A. Introduction



In the right context and for the right client with sufficient property to warrant in depth planning, more sophisticated planning steps are available. It should be kept in mind that it is good practice to fragmentize the risk management process so that not all of the client's eggs are in one basket.

B. The Modular Concept

Often times it is appropriate to plan an asset protection program that is modular in nature. For example, a domestic asset protection trust or offshore trust can be formed by the client's parents or a relative for the benefit of the client's heirs. The trust would then not be a self settled trust and the client would really have no outright interest in the trust. This control trust can then be the owner of some management type entities (LLCs) that can be utilized to provide management services for other types of charging order protected entities. The client can then set up a self settled trust which, in turn, would establish charging order limited entities in which to place the client's assets. The management entity owned by the control trust would be the manager of these other entities.

C. Private Annuity

In the appropriate circumstances one of the most effective estate and risk management planning techniques is the private annuity. Simply stated, a private annuity is a legally binding agreement between two parties (neither of whom has to be in the business of selling annuities) under which one party transfers property to the other party in exchange for an unsecured promise to make periodic payments in a fixed amount for the transferor's life or term of the years. The annuity can really be considered a sale wherein the transferor sells the property to another individual or entity known as the obligor in exchange for the transferee's unsecured promise to make periodic payments to the transferor for the balance of his or her lifetime. The amount of the annuity is computed upon the fair market value of the property conveyed, the annuitant's life expectancy and the applicable federal fund rate at the time of the sale. The annuity transaction can also be structured to provide for the life of the individual and his or her spouse. A private annuity is something like an installment sale except that instead of specifying an exact number of payments, the obligor promises to make payments to the transferor for the rest of his or her life. The annuity payments may begin immediately or they may be deferred for some period of months or years.

D. Other Techniques

There are a multitude of other techniques that can be utilized including advanced life insurance and annuity strategies, collateralization and structured financial products. These techniques should only be implemented under the guidance of an experienced and qualified attorney who practices in these areas.

Copyright (c) 2009 Jeffrey Matsen