POHL & SHORT, P.A. Wealth Protection News

REVIVAL OF THE MULTI-MEMBER, LLC AND BURIAL OF THE SINGLE MEMBER, LLC

2011-05-25T10:01:00.000-07:00

About a year ago, I wrote to let you know that the Florida Supreme Court dismantled the single member LLC in the Olmstead ruling. The court invalidated the statutory creditor protection of LLC interests if the entire LLC is held by one member. The ruling also cast doubt on the statutory protection of multi-member LLC interests. The court ignored the protective differences between corporations and LLC's by invalidating the "charging order" creditor protection of LLC equity. The charging order limits any creditor attempting to reach LLC interest to LLC distributions (if any) payable to the debtor/member. The ruling allows for the seizure of single-member LLC interests and potentially exposes all Florida LLCs.

The Florida legislature has addressed the Olmstead decision with a bill adding the necessary "exclusivity" language to the statute. Once signed by the governor, any creditor of a member will be limited "exclusively" to a charging order. The bill, however, allows the creditor to foreclose the membership interests held in a single member LLC. Foreclosure is conditioned on the creditor proving that LLC distributions (to the creditor) will not satisfy the judgment within a reasonable time. The bill provides no guidance as to the determination of "reasonable time" or what "multiple member" means. Although the new law will protect interests in Florida LLC's owned by more than one member, the courts must decide (i) the extent to which parties related to an LLC founder will be treated as a second member (to avoid single member status) and (ii) the distribution standard required to protect the single member Florida LLC.

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Gary Forster is a Florida native practicing in all areas of business transactions, personal planning and tax matters, both domestic and international. Gary handles a variety of corporate, personal and tax planning matters, ranging from wealth protection and corporate structuring to complex business reorganizations. Mr. Forster has designed and drafted hundreds of asset protection plans involving domestic and foreign corporate and trust structures. Gary is a member of both the Florida Bar (admitted October 8, 1993) and District of Columbia Bars (admitted February 6, 1995), including bar sections for international and tax law. Gary is also a member of the U.S. Tax Court. Gary earned an undergraduate degree from Tufts University in 1990, graduating cum laude, with majors in Spanish Literature and Economics. Gary graduated from law school at the University of Florida in 1993 with honors. Gary earned the Masters in Taxation degree in 1994 from the University of Florida where he was a graduate fellow. Mr. Forster writes and lectures frequently on international tax, corporate law and asset protection issues. Gary speaks Spanish fluently. Circular 230 Disclosure: PURSUANT TO INTERNAL REVENUE SERVICE CIRCULAR 230, WE ARE NOT PERMITTED TO RENDER CERTAIN TAX OPINIONS UNLESS WE CONDUCT AN INDEPENDENT INVESTIGATION OF THE RELEVANT FACTS OF A TRANSACTION. AS THE ABOVE NOTE WAS PREPARED TO PROVIDE GENERAL INFORMATION TO OUR CLIENTS AND CONTACTS, WE HAVE NOT COMPLETED THIS INDEPENDENT INVESTIGATION. THIS ARTICLE MAY NOT THEREFORE BE RELIED UPON AS LEGAL ADVISE OR FOR THE PURPOSE OF AVOIDING FEDERAL TAX PENALTIES OR PROMOTING, MARKETING, OR RECOMMENDING TO ANOTHER PARTY ANY TAX-RELATED MATTERS ADDRESSED HEREIN. ANY TAX ADVICE CONTAINED HEREIN IS NOT INTENDED OR WRITTEN TO BE USED AND CANNOT BE USED BY A TAXPAYER FOR SUCH PURPOSES.

Legal Note - The Drawback to Tenancy by the Entities

2010-12-31T07:07:00.000-08:00

Spouses should avoid the principle disadvantage of TBE ownership – joint liability. Both husband and wife are liable for joint obligations arising from, for example, joint ownership of dangerous and/or active assets (such as automobiles and active businesses). Such joint liability (in turn) exposes other assets held TBE (if not otherwise statutorily exempt from creditors or sheltered in a protective entity). Assets which potentially create joint liability should therefore generally be held in an entity, to shield joint owners from any liability arising from the asset. The entity itself may often be held TBE (generally without any exposure to joint liability arising from the underlying property). Insulation of dangerous assets within a protective entity therefore helps avoid joint exposure to the liability derived from such assets.

