Exemption Planning and the Homestead Exemption

What is Exemption Planning?

Exemption planning is the process of reorganizing one’s wealth so that much of it is protected (or “exempt”) by law from creditor attachment, even though it’s still owned by that individual. There are some asset types exempt under federal law, but most exemptions come from state law. Then there are bankruptcy exemptions, which may use federal and/or state exemptions, and which only apply in bankruptcy. The types of state-protected assets vary greatly from state to state. Furthermore, the extent to which assets are protected in a given state also varies. However, there are general categories of exempt assets. These categories include:

  • A single personal residence (commonly referred to as a “homestead”).
  • Pension and retirement plans, which may be protected by state and/or federal law.)
  • Life insurance.
  • Annuities.
  • Items necessary for daily living, such as furniture, an automobile, and clothing (these items are usually only exempt to a few thousand dollars or less).
  • Wages (only protected by a few states, but somewhat protected federally, as the section on wage exemptions discusses below.)
    At first glance, you would think exemption planning to be simple. After all, if the law says an asset is exempt, then it’s exempt, right? Not always. There are always exceptions, caveats, and conditions to the exemption laws. Knowing when an “exempt” asset is truly exempt from a certain creditor and when it is not is what separates the best asset protection planners from the mediocre masses.

Homestead Exemptions

The homestead exemption is a state law (or, sometimes, part of the state’s constitution) that is designed to at least partially protect one’s home from creditors. It is important to read the fine print in a given state’s exemption law. For example, the Texas homestead exemption, which is touted by many, along with Florida’s homestead exemption, as one of the best in the nation, still provides statutory exceptions as to when the exemption does not apply. The law says, for example, that the exemption does not protect against:

  1. Property taxes.
  2. Liens arising due to an initial loan on the home, a refinancing loan, a reverse mortgage, or an equity line of credit.
  3. Mechanic’s liens.
  4. Partition in the property as a result of divorce.

What’s more, many exemptions only protect a limited amount of equity in certain assets. For example, although Iowa, Florida, Texas, Kansas, and Oklahoma protect 100% of one’s homestead from creditors, North Carolina only protects $18,500 of a homestead’s equity. Therefore, if one owned a North Carolina home having $300,000 net equity, a judgment creditor could foreclose on the home and seize any sales proceeds that are not covered by pre-existing liens or this limited exemption. Other than the states mentioned, a few states will not protect any home’s equity, and other states protect varying amounts of equity.

The good news is that homestead protection is added on top of whatever mortgage secures a home. For example, if a home is worth $600,000, but it has a mortgage for $500,000 and is located in a state with a $50,000 homestead exemption, then only $50,000 of the home’s value is exposed to creditors. This is because the mortgage is a lien that is secured specifically to the lien holder. It is there to ensure that the lien holder’s debt or other obligation is repaid. Thus, the equity covered by a mortgage or other lien is unavailable to unsecured creditors (i.e. a creditor that does not have a lien on the property), or to secured creditors whose lien arose afterwards.

Some individuals use mortgages or other types of liens specifically to protect their home from other creditors. We call this technique equity stripping and this book examines such in Chapter 15. Because the homestead protection and pre-existing liens are added together when calculating how much equity is available to subsequent creditors, some homesteads are mostly or completely protected even in states that don’t offer complete homestead protection. At the same time, as a mortgage gets paid down or the property appreciates in value, more and more equity becomes exposed. It is dangerous to therefore think that justbecause a home’s equity is currently covered by a limited homestead exemption that it will always be covered.

With that said, merely using a home as one’s primary residence does not always mean that home is protected by homestead laws. Some states have additional requirements one must meet to claim homestead protection. Some states require their residents to file a declaration of homestead in a public office. Other statesimpose a short residency period before they grant homestead protection. In certain states, only the head of the household can claim homestead protection; however, most states allow either spouse to do so. If you are married, be careful. Sometimes when both spouses file homestead declarations, their cross-declarations cancel each other out.

There are other potential traps. For instance, in Florida, you may or may not lose your homestead protection if you title your home to a trust. Tens of thousands of Floridians have been advised by their estate planners to title their home to their living trust to avoid probate, not realizing that doing so may make them lose their homestead protection. Unfortunately, few of these people realize their homes may now be lost to creditors.

