complications or litigation or the trust is designed to continue on for a period of years or for a beneficiary’s lifetime, it could take many years before the trustee’s duties are completed. WHAT ABOUT COMPENSATION? An Executor is entitled to a “statutory fee” for services performed. This amount is a percentage of the value of the assets that are subject to probate. A Trustee is entitled to receive “reasonable compensation” for services rendered as trustee. What is “reasonable” depends on the circumstances, the trustee’s skill level, the nature and extent of the assets in the trust, and other variables. Banks and trust companies normally have standard fee schedules for trustee services. Co-trustees should be compensated in accordance with the amount of work each person performs. In either case, compensation paid to the Executor or Trustee will be taxable income to them. [Note: You can leave a bequest “in lieu of” compensation that will be tax-free to them.] CAN I NAME MORE THAN ONE PERSON AS EXECUTOR OR TRUSTEE? YES. You can name two (or more) Co-Executors or Co-Trustees. However, you must decide whether each person should be authorized to act alone for the estate or trust, or if both must act together. Also, consider the possible complications, and what is to be done if they cannot agree. It is possible to name an individual and a bank or trust company as Co-Executors or Co-Trustees, and this sometimes can be the best solution to provide a combination of personal attention and professional accountability. WHAT IF YOU ARE ASKED TO SERVE AS AN EXECUTOR OR TRUSTEE? Consider this very carefully. Know what you are getting yourself into ahead of time. Ask lots of questions (see “Questions You Should Know the Answers to …”). Make sure someone else is named as your backup, just in case you cannot serve (or are no longer willing to serve) when the time comes. Beware of surprises: Blended families that don’t get along. Problem children (drugs, alcohol, schizophrenia, prison, etc.). Family business with no succession plan. Taxes & debts with insufficient liquid assets to pay them. A family member who won’t move out of the family home. Joint accounts that end up passing outside the will or trust. Parents who decide on an unequal distribution to the children but who never warned them that this was what they planned to do. Unusual or hard-to-value assets in the estate. If there is a possibility that any of these situations may exist, you need to have a serious discussion with the person whose estate you will have to administer. You need as much detail as you can get about what to expect and any advice on how to handle it. REVIEW YOUR EXECUTOR/TRUSTEE DESIGNATIONS REGULARLY Changed circumstances regularly require changing one’s designated Executor or Trustee. Death, chronic illness, estrangement, relocation, and changing family obligations are some of the most common reasons why a named Executor or Trustee may no longer be the best choice. Keep your will or trust current! FOR MORE INFORMATION: The Executor’s Guide: Settling a Loved One’s Estate or Trust, by Mary Randolph; Nolo Press. How to Settle an Estate, by Charles K. Plotnick & Stephan R. Leimberg; Consumer Reports Books. How to Settle Your Living Trust, by Henry W. Abts III; Contemporary Books. The Executor’s Handbook: A Step-By-Step Guide to Settling an Estate for Personal Representatives, Administrators, and Beneficiaries, by Theodore E. Hughes and David Klein; Facts on File. Executor & Trustee Survival Guide, by Douglas D. Wilson; Fiduciary Pub. How to Administer an Estate: A Step-By-Step Guide for Families and Friends, by Stephen G. Christianson; Career Press. GENERAL PRINCIPLES OF TRUSTEE FIDUCIARY DUTY: The trustee has a duty to administer the trust according to the terms of the trust. The trustee must therefore read the trust document and become familiar with its terms. The trustee should retain counsel to provide advice and guidance. The trustee has a duty to administer the trust solely for the benefit of the beneficiaries of the trust. Where there are multiple beneficiaries, the trustee must deal impartially with all beneficiaries: the law prohibits favoring one beneficiary over others unless the trust expressly requires that. The trustee has a duty of loyalty and must avoid conflicts of interest. (The trustee should not borrow money from the trust or use trust funds to invest in the trustee's own business ventures, for example.) The trustee has a duty to keep control of and preserve the trust property; to make the trust assets productive (income-producing) unless otherwise stated in the trust; to keep trust property separate from other property; to enforce claims on behalf of the trust; and to defend actions that may result in a loss to the trust. The trustee generally may not delegate trustee duties to others, except for investment and management functions permitted by law. If an individual trustee is not knowledgeable about investments, the