Gary Forster is a Florida native practicing in all areas of business transactions, personal planning and tax matters, both domestic and international. Gary handles a variety of corporate, personal and tax planning matters, ranging from wealth protection and corporate structuring to complex business reorganizations. Mr. Forster has designed and drafted hundreds of asset protection plans involving domestic and foreign corporate and trust structures. Gary is a member of both the Florida Bar (admitted October 8, 1993) and District of Columbia Bars (admitted February 6, 1995), including bar sections for international and tax law. Gary is also a member of the U.S. Tax Court. Gary earned an undergraduate degree from Tufts University in 1990, graduating cum laude, with majors in Spanish Literature and Economics. Gary graduated from law school at the University of Florida in 1993 with honors. Gary earned the Masters in Taxation degree in 1994 from the University of Florida where he was a graduate fellow. Mr. Forster writes and lectures frequently on international tax, corporate law and asset protection issues. Gary speaks Spanish fluently. Circular 230 Disclosure: PURSUANT TO INTERNAL REVENUE SERVICE CIRCULAR 230, WE ARE NOT PERMITTED TO RENDER CERTAIN TAX OPINIONS UNLESS WE CONDUCT AN INDEPENDENT INVESTIGATION OF THE RELEVANT FACTS OF A TRANSACTION. AS THE ABOVE NOTE WAS PREPARED TO PROVIDE GENERAL INFORMATION TO OUR CLIENTS AND CONTACTS, WE HAVE NOT COMPLETED THIS INDEPENDENT INVESTIGATION. THIS ARTICLE MAY NOT THEREFORE BE RELIED UPON AS LEGAL ADVISE OR FOR THE PURPOSE OF AVOIDING FEDERAL TAX PENALTIES OR PROMOTING, MARKETING, OR RECOMMENDING TO ANOTHER PARTY ANY TAX-RELATED MATTERS ADDRESSED HEREIN. ANY TAX ADVICE CONTAINED HEREIN IS NOT INTENDED OR WRITTEN TO BE USED AND CANNOT BE USED BY A TAXPAYER FOR SUCH PURPOSES.

Legal Note - The Death of the Single Member LLC in Florida

2010-07-01T07:52:00.000-07:00

Several states (including Florida) provide statutory creditor protection to single member LLCs. Such protections generally limit the legal remedies available to creditors seeking LLC equity. Creditors are generally restricted to only the legal remedy known as a “charging order” against the debtor’s interest in the LLC. The charging order remedy generally limits the creditor to LLC distributions. The creditor may not therefore generally attach voting rights or force liquidation of the LLC.

The U.S. Bankruptcy Court, however, compromised the charging order protection for single member LLCs. In re Albright, the Bankruptcy Court in Colorado ruled in 2003 that a bankruptcy trustee may transfer the interest of a single bankrupt member to creditors of the debtor. The creditors could therefore liquidate the assets of the LLC to pay the debts of the member. The Bankruptcy Court based its decision to disregard state statutory protections (of the single member LLC) on a historical partnership principle. The court determined that the charging order was historically established to protect the partnership and partners other than the debtor. In other words, the partnership charging order protection was implemented to shield partnership assets and the other non-debtor partners. In so ruling, the court negated Colorado’s charging order protections over solo LLCs, in the bankruptcy context. The bankruptcy court therefore apparently invalidated state protections afforded single member LLCs (at least for bankruptcy purposes) even though the applicable state statute specifically entitles single member LLCs to charging order protection.

Outside the bankruptcy setting (where state courts are more tightly bound to limit legislation from the bench), the Florida Supreme Court last week invalidated the prior revision to the Florida Statutes protecting single member LLCs. The case involved a judgment the FTC won against defendants, Shawn Olmstead and Julie Connell. The FTC sought single member LLC interests as part of a collection action to recover more than $10,000,000 in restitution to victims of the defendants’ credit card scam. The Florida Supreme Court ruled that a debtor may be forced to surrender equity in a single member LLC, to satisfy an outstanding judgment.