Bankruptcy Exemptions/Pre-Bankruptcy Planning

Up to this point, we’ve mostly discussed exemption planning in a non-bankruptcy context. However, when one files for bankruptcy the exemption rules change considerably. Therefore, when doing exemption planning one must consider the likelihood of an individual declaring bankruptcy in the future. Even if bankruptcy is unlikely, one must plan for the contingency that it could happen. For example, an individual could be involuntarily petitioned into bankruptcy (Chapters 7 or 11) by three or more creditors if their aggregate claim exceeds $12,300, or even by one creditor if the debtor has fewer than 12 unsecured creditors, and the creditor filing the petition has claims exceeding, in the aggregate, $12,300.

The law of the state where one resides determines whether one may use state exemptions only, or whether one may choose between state or federal exemptions. If a state allows one to choose, then one may choose one set of exemptions but not both. The federal exemption amount may be doubled for a married couple, although this may or may not be the case with state exemptions.
Note that moving to a more exemption-friendly state before one files bankruptcy only works if the move is made at least 730 days (about 2 years) before filing.If state exemptions are chosen, there may be federal restrictions to those exemptions. The most notable is the homestead restriction. Federal law states that a homestead exemption may not exceed $125,000 for any home purchased within 1215 days (3.3 years) of filing bankruptcy (the full homestead exemption is allowed so long as one owns their home for more than 1215 days before filing.)

(From Asset Protection in Financially Unsafe Times, p. 73-75, 82-83

Non-Qualified Personal Residence Trusts

From Asset Protection in Financially Unsafe Times, pp. 197-199

What is a Non-Qualified Personal Residence Trust (Non-QPRTs)?

While a Qualified Personal Residence Trust(QPRT) has many potential benefits, it also has some glaring drawbacks; namely, if the grantor dies before their right to live in the home taxfree expires, they will be worse-off, from an estate-tax standpoint, than if they had not used a QPRT at all. Furthermore, the QPRT’s asset protection benefits are questionable at best.

How then might one overcome a QPRT’s asset protection and potential tax shortcomings? One way is to use a non-QPRT (also referred to as an NQPRT). A non-QPRT is a trust that holds a home while not being qualified for estate tax savings under IRC §2702. Nonetheless, estate tax savings may still be realized, although not in the same way as with a QPRT.

A non-QPRT is a non-self-settled, irrevocable grantor trust that buys the home (a self-settled trust is a trust where a grantor is also a beneficiary; most states do not allow such trusts to protect assets from the grantor’s creditors).

Trust assets are not included in the seller’s estate. Simply put, the trust gives the seller a self-canceling installment note (SCIN) in exchange for his home. As we discussed in the chapter on trust fundamentals, an SCIN is a promissory note to pay a debt in regular installments, however if the note-holder dies, then the note is cancelled and the trust owes no further payments; the home is now owned free and clear by the trust. As long as the promissory note’s value is equivalent to the fair market value of the home, the transfer of the home to the trust in exchange for the SCIN is an exchange of equivalent value and thus the transfer is much less likely to be considered fraudulent.

After the transfer, the seller pays fair market value rent to the NQPRT for his continued use of the home, which the NQPRT in turn uses to make payments on the SCIN. After the fraudulent transfer statute of limitations expires, one may safely engage in more aggressive estate tax savings, if desired, by forgiving up to $26,000 in note payments per year as a split gift between husband and wife. Thus, rent payments are made to the trust, which reduces the seller’s taxable estate, and the trust can keep more of those payments from going back to the seller since it now pays less (or nothing) on the SCIN. When the seller dies, the home and any rent payments that have accumulated in the trust are not included in his gross estate. Trust property instead passes to his heirs, who are residual beneficiaries of the trust.

The NQPRT is a stronger asset protection tool than the QPRT because the home is transferred to the trust in exchange for something of equivalent value (the SCIN), and furthermore the transferor does not live in the home rent free. There is also less risk with a NQPRT from an estate tax perspective, since there is no term of years the transferor must survive in order to make sure the trust reduces estate tax liability.

A NQPRT is often a more effective tool than a QPRT, but it may not be a good idea for anyone who only wishes to protect their home. Remember, a NQPRT is an irrevocable trust, meaning once you make the transfer, you can’t get the home back. For maximum asset protection, the transferor shouldn’t retain the right to direct the trustee to sell the home, purchase a new home, or distribute trust funds to the transferor (the trust may however be drafted so that the residual beneficiaries have limited powers to direct the trustee in such a manner).