prudent course of action is to hire an investment advisor to assist with the structuring and monitoring of the trust investment portfolio. [Hiring an attorney or an accountant to advise the trustee and prepare trust tax returns is not a delegation of duties.] The trustee (if the trust is irrevocable) must periodically account to the trust beneficiaries -- the trustee cannot keep his/her actions secret. Beneficiaries are entitled to receive a copy of the trust when the trust becomes irrevocable. If a trust has two or more co-trustees, each trustee is legally required to participate in the administration of the trust and make sure no other trustee commits a breach of trust. The trustee must comply with the provisions of the Prudent Investor Rules as set forth in state statutes (see below). Trust litigation is expected to be a booming legal field in the years ahead as trusts become increasingly common. Much of the litigation will center on the actions of the trustee and whether the trustee failed to comply with the law. [The California statutes governing the duties of a trustee are set forth in Probate Code §§16000-16105.] UNIFORM PRUDENT INVESTOR ACT [CA Probate Code §§16045-16054] These rules apply only to irrevocable trusts, not to trusts that are still revocable. [But note that revocable trusts typically become irrevocable at the death of the person who established the trust.] The trustee must manage the trust assets for the benefit of both current and future beneficiaries without favoring one over the other. This means that trust assets may not be invested solely for current income or for future growth. (For example, a conservative portfolio consisting entirely of money market funds and U. S. Treasuries would not comply with the Prudent Investor Rule.) An investment portfolio must be structured to take into account: (1) the purpose of the trust, (2) the needs and other resources of the beneficiaries, (3) the risk/return ratio of individual investments, (4) the possible effects of inflation and other economic conditions on the trust assets, (5) the tax consequences of investment decisions, (6) the expected total return, and more. Diversification is mandatory "unless the trustee reasonably determines that, because of special circumstances, the purposes of the trust are better served without diversifying." If the trust consists primarily of a closely-held business or a single large real estate holding, the diversification requirement may be waived. Trustees are now permitted to delegate investment and management functions, so long as the trustee monitors the persons handling these functions. QUESTIONS YOU SHOULD KNOW THE ANSWERS TO IF YOU ARE NAMED AS SOMEONE’S EXECUTOR OR SUCCESSOR TRUSTEE The Executor/Successor Trustee needs to ask the following questions [not all questions will apply in every case]: Where do you keep your will or trust? Do you have any special directions for them regarding how your assets are to be distributed (especially tangible personal property like jewelry, art, books, collectibles, furniture, etc.)? What sort of assets do you have? (Real estate, stocks, bonds, mutual funds, life insurance, annuities, U.S. savings bonds, bank accounts, partnerships, a business?) (If you have a living trust . . . ) Are all of your assets properly titled in trust name? Do any of your beneficiaries owe you money? If so, how should this be handled? Will this be considered a part of that person’s share of the estate, or what? Will there be enough cash available to deal with foreseeable expenses and taxes? If there will be estate taxes due and payable, what assets will be used to pay for this? What are your debts/liabilities (and contingent liabilities) and how will these be paid? Is there any life insurance? If so, who is the beneficiary? Where is the policy? Are there other assets that will pay death benefits? If so, how do I claim these? Who are the designated beneficiaries on IRAs, annuities, and other such assets? Will there be any ongoing support obligations for dependents? Where are your important papers kept? [deeds, vehicle “pink slips”, savings bonds, stock certificates, investment and bank account statements, insurance policies, pension information, etc.] Do you have a safe or safe deposit box? If so, where is it located, and where is the key/combination kept? If there is a business involved, what is the plan for business continuation or transfer upon your death? Where are the business records kept? What are the names, addresses and phone numbers of all your beneficiaries? What are the names, addresses and phone numbers of your accountant, attorney, investment advisor, insurance agent? Do you have a cemetery plot or prepaid mortuary arrangements? If so, where? Are there any special circumstances involving your beneficiaries that I should know about? [problem relationships, troubled marriages, substance abuse problems, physical or mental disability, financial irresponsibility, threatened