Similar to the bankruptcy court in Albright, the Florida Supreme Court disregarded the statutory language permitting single member LLCs in Florida. The Court did so by analogizing LLC equity to freely transferable (exposed) corporate stock. The Court further supported the unraveling of the solo LLC by citing the omission by the Florida legislature of the word “exclusive” in the statutory language. In the absence of statutory language limiting creditor remedies against LLC members “exclusively” to the charging order, the Court took the liberty of simply ignoring the basic difference between corporations and LLCs. Such broadening of creditor rights beyond the charging order may actually expose all Florida LLC interests to foreclosure. The case is yet another example of legislation by judicial edict, to permit creditors access to the assets of a bad actor. Although well intended, the case will eliminate legitimate planning opportunities and force existing Florida LLC owners to seek a more protective entity. Chief Justice Lewis correctly noted in his dissenting opinion that “…the majority today steps across the line of statutory interpretation and reaches far into the realm of rewriting this Legislative Act.”

The decision will generally eliminate any advantage of the Florida single member LLC (over the corporation). Moreover, the tenure of the ruling suggests that the Court may later allow foreclosure of equity in multiple member LLCs. The single member LLC will, however, likely remain protected in the few states which have adopted more meticulously drafted legislation. The law of Delaware, for example, specially limits the creditor of an LLC member to a charging order, even if the LLC is held by a single member. Solo LLCs should therefore convert to a more protective jurisdiction or add at least one member.

Gary Forster is a Florida native practicing in all areas of business transactions, personal planning and tax matters, both domestic and international. Gary handles a variety of corporate, personal and tax planning matters, ranging from wealth protection and corporate structuring to complex business reorganizations. Mr. Forster has designed and drafted hundreds of asset protection plans involving domestic and foreign corporate and trust structures. Gary is a member of both the Florida Bar (admitted October 8, 1993) and District of Columbia Bars (admitted February 6, 1995), including bar sections for international and tax law. Gary is also a member of the U.S. Tax Court. Gary earned an undergraduate degree from Tufts University in 1990, graduating cum laude, with majors in Spanish Literature and Economics. Gary graduated from law school at the University of Florida in 1993 with honors. Gary earned the Masters in Taxation degree in 1994 from the University of Florida where he was a graduate fellow. Mr. Forster writes and lectures frequently on international tax, corporate law and asset protection issues. Gary speaks Spanish fluently. Circular 230 Disclosure: PURSUANT TO INTERNAL REVENUE SERVICE CIRCULAR 230, WE ARE NOT PERMITTED TO RENDER CERTAIN TAX OPINIONS UNLESS WE CONDUCT AN INDEPENDENT INVESTIGATION OF THE RELEVANT FACTS OF A TRANSACTION. AS THE ABOVE NOTE WAS PREPARED TO PROVIDE GENERAL INFORMATION TO OUR CLIENTS AND CONTACTS, WE HAVE NOT COMPLETED THIS INDEPENDENT INVESTIGATION. THIS ARTICLE MAY NOT THEREFORE BE RELIED UPON AS LEGAL ADVISE OR FOR THE PURPOSE OF AVOIDING FEDERAL TAX PENALTIES OR PROMOTING, MARKETING, OR RECOMMENDING TO ANOTHER PARTY ANY TAX-RELATED MATTERS ADDRESSED HEREIN. ANY TAX ADVICE CONTAINED HEREIN IS NOT INTENDED OR WRITTEN TO BE USED AND CANNOT BE USED BY A TAXPAYER FOR SUCH PURPOSES.

Legal Note - Future Creditors

2010-04-01T10:46:00.000-07:00

In prior legal notes we discussed the rights of present and “future” creditors to reach assets transferred by the debtor to avoid paying the creditor. The fraudulent transfer acts (of the various states) therefore generally empower creditors (existing at the time of an asset transfer) to reach assets transferred outside the grasp of a creditor. The same remedy is available to reasonable foreseeable future creditors (such as guaranty and contract claimants) who have not yet obtained a judgment at the time of the transfer.