A NQPRT, like the QPRT, is meant to eventually pass a home to one’s heirs. Furthermore, transferring a mortgaged home to a non-QPRT may cause problems with the mortgage holder, which means only unencumbered homes, or homes whose mortgage could be paid off, are ideal candidates for a non-QPRT unless the mortgage holder agrees to the transfer. Therefore, if the parameters of an NQPRT do not match an individual’s goals and circumstances, they should protect their home via equity stripping, which is discussed in chapter 15. Alternatively, a person could move to one of the five states that protect 100% of a homestead’s value from creditors, or perhaps use a Domestic Asset Protection Trust (DAPT) if his state of residence has passed DAPT legislation (however the authors recommend DAPTs only if none of the other strategies are feasible).

Additional Suggested Reading:
Asset Protection in Financially Unsafe Times, chapters 5, 11, 12, 13.

Foreclosure is Not Always Tax Free

Video Transcript

A lot of you are losing your homes and your investment real estate. A lot of you have mortgages on that real estate that exceeds your cost of the real estate. In that case, you probably have a mortgage on you real estate which exceeds its basis.

And there’s a trap. It adds insult to injury. Not only do you lose your property. Not only is your credit impaired. Not only is your self-respect and your relationships with people sometimes impaired because us guys judge our value as humans in large part on our ability to produce income and make money and keep money.

Well, I want to warn you about a little known tax trap that you become very aware of if you’re losing real estate. Bottomline, if your mortgage exceeds your basis, you will have a taxable event when your property is lost or sold in a foreclosure.

The amount of the gain will be the difference between the mortgage and the basis on the real estate and the only exception to this is if you are insolvent at the time of the foreclosure, both before and after, if you can’t meet your reasonably anticipated debts and pay your bills if you’re completely insolvent and can prove it then there is no tax on the foreclosure.

That’s the only way out that I know of and that’s the only way out that I think you’ll be able to possibly avail yourself of.

So, if you’re about to lose a property, go talk to your tax advisor. Make sure that your not going to not only lose your property in this, your savings that you put into it but make sure you’re not hit with a substantial tax bill six months or a year later when you have to file.

Be prepared for it, work around it and I hope that this helps you. I just wanted to warn you about a problem that sometimes jumps up and bites you.

Watch out for the Cancellation of Indebtedness Trap.

To add insult to injury, Uncle Sam may demand a hefty tax when you lose a property in foreclosure. This happens when your mortgage is in excess of your bases and you are not insolvent at the time of foreclosure.

Until the End of 2012 the Mortgage Forgiveness Debt Relief Act might also help. In general, this act generally allows taxpayers to exclude income from the discharge of debt on their principal residence subject to many exceptions.

Debt reduced through mortgage restructuring, as well as mortgage debt forgiven in connection with a foreclosure, may also qualify for this relief. You need to discuss this with your Tax Return Preparer.

Co Ownership Planning (JTWROS)


(Excerpt from Chapter 7 of Asset Protection In Financially Unsafe Times by Ryan Fowler & Dr. Goldstein)

What is Co-Ownership Planning and JTWROS?

Co-ownership planning is defined as the concurrent ownership of property by two and wife. When we refer to co-ownerships, we do not usually mean the ownership of business entities by multiple individuals (unless an undivided interest is held jointly or as tenants by the entirety), nor are we referring to multiple beneficial interests in a trust. There are four types of co-ownership planning, namely:

  • Tenancy in common (TIC).
  • Joint tenants with right of survivorship (JTWROS); JTWROS is often
    referred to simply as “joint tenants” ownership.
  • Tenants by the entirety (TBE).
  • Community property.

Of the above, only TBE ownership provides any meaningful asset protection, and the other ownership types may actually increase the chance of losing property to creditors. We examine each type of ownership below.

Tenancy in Common (TIC)

When property is held as tenancy in common (TIC), it means each person holds a distinct and separate share of the property. Shares need not be equal. For example, three people may own real estate, wherein two people each could own 25% of the property and one owns 50%. If the property is sold, each person would receive their respective share of the proceeds. Unless a contract says otherwise, each person has the right to transfer their interest without the consent of the other owners. TIC is the default type of concurrent ownership, and does not include right of survivorship (we define right of survivorship in the next section.)

TIC does not provide any meaningful asset protection. If one of the TIC owners has a judgment creditor, that creditor can either force the sale of property through foreclosure, or (if feasible) they can partition the property and then seize the debtor-owner’s partition in its entirety. If a foreclosure sale is held, the creditor can only receive a portion of the foreclosure proceeds that are proportionate to the debtor’s share in the property.