lawsuits, etc.] If you keep your financial records on a computer, please give details and password. PRIMARY RESPONSIBILITIES OF THE EXECUTOR Probate the Will and get appointed by the court. Obtain certified copies of death certificate. Submit claim(s) for life insurance benefits if the estate is the beneficiary (get Form 712 from insurance company and consider mode of payment - lump sum, annuity, etc.). Submit claim(s) for pension and profit-sharing plan benefits, if any. Secure the decedent’s home and arrange for distribution/sale of personal property. Inventory safe deposit box and close out decedent's bank accounts. Notify creditors and close any existing credit accounts. Open estate checking and savings accounts. Account for all assets in the estate and file inventory of assets with the court. Get date of death appraisals for all real property and securities. Take care of any of decedent's unpaid medical and funeral expenses. Verify and pay valid debts and expenses of the estate. Obtain copies of all gift tax returns filed by decedent, if any. File final Federal and State individual income tax returns for decedent by April 15 of the year following the year of death. Arrange for ancillary probate administration for out-of-state real property, if any. File Federal Estate Tax return (and possibly State forms) if the estate exceeds the allowable estate tax exclusion amount – return and taxes are due 9 months after date of death. Pay the attorney, accountant, appraiser, etc., for their services. File final accounting or informal family agreement. Arrange for final distribution of assets and recording of court order affecting real property. Record "Affidavit of Death of Joint Tenant" for any real property held in joint tenancy with right of survivorship titling. For property transferred to decedent’s children, arrange to file the Claim for Reassessment Exclusion for Parent-Child Transfer. Note that many items on this list will require the involvement of some outside professionals, such as a lawyer, accountant, appraiser, realtor, stockbroker, etc., and that this is not an exhaustive listing of all executor duties. More complicated estates involve many additional duties. If the decedent's assets were held in a revocable living trust, there may be no need for a probate, so some of these functions related to probate will not be necessary. The trustee, however, will perform many of these functions. THE COST OF PROBATE The fees paid to the executor and to the estate's attorney in California for their services in handling a probated estate are set by law (See California Probate Code Sections 10800 through 10814), and represent a portion of the value of the assets that go through probate. These "statutory fees" range from 4% of the first $100,000 of assets that go through probate down to 1/2 % or a "reasonable amount to be determined by the court" for probate estates in excess of $25,000,000. [Note that estates valued below $100,000 are normally exempt from full probate proceedings; assets are typically transferred by affidavit.] AN EXAMPLE: The percentages set forth in the California Probate Code are as follows: (many states are similar) 4% of the first $ 100,000 3% of the next 100,000 2% of the next 800,000 1% of the next 9,000,000 1/2% of the next 15,000,000 These fees work out to the following amounts paid to both the executor and the attorney for the estate: PROBATE ESTATE VALUES TOTAL ATTORNEY AND EXECUTOR FEES* $100,000 $8,000 200,000 14,000 300,000 18,000 400,000 22,000 500,000 26,000 600,000 30,000 700,000 34,000 800,000 38,000 900,000 42,000 1,000,000 46,000 2,000,000 66,000 3,000,000 86,000 4,000,000 106,000 5,000,000 126,000 *The Attorney receives one-half of this sum and the executor receives the other half. However, often extraordinary fees are allowed which could make this total even higher! These fees are based upon the gross value of the assets that go through probate as shown on the estate inventory, plus the income (dividends, rents, interest) collected during probate, plus any gains from the sale of estate assets, less any losses upon the sale of estate assets. Either the executor or the attorney can waive all or a part of their statutory fee. If taken, the fee is taxable income to the recipient. If there is more than one executor or attorney, the fee is divided accordingly. Extraordinary fees (i.e., fees payable in addition to the above statutory fees) are granted for appraisals, tax work, costs of sale of estate assets, litigation, expenses for running the decedent's business, and any unusual matters. All of the statutory and extraordinary fees are paid by the estate at the conclusion of probate and upon a court order. In addition to these fees, there are separate fees for the probate court filing fee (which can range from a few hundred dollars to several thousand dollars, depending on the size of the estate), a legal notice publication fee, appraisal fees, and fees for certified copies of court documents. California's fee schedule for attorneys is found at Probate Code Section 10810 and for executors is at Probate Code Section 10800 and is a somewhat complicated formula. For ease of approximation, a simplified formula can be used. It works for probate estates with a value between $100,000 and $1 million. It is 2% of the probate estate value + $3000. That sum would be the statutory fee for the attorney and the executor would receive an identical sum. ============================================= Foreign Account Tax Compliance Act (FATCA). 