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Monday, July 19, 2010 WHY HAVE A COMPREHENSIVE ESTATE PLAN FOR YOUR REAL ESTATE? There are generally three ways real estate can be deeded or conveyed and thus held:
joint tenancy, tenancy in common, and tenancy by the entirety. Under the joint tenancy form of ownership, two or more individuals jointly own the real estate.
When one of the joint tenants dies, the ownership automatically passes to the surviving joint tenant or tenants this
is called the right of survivorship.When one of the tenants in common dies in Tenancy in common the deceased’s percentage
share passes through probate to their heirs. Tenancy
by the Entirety is only available to spouses, can only be created and destroyed by joint action and has the wonderful benefit
of asset protection (the creditors of one
8:07 am hst spouse cannot attach the property or force its sale to recover debts unless both spouses consent). This means unless both spouses mess up a judgment creditor cannot get to the real property. This points out major disadvantages to both joint tenancy and tenancy in common. Creditors can attach the tenant’s property. Another big problem with inferior tenancy is when it is conveyed out it can be considered a gift and does not get a step up in basis! Ouch! Yes joint tenancy avoids probate…upon the first transfer from one joint tenant to the other but it doesn’t avoid probate on the death of the last tenant. Basically, if you have a high risk of being sued holding your assets in Tenancy by the entirety is preferable to a living trust with no asset protection provisions. However, holding assets in a good comprehensive estate plan with asset protecting on the mind and specific provisions to obtain full tax advantages is a preferable method of holding title. This way you get your full stepped up basis on the real estate and you also protect those assets from predatory litigation attorneys. Wednesday, July 14, 2010 YEAH! HAWAII DOMESTIC ASSET PROTECTION TRUSTS (HDAPTs)Hello to The Permitted Transfers in Trust Act - Hawaii Senate Bill
2842 passed as Act 182. The Act allows individuals to establish trusts in Hawaii with cash and marketable
securities that (a) last forever (Dynasty), and (b) are protected from the claims of creditors (with exceptions, of course). Very few other jurisdictions offer superior trust laws than Hawaii now offers. a. The Act permits trusts established pursuant to the Hawaii Act to last forever (in perpetuity).
Before in Hawaii and presently in most jurisdictions a trust must end measured by a life (90 years, for example) or 21 years
after the death of a live person. This idea is based on the Rule Against Perpetuities (RAP), i.e. Old English
Crap. Anyway, The Tax Reform Act of 1986 created a new tax know as the dreaded Generation Skipping Transfer
Tax (GSTT). If a trustor or grantor tried to leave assets directly to grandchildren, for example, their
estate would pay a heavy tax for that effort. Lawyers have been able to get around the GSTT using trusts,
however, until now the trust could not last longer than 90 years or a life in being plus 21 years (RAP) in Hawaii.
Now that the Rule Against Perpetuities is virtually abolished (for trusts established under the act) in Hawaii these
trusts can last forever. This allows individuals to leave assets in trust and those assets will never be
charged with the GSTT. Remember that these trusts can only be funded with cash or marketable securities
(not real estate) and must abide by the fiduciary investment standards. However, for many mainland individuals
that own property in Hawaii as a vacation home, having your cash and securities safely stashed at your favorite vacation spot
makes lots of sense. b. The Act allows individuals to form a trust pursuant to the Hawaii
Act 182 and they are permitted to be a beneficiary of the trust. This means that an individual is allowed
to take a portion of their estate (not more than 25%) and transfer it to a Hawaii Act 182 trust that is protected against
their future (unknown) creditors. This allows individuals to establish a nest-egg in Hawaii for themselves
with which they can start over with in case they are wiped out by the rough business life in today’s litigious society.
This should be very attractive to Professionals or Business persons in high litigation risk work arenas.
When the Great Architect of the Universe calls them home, the assets will remain in Hawaii in trust for their heirs
forever and ever and ever. The bad and ugly: The new Act levies a new 1% tax as a one time ding
for transfers into the HDAPT.
7:30 pm hst However, we believe the 1% is a great value when individuals consider the cost and effort involved for vexatious litigants that want to try to get to your funds (they have to fly to Hawaii). It is much easier to hop a flight to other DAPT jurisdictions such as Nevada and Delaware. |
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Asset Protection Asset Protection Asset Protection Asset Protection Domestic Asset Protection Trust Domestic Asset Protection Trust Permitted Transfers to Trust Hawaii Hawaii Hawaii Hawaii Hawaii Hawaii Hawaii Hawaii Honolulu Honolulu Honolulu Honolulu Honolulu trust trust trust trust securities cash cash cash securities kauai kauai kauai maui maui maui real estate real estate realtor realtor real estate agent estate planning estate planning estate plan estate tax estate tax will will will will will will will physician lawsuits lawsuits creditors creditors off shore off shore off shore honolulu lihue lihue lihue lihue lihue kapaa kapaa kapaa princeville princeville trust trust trust asset asset off shore tax avoidance tax avoidance tax irs irs irs irs irs dapt dapt dapt fapt fapt ira ira ira