However, the non-debtor owners still lose the property, although they do receive the remainder of foreclosure proceeds. One could say that TIC actually makes things worse from an asset protection perspective, because the more owners there are, the more likely it is that one of them will encounter creditor problems, which could cause everyone to lose the property. We therefore never recommend TIC as a means to protect assets.

Joint Tenants with Right of Survivorship (JTWROS)

Joint tenants with right of survivorship (JTWROS) is akin to TIC ownership, except when one owner dies, their interest does not pass to his or her heirs. Instead, the other owners automatically receive the deceased individual’s interest (this is called “right of survivorship”.) JTWROS thus avoids probate, which is the often costly and time- consuming court-supervised process of passing wealth to one’s heirs. JTWROS is also different from TIC in the following ways:

    • Each person must acquire title to the property at the same time.
    • Each person must have an equal share in the property.
    • Each person must hold the same type of title.
    • Each person must have access to the property in its entirety (for example,
    a joint bank account’s funds must be completely accessible to each joint
    owner.)

Although JTWROS may offer estate planning benefits, a creditor can attach, foreclose on, or partition a JTWROS interest just like it can with tenancy in common property.

In the case of joint bank or trading accounts, either owner may access all of the account. Therefore, a creditor may do likewise, meaning a creditor of either joint owner may seize all of the account’s funds in order to satisfy their debt. Consequently, although there may be valid reasons for wanting a joint account, there is always a safer alternative.

For example, suppose an elderly widow wanted a joint bank account with her son, so that if anything happened to her the son could use the money to take care of her, or he could inherit the money sans probate if she died. The downside is that this account could be seized by either the son’s or mother’s creditors.

A better solution would be for the mother to give her son a durable power of attorney, which would allow him to access the account if she was incapacitated. A living trust could also be created to quickly and safely pass the account’s ownership to the son when the mother dies.

Neither of these tools would expose the account to the son’s creditors during the mother’s lifetime. If desired, the trust could be structured so that even after the mother’s death, trust assets would remain out of the reach of her son’s creditors.

JTWROS may have other unintended and undesirable side-effects. For example, let’s say a man married and had three children. He then divorced and remarried. Subsequently, he titled his home and liquid assets in his and his spouse’s names as JTWROS. When the husband dies, do the children inherit the home or liquid assets? Unfortunately, the answer is no.

All JTWROS property passes to the new spouse and the children get nothing. Because of the often unintended consequences of JTWROS, we almost always recommend alternatives.

Tenancy By the Entirety (TBE)

Of all co-ownership types, tenancy by the entirety (TBE) is the only one that may provide meaningful asset protection. Tenancy by the entirety is a special type of co-ownership that is only available to a husband and wife. TBE ownership must also meet the requirements of JTWROS in order to be valid, and if a couple divorces, then ownership will be held as TIC or JTWROS rather than tenants by the entirety. TBE offers right of survivorship benefits (like JTWROS), but it may also protect the asset in certain states, as along as only one spouse comes under creditor attack.

That’s because, in most states that allow TBE, the property may not be transferred or otherwise alienated without the other spouse’s consent. Furthermore, neither spouse owns a fractional share in the property. Rather, each spouse claims an entire ownership interest in the property, but such ownership is subject to the other spouse maintaining their property rights as well. Because the ownership interest is not divisible, and may not be transferred without the other spouse’s consent, most TBE states do not allow a creditor of one spouse to attach any TBE property without the consent of both spouses.

Unfortunately, TBE ownership is not available in all states, and in states where it is available, it may not be allowed for all property types. Figure 1, below, differentiates between states that allow TBE, states that allow TBE for real property only, states that prohibit TBE (either by case or statutory law), or states where it is unclear whether TBE ownership is allowed.

Even with the breakdown of TBE ownership into these four categories, one should still consult statutory and case law for his or her particular state, as there are further subcategories of TBE ownership types. For example, a few states restrict TBE ownership to primary residences only. Furthermore, only Alaska, Hawaii, Tennessee, and Vermont specifically allow rental real estate to be held as TBE.1

TBE Ownership Types Among the 50 States

    TBE Allowed for property types besides real estate
    Alaska, Arkansas
    Delaware
    District of Columbia
    Florida
    Hawaii, Maryland
    Massachusetts
    Mississippi, Missouri
    New Jersey, Oklahoma
    Pennsylvania
    Rhode Island
    Vermont
    Virginia
    Tennessee
    Wyoming

Even if TBE is allowed, the case and statutory law of a few states will not protect TBE property from creditors. Therefore, these laws and cases must be checked before relying on TBE ownership for asset protection. Another problem with tenancy by the entirety is the fact that TBE’s asset protection has somewhat eroded over the years.