1. You must acknowledge signatory or other authority over foreign accounts annually on Schedule B of your federal income tax return. Domestic corporations and other domestic entities must also acknowledge foreign accounts on their respective tax returns. 2. You must make an annual report of interests in, or authority over, all foreign accounts with an aggregate value of $10,000 or more. The form to be completed is Treasury Form 114 (formerly Form TD F 90-22.1), the Report of Foreign Bank and Financial Accounts (FBAR) form. Reporting is required even if the accounts contain only precious metals or other non-cash assets, even if they don’t generate income. The FBAR form is not part of your tax return. The deadline for filing is June 30 for foreign accounts held the previous year. No extensions are possible, and the form must be filed electronically. 3. Domestic corporations and partnerships in which you own more than 50% of the stock, partnership interest, or entitlement to profits must also file FBARs. ---------------------------------------------------------- Foreign investments in retirement plans. Investments in your retirement plan you hold abroad aren’t subject to reporting either on the FBAR or on Form 8938. However, if your plan formed a domestic entity (such as an LLC), you may need to file the FBAR for any foreign accounts the entity holds. If your retirement plan forms a foreign entity to hold non-US assets, that entity won’t need to file its own FBAR, but it will need to file an information reporting return, such as Form 5471 (for foreign corporations) or Form 8858 (for foreign disregarded entities). If you have signatory or other authority over the foreign entity’s account, you need to acknowledge that relationship on your own FBAR (although not on Form 8938). ---------------------------------------------------------- Foreign trusts use Form 3520 and Form 3520A. ---------------------------------------------------------- http://www.theprotectionbook.com/plans/What-Happens-Without-A-Trust.html http://www.mystatewill.com/intestacy_facts.html#.Uv0YVPldVRY Atty Kurt R. Nilson 814-792-5311 JohnstownLegal.com Johnstown, Pennsylvania TOP 10 FREEDOM REQUIREMENTS: 1. Respect the Constitution and the Bill of Rights! 2. All politicians must have the same retirement & healthcare plans as everybody else. 3. Maximum 4 year term in Congress and the Senate. 4. Language: English only. 5. Mandatory Job Training, Job Assignment, and Drug Screening before & during Welfare. 6. NO freebies to Non-Citizens. 7. Balance the budget. No spending beyond our income. 8. Charge foreign countries for our help! No freebees. 9. Respect "GOD" as the foundation of America. 10. Protect our Borders. MORE... 11. Replace the income tax with a sales tax except for food, clothes, and housing. 12. No more campaign funds from corporations. 13. No corporation can be allowed to get bigger than government control. 14. No spread of pay earnings for any person can exceed 100x of lowest paid worker. 15. No spying on Americans without specific court order. 16. Merge all 16 government police agencies into one agency (CIA, FBI, NSA, TSA, Marshals, IRS, etc.) 17. Reformat military pay to civilian pay. 18. Merge all civilian, business, and government retirement into Social Security. 19. Restore the Gold Standard and eliminate the Federal Reserve. 20. Free preventive health care and emergency health care. Buy your own extra insurance. EVEN MORE... 21. Reduce size of government by 50% over the next 10 years by eliminating or merging many agencies. 22. Eliminate Department of Education. 23. Eliminate all drug, cigarette, and alcohol advertising. 24. Eliminate rebates and other deceptive advertising like "2nd item 50% off". 25. Replace asset forfeiture to government with asset auctions to citizens. 25. Allow "illegals" to become legal by paying taxes and paying penalties. 27. Eliminate all federal laws concerning sex, marriage, birth control, abortion, education, or insurance. 28. Eliminate all federal laws concerning guns that weigh less than 30 pounds. 29. Eliminate farm programs, Section 8 housing, federal unemployment programs. 