Although a debtor may be encumbered with substantial personal debt (and will likely face future creditors), planning is available to protect assets from potential claims. A physician, may, for example, protect exposed assets (by transfer to a protective structure) against unknown medical malpractice claims. As long as the client, patient, customer, etc., is unknown or could not be reasonable expected to make a financial claim (at the time of the transfer) the transfer will generally be effective to protect otherwise exposed assets from such a potential claimant. The availability of asset protection is therefore based on the facts and circumstances of the specific case.

Gary Forster is a Florida native practicing in all areas of business transactions, personal planning and tax matters, both domestic and international. Gary handles a variety of corporate, personal and tax planning matters, ranging from wealth protection and corporate structuring to complex business reorganizations. Mr. Forster has designed and drafted hundreds of asset protection plans involving domestic and foreign corporate and trust structures. Gary is a member of both the Florida Bar (admitted October 8, 1993) and District of Columbia Bars (admitted February 6, 1995), including bar sections for international and tax law. Gary is also a member of the U.S. Tax Court. Gary earned an undergraduate degree from Tufts University in 1990, graduating cum laude, with majors in Spanish Literature and Economics. Gary graduated from law school at the University of Florida in 1993 with honors. Gary earned the Masters in Taxation degree in 1994 from the University of Florida where he was a graduate fellow. Mr. Forster writes and lectures frequently on international tax, corporate law and asset protection issues. Gary speaks Spanish fluently.

Circular 230 Disclosure: PURSUANT TO INTERNAL REVENUE SERVICE CIRCULAR 230, WE ARE NOT PERMITTED TO RENDER CERTAIN TAX OPINIONS UNLESS WE CONDUCT AN INDEPENDENT INVESTIGATION OF THE RELEVANT FACTS OF A TRANSACTION. AS THE ABOVE NOTE WAS PREPARED TO PROVIDE GENERAL INFORMATION TO OUR CLIENTS AND CONTACTS, WE HAVE NOT COMPLETED THIS INDEPENDENT INVESTIGATION. THIS ARTICLE MAY NOT THEREFORE BE RELIED UPON AS LEGAL ADVISE OR FOR THE PURPOSE OF AVOIDING FEDERAL TAX PENALTIES OR PROMOTING, MARKETING, OR RECOMMENDING TO ANOTHER PARTY ANY TAX-RELATED MATTERS ADDRESSED HEREIN. ANY TAX ADVICE CONTAINED HEREIN IS NOT INTENDED OR WRITTEN TO BE USED AND CANNOT BE USED BY A TAXPAYER FOR SUCH PURPOSES.

Legal Note – Transfers in Contemplation of Bankruptcy

2010-02-01T08:08:00.000-08:00

The U.S. Bankruptcy Code contains provisions similar to the various state fraudulent transfer acts. The bankruptcy court may disregard any property transfer made within two years of bankruptcy, if the transfer was made to defraud creditors. Generally, the bankruptcy code finds voidable fraudulent transfers made (i) with the intent to defraud, hinder and delay creditors, or (ii) for less than reasonably equivalent value, while the debtor was insolvent. Therefore, any transfer within the two year window made with the intent to avoid any present or future creditor may be reversed by the bankruptcy court.

The 2005 Bankruptcy Abuse, Prevention and Protection Act imposes an additional ten year look-back on transfers made for asset protection purposes. The ten year rule generally permits the bankruptcy trustee to void any transfer made within a decade of bankruptcy, if made (i) to a “self-settled trust” (for which the debtor is the grantor and beneficiary) and (ii) with the intent to avoid a present or future creditor. The rule therefore creates an almost indefinite period during which assets used to fund a trust (benefiting the grantor) may be pursued. Any U.S. grantor to an asset protection trust (foreign or domestic) must therefore make absolutely certain that funding a trust for his own benefit does not result in insolvency or bring into question the grantor’s ability to pay existing (and reasonably expected future) debts. The trust should, of course, be prepared by a seasoned attorney.

