Does anyone have any opinions on the Premiere II Life Estate Trust as a means of Asset Protection. If you disagree with this strategy, could you please give your reason. If you agree with this strategy, could you please explain why this approach would be better than an FLP.

This tool is promoted by the National Association of Financial and Estate Planning. Any comments on the strength of this organization would also be appreciated.

Here is a link to a pdf file which contains information on their method of asset protection...

http://www.nafep.com/PDF/Estate%20Planning%20With%20Asset%20Protection.pdf

Thank you for you time.

Before I waste my time responding, please answer these questions:

(1) What makes you believe that NAFEP is even minimally competent to engage in asset protection planning?

(2) Why isn't their trust structure considered a self-settled trust?

(3) Doesn't this structure require that the settlor/beneficiary give up all control of assets to unknown third-parties?

(4) Why would this trust structure (or any trust structure) be exclusive of the use of a LP or LLC, etc.?

(5) Why would one believe than an FLP having no bona fide commercial activity and simply holding personal assets would survive a creditor attack against an interest holder?

Thanks in advance.

I had a minute so I went ahead and pasted the link in my browser and read a few pages. Skimming to about page 3 I'm saying to myself "man there is no way this would work" for too many reasons than I care to list here. The most significant reason is that the promoter claims you have the control as you would over a regular revocable trust; but they make this "irrevocable" and you designate someone else the trustee (apparently all the while still controlling the assets), and no one can force the trustee to revoke your irrevocable trust.

Oh that it were so easy.

It looks like the program sets up a number of ridiculously complicated layers of trusts and then really just relies on the notion that the assets wouldn't be able to be tracked to you if someone gets a judgment against you. If it does anything at all I would say maybe it would provide some degree of privacy protection, but not much.

I didn't read much past page 3 or 4 of this thing, so there might be more to it, but I wouldn't go in for something like this if I were you.

Jay, thanks for your insightful questions.

Douglas, thanks for your comments and advice.

I have read some of your previous threads and want to thank the 2 of you as well as others for your thorough discussions.

I guess I should have introduced myself as I am new to this forum.

I am a radiologist in the Chicagoland area. I've only been in practice for a year and a half (having recently completed my training). Currently, I own a home with my wife. Our other assets are rather limited at this time as we have just started saving. I foresee most of my future assets consisting of my qualified retirement account, personal investment accounts, cash savings accounts, and possibly real estate property.

I am trying to figure out what asset protection vehicles would be best for my particualr situation.

I have met with a financial planner who introduced me to the NAFEP Life Estate Trust concept. Based on your responses, it is clearly not the right decision for me.

Do your law firms practice in Illinois? If not, can you provide me any recommendations for attorneys who do practice in Illinois.

Also, for individuals with a similar background as myself, for a good plan, what would be a fair legal fee. I know you would probably need more specifics but I'm interested in knowing what a ballpark figure would be.

Thanks again for all of your help!!

Sorry if I was a little bit gruff, but my opinion of NAFEP is not the highest.

One of my brothers is about to graduate medical school and has asked similar questions.

At your level, you need something pretty simple but which you can expand upon later. Also, you need to make sure that your insurance limits are reasonable and that you have some umbrella insurance for non-med-mal claims.

A minimalist asset protection structure will run somewhere between $7,500 and $20,000 for something that works but that will not overly restrict you. Also, in Illinois you may decide to take advantage of certain exemptions for awhile until you accumulate some more assets.

Asking for a referral off a BBS is a really bad idea.

Thanks again Jay.

There are many attorneys in my area who list themselves as specialists in asset protection. It's difficult to figure out which one to go to. Is there a resource that may help me find a good asset protection attorney. I'd hate to run into someone who tries to sell me a plan similar to the NAFEP strategy!!

Thanks in advance.

I have to agree with Jay 100% on this matter.

Here's a good way to know if a domestic based trust will work or not:

1) In 42 of the 50 states, if the trust is revocable, you retain control over the trust, OR continue to benefit from trust assets, then by both statutory and case law you have NO asset protection - end of story. The Queen Elizabeth Statute of common law (I believe it was passed way back in 1571) also forbids all trusts as described above from providing asset protection, so the "common law applies to trusts" argument doesn't stand up, either (and in any case, if a statutory law conflicts with common law, then the statutory law will control.)

2) Eight states (Alaska, Delaware, Missouri, Nevada, Rhode Island, South Dakota, Utah, and Oklahoma) allow irrevocable trusts to provide asset protection, even if the grantor continues to benefit from trust assets. These types of trusts are called domestic asset protection trusts, or DAPTs. However, in order for the trust to work, the grantor cannot retain any control over the trust, and a statute of limitations (ranging from two to four years, depending on the state) must first expire before the trust will protect assets. If you live in and have assets exclusively within these 8 states, you and your assets remain in these states, and the trust is done right, then you will *probably* have asset protection AFTER the statute of limitations expires UNLESS you file or are forced into bankruptcy (in which case the trust will almost certainly fail). If you don't live in any of these 8 states, then forget about using a DAPT. Jay just posted a case on this site (In re: Higashi, I believe) that very much points out the fact that if you and your assets are in a state that doesn't allow DAPT's, then a judge will probably say that trust law of the state you and/or your assets are in controls, rather than the state you formed your DAPT in; this of course means your DAPT just got creamed.

3) If you want to use an offshore trust, and you're willing/able to move assets offshore if need be (easy to do for cash, hard to do for real estate), then you could get good asset protection if the trust is set up correctly and is reinforced so as not to expose you to civil contempt for ignoring a repatriation order. I think the only offshore planners I'd trust to do this (besides myself) are real heavy-hitters such as Rob Lambert, Gideon Rothschild, or Barry Engel. And I will say that I almost never use offshore trusts by themselves, and I pretty much don't use them like other offshore planners do.