30. Eliminate rebuilding aid in disaster prone areas. ------------------------------------------------------------------- Advantages of An Unincorporated Nonprofit Association - Many so-called nonprofits are simply groups of people who come together to perform some social good. These informal groups are called unincorporated nonprofit associations. An unincorporated nonprofit association may be subject to certain legal requirements, even though it hasn't filed for incorporation under its state's incorporation laws. For example, an unincorporated association will generally need to file tax returns, whether as a taxable or tax-exempt entity. Additionally, there may be state registration requirements. There may also be multiple state and local registration requirements no different from a similar nonprofit corporation, such as charitable solicitation registration, out-of-state qualifications to do business, and local business registration. Recommended registrations to provide legitimacy include registering with the Secretary of State even if not required, and administrative steps that trigger other registration requirements (for instance, applying for an Employer Identification Number (EIN) to open a bank account). There are however generally minimal legal requirements with respect to corporate formalities and governance under state law. ------------------------------------------------------------------ The Disadvantages to being an Unincorporated Nonprofit Association Members of an unincorporated nonprofit association may be exposed to personal liability for the obligations of the association if state laws do not explicitly provide for limited liability (e.g., California provides for limited liability with respect to members of an unincorporated nonprofit association). Regardless, the law is still less certain regarding personal liability as compared to corporations. Therefore, an unincorporated association may not be ideal if the group's activities create heightened concerns about contract or tort liability (two common areas where liability issues arise), or if potential members, board members, and supporters would be deterred by such concerns. Generally, an unincorporated association can operate as a tax-exempt nonprofit as long as the purpose of its activity is of public benefit, and annual revenues are less than $5,000. It can even provide contributors with a tax deduction for their donations. An unincorporated association can also apply for federal tax-exempt status under 501(c)(3) (see Form 1023 Instructions). However, practically speaking, the group may want to seriously consider incorporating at that point especially because the IRS will want to see certain documents even if not required by state law (for instance, organizing documents), and will also be checking for common governance issues such as compensation practices and conflict of interest procedures. Without a determination letter from the IRS, it may be difficult to get donations and almost impossible to get grants. It may also be difficult to enter into contracts with some other entities (e.g., too many risks for the other party without more extensive due diligence). The group will also need to check the requirements for obtaining tax-exempt status on the state level. Although there may be no need to file for tax-exemption under 501(c)(3), if the association has annual gross receipt of normally not more than $5,000, it must still annually file Form 990-N with the IRS. Associations may also claim tax-exemption under other categories (e.g., a 501(c)(4) or 501(c)(6) don't need to apply for federal exemption even if income exceeds the $5,000 threshold). Unincorporated nonprofit associations work best for informal, ad hoc situations where people get together to perform some sort of community service or raise funds for a particular, and usually short-term, goal. If an organization is not ready to file for 501(c)(3) status from the IRS, an alternative may be to seek a fiscal sponsor. The most common form of nonprofit is the 501(c)(3), a tax-exempt organization recognized by the IRS. These are the nonprofits we most commonly contribute to, volunteer for, and hear about through the media. But there are many types of nonprofits that are registered by the IRS, and they all have different designations. For instance, a child care nonprofit is a 501(k) and a Chamber of Commerce is a 501(c)(6). 501(c)(3) This is the most common type of nonprofit. It includes organizations that are religious, educational, charitable, scientific, and literary; groups that test for public safety, that foster national or international amateur sports competition; or organizations engaged in the prevention of cruelty to children or animals. This type of nonprofit applies for its status using IRS form 1023, and files annually form 990, 990EZ, or 990-PF. Contributions are usually tax-exempt. All 501(c)(3) organizations are considered either: A private foundation. These are nonprofits that don't qualify as public charities. Foundations may be sub-classified as private operating foundations or private non-operating foundations, and receive some of the advantages of public charities. Or a public charity. 