For example, a 2002 U.S. Supreme Court case allowed an IRS tax lien to ignore the protection normally afforded TBE ownership.4 Consequently, it is now standard operating procedure for the IRS to seize one-half of a TBE property’s sale proceeds (up to the amount of the tax lien) if a tax lien has attached to either spouse.

A state-specific example of TBE failing to protect an asset is found in a 1993 Massachusetts case, Coraccio v. Lowell Five Cents Savings Bank.6 In Corracio, the court ruled that under Massachusetts law, a husband had a right to unilaterally manage TBE property, which in this case was the debtor’s primary residence. This right gave him the power to transfer or encumber the property without the wife’s consent, whereas the wife only had a right of survivorship. The court ruled that, although the husband could not alienate her right of

    TBE Allowed for real property only
    Illinois
    Indiana
    Kentucky
    Michigan
    New York
    North Carolina
    Oregon

    TBE Not Allowed
    California
    Connecticut
    Washington
    Iowa
    Maine
    Minnesota
    Nevada
    New Hampshire
    New Mexico
    North/South Dakota
    West Virginia
    Wisconsin

…survivorship, but he could alienate the property itself. Conversely, the wife did not have the right to alienate the property without her husband’s consent. The special rights afforded the husband were due to ancient TBE laws that were not properly updated as women were given equal rights in our society. Subsequently, when the husband applied for a 2nd mortgage on their home and failed to make payments, the bank that held the mortgage was allowed to foreclose on the property. Although most states that specifically allow TBE ownership do not have adverse case law like the Corracio case, one law professor notes that “only Massachusetts, Michigan, and North Carolina have broughtinto modern times the tenancy’s ancient husband-oriented form.”7

In contrast to the above, there are cases where TBE ownership has successfully shielded assets.8 Nonetheless, the foregoing leads us to conclude that TBE cannot be relied upon as an impenetrable creditor defense. On the upside, because it’s very easy to title assets as tenants by the entirety between a husband and wife (in states that allow such), TBE is a great way to add an extra layer of protection.

For example, in a state that allows TBE, it may be a good idea to title ownership of business entities as TBE. In one Florida case, doing this protected the ownership interests from the husband’s creditors.9 Yet merely saying an asset is held as TBE is not sufficient by itself. One must also meet the criteria described in this chapter’s section on joint tenants with right of survivorship, in addition to both owners being husband and wife.

Community Property

There are ten community property states: Alaska, Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin. A community property state is a state where all marital property (property of the “community”) is automatically deemed to be owned 50/50 by each spouse, even if it is only titled in one spouse’s name. Marital property is defined as any property acquired during the marriage.

A boat one spouse acquired before marriage, for example, will not be considered community property, unless the boat is subsequently titled in both spouse’s names. At the same time, it is easy for one spouse’s pre-marital non-titled property, especially cash, to be commingled with the community and thus be considered community property. An inheritance acquired by one spouse during marriage may or may not be considered community property, depending on state law.

A married couple may separately own assets in a community property state via a transmutation agreement. A transmutation agreement is a type of post-nuptial agreement wherein each spouse agrees to keep their own property separate and outside the
community estate.

A well-drafted transmutation agreement thus supersedes community property law. When drafting a transmutation agreement, each spouse should retain separate counsel and have full disclosure of the agreement’s ramifications in order to prevent the agreement from later being challenged. If one spouse is particularly vulnerable to creditor threats, a transmutation agreement allows the less vulnerable spouse to separately hold assets, which may provide asset protection if done before the more vulnerable spouse has creditor problems.

There are some potential downsides to this solution, however, which we discuss in the next section. The community property law of some states actually increases one’s likelihood of losing marital assets to creditors. As we discussed in the McIntyre v. USA10 case in Chapter 6, some states (such as California in the McIntyre case) allow a creditor to reach all community assets for the debts of either spouse. In contrast, a few states’ community property laws actually provide limited asset protection.