4) Keep in mind that, generally speaking, trusts are more expensive to set up and maintain, more cumbersome, and less flexible than some other asset protection tools.

5) At the same time, a trust MAY be the best way to go for you. For example, if you want to pass wealth to your heirs, while reducing/eliminating estate tax liability and avoiding probate, then a trust may be the best choice for you.

6) From a pure asset protection standpoint, however, a domestic trust (where the grantor continues to benefit from trust assets) is a terrible asset protection tool in a non-DAPT state, and is at best a mediocre asset protection tool in a DAPT state. In most (not all) situations, there are simply better tools out their that will meet your needs with less of a headache.

And with that said, you may want to look at the following:

1) Consider equity stripping your home. Jay and I, I believe, are probably the 2 best guys in this subsection of asset protection nationwide.

2) If you are not an employee, I would strongly consider forming a Professional LLC or other professional entity. Note that a PLLC won't shield you from malpractice claims, and if you are the sole owner of the PLLC, you won't gain any significant asset protection benefits, BUT you will likely realize substantial tax savings (especially self-employment tax reduction) by using a PLLC that elects S corporation tax treatment.

And with THAT said, don't try any of the above without first consulting with a qualified professional who works in tandem with a qualified local attorney and/or tax professional, as necessary.

I actually think you can get something set up for about $5000-8000, given your current, relatively simple wealth portfolio. You of course would want to add to your plan as your wealth grows, but this basic plan will serve you well for many years to come. If you're not an employee, then the tax savings you realize by forming a PLLC taxed as an S corp will probably in 1 year pay for the cost of setting your entire plan up.

As far as who to use for a planner, here's the deal: there's less than 20 people nationwide that are really good at asset protection. In my humble and possibly biased opinion, Jay Adkisson, Rob Lambert, me, Randall Edwards (who I often work with), and Roccy De Francesco should be included in the foregoing group, and we all post on this board. I might also add that Chris Riser, Gideon Rothschild, Dr. Arnold Goldstein, Jonathan Alper (who concentrates pretty much only in Florida) and Barry Engel don't post on this board but should also probably be considered in the top 20. Do a google search, if you want, and you'll find their respective websites. The above is a partial list. Sorry if I left anyone out. A few of the above planners specialize in certain areas of asset protection that may not be what you need for your specific situation.

I've ran across and worked with quite a few (easily a few dozen) attorneys, CFPs, CPAs, and other professionals who fancied themselves experts at asset protection. In my opinion, 95%+ of these professionals use outdated and seriously flawed methods. Some have absolutely no clue know what they're doing. The problem is most of these professionals do asset protection "on the side", if you will, in addition to their core practice. Asset protection is simply too complex for the casual practitioner, regardless of their other legal experience and/or educational background. You must have lots of legal and tax training and then you must exclusively or almost exclusively focus on asset protection planning. Very few practitioners specialize at asset protection to this degree, and are thus left in the dust.

I've also taken quite a few CPE/CLE (continuing professional/legal education) courses on asset protection, and I've read quite a bit from the American Bar Association's Asset Protection Journal. Most of the stuff I read is outdated and seriously flawed. Some of it, even CPE/CLE approved courses, is total, complete crap.

In light of all this, my advice is to retain a respected planner with a nationwide clientele, then have him work under your local attorney, who'll cover local tax and regulatory issues, as well as provide a 2nd opinion that is sometimes helpful. Even better, have your attorney be a bankruptcy, divorce, or general litigation guy, who understands how a judge may react to your asset protection plan, and then use a CPA to make sure tax aspects are good.

Regards,

Ryan Fowler
www.pfshield.com
wrf90@hotmail.com

Yeah, I forgot NAFEP was based out of Salt Lake City, Utah, where Randall and I live. These guys have been promoting this trust for several years, and it doesn't work, not even (I'm pretty sure) in Utah, which allows a PROPERLY structured self-settled trust to provide asset protection, once 4 years after the date of the transfer to the trust has elapsed.

Here's one quote from page 4 of NAFEP's e-brochure that demonstrates to me that the trust won't work:

"The Premier II Life Estate Trust is a family friendly type of irrevocable trust, one which is completely flexible and simple to use by you, the Grantor and your heirs. Throughout the grantors’ lifetime, they have full control and benefit of the property itself. No one but the grantors, not even the trustee, can change or affect this control and usage of your property."

Compare this with the following statutory trust law of a state such as, for example, Texas:

Texas Trust Code, §112.035(d) If the settlor [which is the same thing as a grantor] is also a beneficiary of the trust, a provision restraining the voluntary or involuntary transfer of his beneficial interest does not prevent his creditors from satisfying claims from his interest in the trust estate.

Yes, that means if you put assets in a trust and continue to benefit from them, you have NO asset protection.

Of course, some trust planners say "oh, it's simple to get around that statute... you're not listed as a trust beneficiary."

What these planners fail to mention is the US Supreme Court has many times stated that substance (what is actually happening) controls over mere form (what the legal documents say is happening.) Therefore, if you in actuality continue to benefit from trust assets, regardless of what the trust document itself says, then those assets are not protected in most circumstances. If your trust says you're not a beneficiary, but you really are a beneficiary, then a judge will label this trust a sham and there goes your asset protection.

There are, of course, other ways to properly do asset protection.

Regards,

Ryan Fowler
www.pfshield.com
wrf90@hotmail.com

Thank you very much Ryan for the detailed information.

You're welcome