501(c)(7) Social and recreation clubs fall into this category. They promote pleasure, recreation, and social activities. They apply using IRS form 1024 and file annually the 990 or 990EZ. 501(c)(8) This category includes fraternal beneficiary societies and associations. They provide for the payment of life, sickness, accident, or other benefits to members. They apply using IRS form 1024 and file annually the 990 or 990EZ. 501(c)(10) Domestic Fraternal Societies and Associations. A lodge devoting its net earnings to charitable, fraternal, and other specified purposes. No life, sickness, or accident benefits to members. Apply using IRS form 1024 and file annually the 990 or 990EZ. ---------------------------------- International Private Asset Protection and Trusts: There are Laws, Rules, Regulations, and Instructions about "Reporting" that continue to be imposed, (some retro-actively), that may (or not) be legal. Specifically, we are discussing FBAR, FINCEN, and CTR reporting. The intent of those forms is to expose numbered Swiss Bank Accounts, criminal activity, and huge tax evasion. In the past, privacy allowed for crimes and tax evasion to remain hidden. We all now realize reasonable levels of privacy may never again be possible. Fortunately, we have never agreed to assist criminals, help with avoidance of child support, drug activity, or encouraged tax evasion. Privacy, legacy concerns, multi-generational well being, health maintenance, retirement, asset protection, principal growth, management, and estate planning are all goals worth of our Private Asset Protection Plan. Our international trusts are structured so that ultimately: 1) The Trustee will NOT be an American. 2) The Beneficiary will NOT be an American. Note that: 1) An International person designated "Manager" can be the Trustee (with limited powers and continually subject to oversight by the Protector). 2) The Beneficiary can be "Bearer Shares" or designated "at will" or "at event" (like certain time frame. or upon death, or upon certain events). All are able to be revised or amended). Also, Note that: Since 1973, we have been determined to advise and assist our associates, friends, and family to protect themselves, pursue fairness, and act lawfully. Therefore, we have taken on the task of timely reporting in such a fashion as to perform the reports in the names of the trusts, with our own contact information, and filed by our attorney. We all want peace of mind. Reporting eliminates risk. Attorney reporting maintains private attorney-client privilege. This solution adheres to and anticipates interpretation, and evolution of the laws. ---------------------------------- Note: Sadly, the tax laws and codes are many thousands of pages long and there is no employee of those agencies willing to state that they understand or can explain those rules and laws. The tax information collection interface and any tax-related information provided by this correspondence and the company and the involved individuals are not intended as and should not be construed as legal, tax, or investment advice. You should always consult your tax advisor to help answer specific questions regarding how tax laws apply to you and/or your business. None of the parties including the tax authorities guarantee and are not liable for the accuracy or completeness of any tax information provided, or any results or outcome as a result of the use of any information, regardless of the source. This email, links or files attached may contain information, which is confidential and/or privileged. The information is intended solely for the use of the individual or entity named above. If you are not the intended recipient, be aware that any disclosure, copying, distribution or use of the contents is prohibited. If you have received this electronic transmission in error, please notify the sender by telephone or return email and delete the material from your computer. This email and all attachments, and related information only has validity within the country of origin. As such, it is not an offer, solicitation, advertisement, inducement, agreement, or contract. Furthermore, this communication and all contents is specifically restricted, invalid, and void where prohibited, controlled, permitted by law, or could incur a tax, and therefore should be disregarded except for pleasure and entertainment purposes. "SAFE HARBOR" Statement: This message, its enclosures, links, associates, or associated material and information may contain forward-looking statements. The words "estimate", "possible" and "seeking" and similar expressions identify forward-looking statements, which speak only as to the date the statement was made. The senders and associated participants, various companies, parties, and all individuals undertake no obligation to publicly update or revise any forward-looking statements, whether because of new information, future events, or otherwise. Forward-looking statements are inherently subject