For example, Arizona allows a debt acquired by either spouse prior to marriage to be satisfied from community property, but only to the extent of the value of that spouse’s contribution to the community that would have been such spouse’s separate property if he or she were single.11 In contrast, an unsecured debt acquired during marriage may not be satisfied from community property.12 Nevada allows a spouse’s separate debt to be satisfied from community property, but only if the wife acquires debt because the husband didn’t provide for her necessities.

Such a debt can then be satisfied from any community property, or from the husband’s separate property.13 In Texas, only tort debts (but not contract debts) may be satisfied from community property, but if the debt arises from a tort, then it may be satisfied from any and all community property.14 The same can be said for tort debts in Washington, except they may only be satisfied from the debtor’s half of community
property.15

On the other hand, California, Louisiana, Idaho, New Mexico, and Wisconsin16 allow a separate debt acquired by either spouse during marriage to be satisfied out of any community property.

Titling Assets in the Name of a Less-Vulnerable Spouse

If one spouse’s activities expose him or her to a high risk of lawsuits or other creditor threats, titling assets into the other spouse’s name may be a good idea. However, there are exceptions to this rule. For example:

    • As we discussed earlier in this chapter, titling assets into the other spouse’s name, without a transmutation agreement, isn’t effective in community property states.

    • In non-community property states, or in a community property state with a transmutation agreement, titling the bulk of marital assets in a single spouse’s name can cause obvious problems in the event of divorce. Why should the spouse with most of the assets give those assets back to the spouse who willingly gave up those assets in the first place? It’s not wise to leave it up to a divorce court to answer this question!

    • Transferring assets to a spouse is almost always done as a gift, and as this book’s chapter on fraudulent transfers explains, gifts are very susceptible to fraudulent transfer rulings. An apparent workaround for this dilemma would be for one spouse to actually sell assets to the other instead of making gifts. However, doing this would probably not avoid a fraudulent transfer ruling for several reasons. First, such a transfer is to an insider. Second, it will be difficult to justify why one spouse sold something to another spouse for any reason other than asset protection. If a court determines the sale was done to protect assets, they may determine such as prima facie evidence of intent to defraud creditors, even if creditor threat was not imminent when the transfer was made.17

How Much Should One Rely on Co-Ownership Laws for Asset Protection?

Co-ownership planning has its pitfalls and thus should never be the exclusive line of defense against creditors. First, the statutory protection afforded co-ownerships has been steadily eroded by the courts. We can expect parts of this protection, at least, to continue to erode in the future. Furthermore, a client may move from a state that protects assets through co-ownership to one that does not. For example, a client can move from a state that allows TBE ownership to a state that forbids it, or to a state that allows it but does not allow TBE ownership to protect assets.

Third, like with exemption planning there are always caveats to when a certain type of co-ownership will protect assets. Because such broad, “blanket” protection is unavailable through co-ownership planning, assets should, when possible, always be protected by additional measures, such as equity stripping, placing assets offshore, or placing assets in a limited partnership or LLC.

i Alaska Stat. §34-15-40; Ha. Rev. Stat. §509-2; Tenn. Code Ann. §66-1-109; Ver. Stat. Ann. Title 15 §67.
ii Janet D. Ritsko, Lien Times in Massachusetts: Tenancy by the Entirety After Coraccio v. Lowell Five Cents Savings Bank, New England Law Review, vol. 30, no. 1, Fall 1995, fn 16.
iii Ibid.
iv See United States v. Sandra L. Craft, 535 U.S. 274 (2002).
v Notice 2003-60, I.R.B. 2003-39, 9/11/03.
vi Coraccio v. Lowell Five Cents Savings Bank, 415 Mass. 145, 612 N.E.2d 650 (1993) (No. 92-P-0175).
vii Janet D. Ritsko, Lien Times in Massachusetts: Tenancy by the Entirety After Coraccio v. Lowell Five Cents Savings Bank, New England Law Review, vol. 30, no. 1, Fall 1995.
viii Berlin v. Pecora, So.2d, 2007 WL 2710764 (Fla. 4th DCA Sep 19, 2007); Beal Bank SSB v. Almand & Assoc., 780 So.2d 245 (Fla. 2001).
ix Berlin v. Pecora, So.2d, 2007 WL 2710764 (Fla. 4th DCA Sep 19, 2007).
x McIntyre v. USA (9th Cir. App. case No. 98-17192 (2000)).
xi Ariz. rev. stat. §25-215.
xii State ex rel Industrial Commission of Arizona v. Wright, 2002.AZ.0000047 (Ariz.App.Div.1 04/02/2002); Schilling v. Embree, 118 Ariz. 236, 239, 575 P.2d 1262, 1265 (App. 1977).
xiii Nev. rev. stat. §123.090.
xiv Tex. Fam. Code. Ann. §3.202(b), §3.202(d).
xv DeElche v. Jacobson, 95 Wn.2d 237, 245, 622 P.2d 835 (1980); 104 Wash. 2d 78, 701 P.2d 1114 (1985).
xvi Calif. Fam. Code §910(a); Id. Code §32-912; La. Civ. Code. Ann. Art. 2364; N.M. Stat. Ann. §40-3-10; Wis. Stat. Ann. §766.55(2)(b).
xvii U.S. v. Bryce W. Townley, No. CS-02-0384-RHW (USDC E. Wash., Jul. 29, 2004). Note the following excerpt from this case: “…a transfer of property made with actual intent to delay, hinder, or defraud a creditor is prohibited… Mr. Townley stated in his deposition that he was concerned about potential „lawsuits from the exposure we had from liability from troubled boys in the State of Washingtion.‟ (Ct. Rec. 58, Ex. 1). Additionally, Mr. Townley stated that it was his goal to protect his assets from anyone who might get a judgment against him… Plaintiff asserts that Mr. Townley’s statements that he intended to protect his assets from anyone who might get a judgment against him is conclusive, direct evidence of intent to hinder, delay, or defraud. The Court agrees.” [emphasis is mine]