Gary Forster is a Florida native practicing in all areas of business transactions, personal planning and tax matters, both domestic and international. Gary handles a variety of corporate, personal and tax planning matters, ranging from wealth protection and corporate structuring to complex business reorganizations. Mr. Forster has designed and drafted hundreds of asset protection plans involving domestic and foreign corporate and trust structures. Gary is a member of both the Florida Bar (admitted October 8, 1993) and District of Columbia Bars (admitted February 6, 1995), including bar sections for international and tax law. Gary is also a member of the U.S. Tax Court. Gary earned an undergraduate degree from Tufts University in 1990, graduating cum laude, with majors in Spanish Literature and Economics. Gary graduated from law school at the University of Florida in 1993 with honors. Gary earned the Masters in Taxation degree in 1994 from the University of Florida where he was a graduate fellow. Mr. Forster writes and lectures frequently on international tax, corporate law and asset protection issues. Gary speaks Spanish fluently.

Circular 230 Disclosure: PURSUANT TO INTERNAL REVENUE SERVICE CIRCULAR 230, WE ARE NOT PERMITTED TO RENDER CERTAIN TAX OPINIONS UNLESS WE CONDUCT AN INDEPENDENT INVESTIGATION OF THE RELEVANT FACTS OF A TRANSACTION. AS THE ABOVE NOTE WAS PREPARED TO PROVIDE GENERAL INFORMATION TO OUR CLIENTS AND CONTACTS, WE HAVE NOT COMPLETED THIS INDEPENDENT INVESTIGATION. THIS ARTICLE MAY NOT THEREFORE BE RELIED UPON AS LEGAL ADVISE OR FOR THE PURPOSE OF AVOIDING FEDERAL TAX PENALTIES OR PROMOTING, MARKETING, OR RECOMMENDING TO ANOTHER PARTY ANY TAX-RELATED MATTERS ADDRESSED HEREIN. ANY TAX ADVICE CONTAINED HEREIN IS NOT INTENDED OR WRITTEN TO BE USED AND CANNOT BE USED BY A TAXPAYER FOR SUCH PURPOSES.

Legal Note - Life Insurance Cash Surrender Value - Florida Protections

2010-01-01T07:41:00.000-08:00

Florida protects the cash surrender value of certain life insurance policies. Unlike the Federal protections described in last month’s legal note, Florida protects cash values only from creditors of the insured. Therefore if a spouse or business associate owns the policy (on a different insured), the cash value of the policy is not protected from creditors of the policy owner. If therefore protecting the cash value of a large life insurance policy is the goal, the Florida insured must own the policy.

Note that proceeds of a policy (distributed upon the death of the insured) are also exempt from creditors of the insured. Unlike the Federal protection, the proceeds are not, however, protected from creditors of the beneficiary. One potential means of avoiding creditors of a beneficiary would be to place the insurance policy (and its proceeds) in a trust benefiting the intended recipient.

Insurance coverage should, of course, form only part of a complete estate and asset protection plan developed by a seasoned professional.

Gary Forster is a Florida native practicing in all areas of business transactions, personal planning and tax matters, both domestic and international. Gary handles a variety of corporate, personal and tax planning matters, ranging from wealth protection and corporate structuring to complex business reorganizations. Mr. Forster has designed and drafted hundreds of asset protection plans involving domestic and foreign corporate and trust structures. Gary is a member of both the Florida Bar (admitted October 8, 1993) and District of Columbia Bars (admitted February 6, 1995), including bar sections for international and tax law. Gary is also a member of the U.S. Tax Court. Gary earned an undergraduate degree from Tufts University in 1990, graduating cum laude, with majors in Spanish Literature and Economics. Gary graduated from law school at the University of Florida in 1993 with honors. Gary earned the Masters in Taxation degree in 1994 from the University of Florida where he was a graduate fellow. Mr. Forster writes and lectures frequently on international tax, corporate law and asset protection issues. Gary speaks Spanish fluently.