to risks and uncertainties, some of which cannot be predicted, or quantified. Future events and actual results could differ materially from those set forth in, contemplated by, or underlying the forward-looking statements. The risks and uncertainties to which forward-looking statements are subject include, but are not limited to, the effect of government regulation, competition and other material, undisclosed, unknown, or unforeseen risks. All trademarks, copyrights, patents, licenses, permits, promotions, and information are the property of their respective owners. ================================================================= 1. A creditor must first retain an attorney in the originating jurisdiction, and jurisdiction declared by the trustee. legal fees from day one. Free from anticipation, alienation, assignment, pledge, obligations of any beneficiary, and free from control of any creditor or their representitives and shall not be subject to any execution, garnishment, or attachment. 2. The Petitioning Party must pay all estimated legal expense of all parties in advance, or post a bond acceptable to the Trustee in the amount of double of the amounts involved, including estimated expenses and legal defense fees in prior to the Petition. It is intended that all costs of any lawsuit, legal and court fees, are not charged to the trust or beneficiaries of the trust. 3. Anyone seeking to recover assets from a Nevis LLC or trust must post a cash bond with the court. The required bond is 100,000 Eastern Caribbean dollars – a little more than US$37,000. The bond covers legal and court costs incurred by the defendant LLC or trust if it prevails in court or prevails in a counter-claim against the creditor. Such Bond may be required to be in physical Gold and must be deposited with legal counsel of the Trustee. 4. Nevis has extraordinarily strong “charging order” protection for its LLCs. I discussed the charging order concept and how you can use it to protect your assets here. This means that a creditor can’t force your Nevis LLC to cease operations or to seize your ownership interest in it. A creditor who obtains a charging order against a Nevis LLC is entitled only to the right to attach future distributions from it. The creditor can’t force you to make distributions. Nor can it disrupt the business of your LLC. 5. An enhanced burden of proof is required to prevail in a fraudulent conveyance action against a Nevis LLC or Nevis trust. Creditors may attempt to challenge transfers to LLCs (and especially trusts) as being designed to “hinder, delay, or defraud” the creditor. This is called a “fraudulent transfer” or “fraudulent conveyance.” The burden of proof in US courts to sustain a fraudulent transfer claim is that the transfer is “more likely than not” to violate whatever rules are in effect in that court. In contrast, Nevis law requires proof “beyond a reasonable doubt” that a transfer was fraudulent for a creditor to prevail in a fraudulent conveyance claim. 6. Receipt of membership interest is an absolute defense to a fraudulent conveyance claim. US courts often can invalidate a transfer of assets to a LLC if a creditor can assert that it has a claim to those assets. But under the laws of Nevis, such transfers can’t be challenged as long as you can prove you received a corresponding ownership interest in a Nevis LLC. 7. Only the LLC may be named as a defendant in any lawsuit. A lawsuit brought against the members or managers of a Nevis LLC must be dismissed. This makes the process required to seize your interest in a Nevis LLC much more difficult. 8. No punitive damages. In the unlikely event that a Nevis court finds your transfer of money or property to a Nevis LLC or Nevis trust fraudulent, it will be set aside only to the extent necessary to satisfy actual damages (not punitive damages) suffered by a particular creditor. Each creditor must bring a separate action in the local court. Unsurpassed International Tax Planning Flexibility A Nevis international trust is also an ideal estate planning option. Not only does it provide unsurpassed asset protection, it also lets you set up a “dynasty trust” that can last for generations – potentially, forever. That’s because Nevis has abolished what’s called the “rule against perpetuities” that in most US states – and many countries – strictly limits the duration of a trust. That’s just the beginning of the planning possibilities. Another compelling estate planning strategy is to gift minority membership interests in a Nevis LLC to your children or other family members. Those interests have a market value less than the value of the underlying assets, because they don’t represent a controlling interest in the LLC. For gift tax purposes, you may discount the value of these interests by 20% or more. If you have a large estate, such “valuation discounts” can lead to huge savings in estate tax. The Protector’s powers should be qualified by an “anti-duress” provision