Coordinating Your Asset Protection Trust With Your Estate Plan or Will



Coordinating Your Asset Protection Trust
With Your Estate Plan

(If You Are Doing Your Estate Planning With An Estate Planning Trust)

Provided that the Settlor has actually settled an estate planning trust (hereinafter Settlor’s Estate Planning Trust) specifically directing that Settlor’s Estate Planning Trust control the disposition of the Trust Fund, the Trustee shall distribute such portion to the Trustee of Settlor’s Estate Planning Trust, as amended, to be held, administered and distributed in accordance with its provisions.

Notwithstanding the foregoing, the Trustee may, with the consent of the Protector, defer distributions to the Trustee of Settlor’s Estate Planning Trust if such delay would be necessary to protect the deceased Settlor’s account from claims of his or her creditors.

In case of such delay, the Trustee shall continue to hold the Settlor’s account, in trust, and administer and distribute it in accordance with the provisions of the Settlor’s Estate Planning Trust as amended as of the date of the deceased Settlor’s death as if the terms of said Trust were set forth herein.

Coordinating Your Asset Protection Trust With Your Estate Plan with Settlor’s Will

(If You Are Doing Your Estate Planning With A Will)

Upon the death of the Settlor, the Trustee shall distribute the Trust Fund or any part thereof to such one or more Discretionary Beneficiaries, on such terms and conditions, either outright or in trust, as the Settlor may appoint by an instrument in writing (including without limitation a Will or a Codicil) signed by the Settlor and delivered to the Trustee, specifically referring to and exercising this power of appointment.

Notwithstanding the foregoing, the Trustee may with the consent of the Protector, defer any distributions pursuant to such power of appointment if such delay would be necessary to protect the deceased Settlor’s account from claims of his or her creditors.

In case of such delay, the Trustee shall continue to hold the deceased Settlor’s account, in trust, and administer and distribute it in accordance with the provisions of such power of appointment as of the date of the deceased Settlor’s death as if the terms of said power of appointment were set forth herein.

Coordinating Your Asset Protection Trust With Your Will

(If You Are Doing Your Estate Planning With A Will)

Upon the death of the Settlor, the Trustee shall distribute the Trust Fund or any part thereof to such one or more Discretionary Beneficiaries, on such terms and conditions, either outright or in trust, as the Settlor may appoint by an instrument in writing (including without limitation a Will or a Codicil) signed by the Settlor and delivered to the Trustee, specifically referring to and exercising this power of appointment.

Notwithstanding the foregoing, the Trustee may with the consent of the Protector, defer any distributions pursuant to such power of appointment if such delay would be necessary to protect the deceased Settlor’s account from claims of his or her creditors. In case of such delay, the Trustee shall continue to hold the deceased Settlor’s account, in trust, and administer and distribute it in accordance with the provisions of such power of appointment as of the date of the deceased Settlor’s death as if the terms of said power of appointment were set forth herein.