Circular 230 Disclosure: PURSUANT TO INTERNAL REVENUE SERVICE CIRCULAR 230, WE ARE NOT PERMITTED TO RENDER CERTAIN TAX OPINIONS UNLESS WE CONDUCT AN INDEPENDENT INVESTIGATION OF THE RELEVANT FACTS OF A TRANSACTION. AS THE ABOVE NOTE WAS PREPARED TO PROVIDE GENERAL INFORMATION TO OUR CLIENTS AND CONTACTS, WE HAVE NOT COMPLETED THIS INDEPENDENT INVESTIGATION. THIS ARTICLE MAY NOT THEREFORE BE RELIED UPON AS LEGAL ADVISE OR FOR THE PURPOSE OF AVOIDING FEDERAL TAX PENALTIES OR PROMOTING, MARKETING, OR RECOMMENDING TO ANOTHER PARTY ANY TAX-RELATED MATTERS ADDRESSED HEREIN. ANY TAX ADVICE CONTAINED HEREIN IS NOT INTENDED OR WRITTEN TO BE USED AND CANNOT BE USED BY A TAXPAYER FOR SUCH PURPOSES.

Legal Note - Protecting Life Insurance Assets

2009-12-01T07:28:00.000-08:00

Several clients have recently inquired regarding available creditor protection for life insurance cash values and proceeds. We first discuss the federal protections.

The federal bankruptcy code contains a creditor exemption for the cash value of life insurance policies owned by the debtor. The insured, must also be either the debtor or a dependent of the debtor. The protection, however, generally exempts only up to about $10,000 of the cash value.

The Bankruptcy Code also exempts the debtor’s entitlement to life insurance proceeds, but without a dollar limitation. The proceeds must, however, be “reasonably necessary” for the support of the debtor and any dependent of the debtor. Moreover, the debtor must have been a dependent of the insured at the time of the insured’s death.

The focus of the federal protection is therefore apparently to protect the income replacement and liquidity benefits to the insured’s family (not to protect the cash value of an active policy). The exemption therefore fails to sufficiently protect current value to allow for substantial lifetime asset protection planning.

Next month we explain the contrasting creditor protection afforded by the Florida legislature.

Gary Forster is a Florida native practicing in all areas of business transactions, personal planning and tax matters, both domestic and international. Gary handles a variety of corporate, personal and tax planning matters, ranging from wealth protection and corporate structuring to complex business reorganizations. Mr. Forster has designed and drafted hundreds of asset protection plans involving domestic and foreign corporate and trust structures. Gary is a member of both the Florida Bar (admitted October 8, 1993) and District of Columbia Bars (admitted February 6, 1995), including bar sections for international and tax law. Gary is also a member of the U.S. Tax Court. Gary earned an undergraduate degree from Tufts University in 1990, graduating cum laude, with majors in Spanish Literature and Economics. Gary graduated from law school at the University of Florida in 1993 with honors. Gary earned the Masters in Taxation degree in 1994 from the University of Florida where he was a graduate fellow. Mr. Forster writes and lectures frequently on international tax, corporate law and asset protection issues. Gary speaks Spanish fluently.

Circular 230 Disclosure: PURSUANT TO INTERNAL REVENUE SERVICE CIRCULAR 230, WE ARE NOT PERMITTED TO RENDER CERTAIN TAX OPINIONS UNLESS WE CONDUCT AN INDEPENDENT INVESTIGATION OF THE RELEVANT FACTS OF A TRANSACTION. AS THE ABOVE NOTE WAS PREPARED TO PROVIDE GENERAL INFORMATION TO OUR CLIENTS AND CONTACTS, WE HAVE NOT COMPLETED THIS INDEPENDENT INVESTIGATION. THIS ARTICLE MAY NOT THEREFORE BE RELIED UPON AS LEGAL ADVISE OR FOR THE PURPOSE OF AVOIDING FEDERAL TAX PENALTIES OR PROMOTING, MARKETING, OR RECOMMENDING TO ANOTHER PARTY ANY TAX-RELATED MATTERS ADDRESSED HEREIN. ANY TAX ADVICE CONTAINED HEREIN IS NOT INTENDED OR WRITTEN TO BE USED AND CANNOT BE USED BY A TAXPAYER FOR SUCH PURPOSES.