that allows the Protector to exercise his powers only of his own free will and not while he is under any compulsion. INCOME - There shall not be any income to the trust. Any potential income shall be distributed as expenses to generate more equity and value of the trust itself. The value of the trust itself shall only benefit the beneficiaries when distributed by the Trustee. Trustee may withhold distributions until termination of the trust. LAPT- Limited Asset Protection Trust =============================================================== IRA Beneficiary – don’t name individuals directly as beneficiaries. Instead, the beneficiary should be a spendthrift trust that understands the IRS rules for deferred or required distributions in an inherited IRA. A well-drafted trust will give beneficiaries significant control over the assets, but only if there are no creditor claims against them. And if a child declares bankruptcy, his or her inheritance is safe (although in the case of inherited IRAs, the trustee may need to make mandatory distributions to comply with IRS rules). The most obvious target for creditors is a surviving spouse. After all, if you name your spouse as a beneficiary of your IRA, he or she now has an “inherited IRA.” Another possibility is for a surviving spouse to use a “qualified disclaimer” to protect his or her inherited IRA. A qualified disclaimer is a written refusal to accept inherited property.. The usual purpose for a qualified disclaimer is to avoid paying estate or gift taxes. But in the context of an inherited IRA, some planners have suggested that an IRA owner can name his or her surviving spouse as beneficiary and establish a trust as contingent beneficiary. If your spouse has creditor concerns when you die, he or she can refuse to receive the inherited IRA directly and instead disclaim it into the more protective trust. QUALIFIED DISCLAIMERS must meet the following requirements: 1) It must be in writing. 2)It must be received by the property owner (or the property owner's legal representative) within nine months of the date of the transfer or by the transferee's 21st birthday. 3)The transferee has not already accepted an interest in the property. 4)The property must pass to someone other than the person making the qualified disclaimer. 5)The person disclaiming the property cannot direct how the disclaimed interest is distributed; rather, the disclaimed interest must pass according to the transferor's directions. Additionally, it is possible to disclaim a portion of property if it is severable into portions. However, a person cannot disclaim property in order to qualify for Medicaid. =============================================================== States have different privacy provisions protecting information contained in a trust from becoming public. Nevada has no privacy provision and, after three (3) years, trust information can become public in Delaware. South Dakota is the only asset protection state that has a total seal on trust information forever. =============================================================== HOMESTEAD - The transferors of the residence are retaining their residence and occupancy rights in the real property, and shall retain possession for their lifetime. Such rights shall be in accordance with the property tax codes, probate codes, and Homestead Exemption rules and regulations, thereby maintaining entitlement to the homestead exemption for ad valorem taxation. ================================================================= A Delaware Trust, Nevada Trust, or other unique State Trust relies on secrecy as its' main ability to protect you. It also points to Delaware as where they want laws and court supervision. That could conflict with the location of the parties or the assets and would probably require attorneys in all jurisdictions or a court fight for jurisdiction. That could also allow seizure of the assets prior to court resolution of the controlling jurisdiction. Perhaps, very slow, and expensive, and assets could be lost. ------------------------------------------------------------- A person can become an independent business owner marketing products and do very well financially; however, they could also not earn any income at all. By following the simple formula of reviewing, and using, and following up, there should be a significant, positive impact on your finances; but again, please understand that there are no financial guarantees. Individual results vary based upon personal effort, talent, time spent on business, attitude, and other immeasurable business practices. True Trust Products do not have any ability to eliminate taxes and are usually tax-neutral. You may be able to shift taxes, or allocate tax responsability to persons at more favorable tax brackets or rates. Consult with a tax professional. To contact the True Trust team, please email info@truetrust.com -------------------------------------------------------------