Legal Note - Choosing the Right LLC #2

2009-10-01T10:44:00.000-07:00

Last month we discussed the lack of public awareness regarding the often substantial differences between the LLCs offered by the various states. The important distinction in protection lies in the relative strength of the applicable “charging order” statutory language.

The charging order concept was first proposed in 19th century England to protect investors from debtor partners. The concept was imported to the U.S. in the 1914 Uniform Partnership Act (“UPA”). From its inception, the concept limited the legal remedies available to a creditor attempting to reach the debtor’s partnership interest. Many states adopted (some or all of) the Uniform Partnership Act to restrict creditors to a “charging order” on distributions payable to the debtor partner. The UPA therefore established the first U.S. protection of partnership equity to shield owners from the personal liabilities of their partners.

Several additional “uniform” acts have been drafted over the last century to provide a suggested format for the codification of partnership and LLC law. Although the charging order concept is included in the UPA and later Uniform Limited Partnership Act, the strength of the protection described in each act varies dramatically. The preferable statutory language has generally developed from the Revised Uniform Limited Partnership Act of 1976 (“RULPA”). The applicable provision limits any creditor of a member to solely a charging order on the debtor’s membership interest. Unfortunately, several states have failed to implement such language and actually allow for attachment and foreclosure of the LLC interest by a creditor.

Some of the states which have adopted charging order statutes similar to the RULPA provision include Arizona, Delaware, New Jersey, Connecticut, Minnesota and Nevada. Note, however, that many state courts have independently chipped away at the applicable statutory protections. Clients should therefore always consult an attorney familiar with the protections desired.

Gary Forster is a Florida native practicing in all areas of business transactions, personal planning and tax matters, both domestic and international. Gary handles a variety of corporate, personal and tax planning matters, ranging from wealth protection and corporate structuring to complex business reorganizations. Mr. Forster has designed and drafted hundreds of asset protection plans involving domestic and foreign corporate and trust structures. Gary is a member of both the Florida Bar (admitted October 8, 1993) and District of Columbia Bars (admitted February 6, 1995), including bar sections for international and tax law. Gary is also a member of the U.S. Tax Court. Gary earned an undergraduate degree from Tufts University in 1990, graduating cum laude, with majors in Spanish Literature and Economics. Gary graduated from law school at the University of Florida in 1993 with honors. Gary earned the Masters in Taxation degree in 1994 from the University of Florida where he was a graduate fellow. Mr. Forster writes and lectures frequently on international tax, corporate law and asset protection issues. Gary speaks Spanish fluently.

Circular 230 Disclosure: PURSUANT TO INTERNAL REVENUE SERVICE CIRCULAR 230, WE ARE NOT PERMITTED TO RENDER CERTAIN TAX OPINIONS UNLESS WE CONDUCT AN INDEPENDENT INVESTIGATION OF THE RELEVANT FACTS OF A TRANSACTION. AS THE ABOVE NOTE WAS PREPARED TO PROVIDE GENERAL INFORMATION TO OUR CLIENTS AND CONTACTS, WE HAVE NOT COMPLETED THIS INDEPENDENT INVESTIGATION. THIS ARTICLE MAY NOT THEREFORE BE RELIED UPON AS LEGAL ADVISE OR FOR THE PURPOSE OF AVOIDING FEDERAL TAX PENALTIES OR PROMOTING, MARKETING, OR RECOMMENDING TO ANOTHER PARTY ANY TAX-RELATED MATTERS ADDRESSED HEREIN. ANY TAX ADVICE CONTAINED HEREIN IS NOT INTENDED OR WRITTEN TO BE USED AND CANNOT BE USED BY A TAXPAYER FOR SUCH PURPOSES.

Legal Note – Choosing The Right LLC

2009-09-01T07:41:00.000-07:00

All fifty states and several foreign jurisdictions have passed LLC organizational statutes. The protections available, however, vary dramatically from state to state (and country to country).

As discussed in prior legal notes, LLCs generally insulate owners (known as “members”) from company liabilities through “inside” asset protection (similar to corporations). Certain states (and countries) offer a second “outside” protection (not offered by corporations). “Outside” LLC protection limits a creditor of a member to a “charging order.” The charging order entitles the creditor (suing to acquire LLC equity) only to distributions associated with the LLC interest. The outside asset protection (if properly implemented) therefore generally eliminates involuntary equity transfers.

Although several states offer highly protective LLCs, other state statutes actually permit attachment and foreclosure of LLC interests. Only if the right state (or foreign) statute is chosen (and properly implemented) will LLC equity be placed beyond the reach of creditors. To understand the differences between the state statutes, one must understand the origins of the law adopted by the respective states. Next month we will provide some historical detail on the more debtor friendly “charging order” jurisdictions.

Gary Forster is a Florida native practicing in all areas of business transactions, personal planning and tax matters, both domestic and international. Gary handles a variety of corporate, personal and tax planning matters, ranging from wealth protection and corporate structuring to complex business reorganizations. Mr. Forster has designed and drafted hundreds of asset protection plans involving domestic and foreign corporate and trust structures. Gary is a member of both the Florida Bar (admitted October 8, 1993) and District of Columbia Bars (admitted February 6, 1995), including bar sections for international and tax law. Gary is also a member of the U.S. Tax Court. Gary earned an undergraduate degree from Tufts University in 1990, graduating cum laude, with majors in Spanish Literature and Economics. Gary graduated from law school at the University of Florida in 1993 with honors. Gary earned the Masters in Taxation degree in 1994 from the University of Florida where he was a graduate fellow. Mr. Forster writes and lectures frequently on international tax, corporate law and asset protection issues. Gary speaks Spanish fluently.

Circular 230 Disclosure: PURSUANT TO INTERNAL REVENUE SERVICE CIRCULAR 230, WE ARE NOT PERMITTED TO RENDER CERTAIN TAX OPINIONS UNLESS WE CONDUCT AN INDEPENDENT INVESTIGATION OF THE RELEVANT FACTS OF A TRANSACTION. AS THE ABOVE NOTE WAS PREPARED TO PROVIDE GENERAL INFORMATION TO OUR CLIENTS AND CONTACTS, WE HAVE NOT COMPLETED THIS INDEPENDENT INVESTIGATION. THIS ARTICLE MAY NOT THEREFORE BE RELIED UPON AS LEGAL ADVISE OR FOR THE PURPOSE OF AVOIDING FEDERAL TAX PENALTIES OR PROMOTING, MARKETING, OR RECOMMENDING TO ANOTHER PARTY ANY TAX-RELATED MATTERS ADDRESSED HEREIN. ANY TAX ADVICE CONTAINED HEREIN IS NOT INTENDED OR WRITTEN TO BE USED AND CANNOT BE USED BY A TAXPAYER FOR SUCH PURPOSES.

Legal Note - Foreign Annuities

2009-08-01T06:43:00.000-07:00

Many Floridians are aware of the creditor protection afforded Florida annuities. Interestingly, foreign annuities may offer even greater protection. Several foreign countries offer creditor protected annuities. Such foreign annuities may not generally be reached by creditors unless funded to avoid a creditor claim. Proving such a fraudulent conveyance is, however, generally difficult, in light of the typical judicial policy to promote investment in the off-shore financial system. Moreover, several off-shore havens do not allow for collection of foreign judgments within their borders. Therefore a judgment creditor in, for example, New York, cannot generally use its judgment to collect against an annuity written in Switzerland. Moreover, several jurisdictions have passed “anti-duress” laws. Such laws are intended to eliminate the forced repatriation of annuity funds to a more creditor friendly jurisdiction. The anti-duress rules generally therefore prohibit the issuing insurance company (in the debtor friendly country) from transferring annuity assets to a creditor friendly jurisdiction, even if demanded by a U.S. (or other) court.

Gary Forster is a Florida native practicing in all areas of business transactions, personal planning and tax matters, both domestic and international. Gary handles a variety of corporate, personal and tax planning matters, ranging from wealth protection and corporate structuring to complex business reorganizations. Mr. Forster has designed and drafted hundreds of asset protection plans involving domestic and foreign corporate and trust structures. Gary is a member of both the Florida Bar (admitted October 8, 1993) and District of Columbia Bars (admitted February 6, 1995), including bar sections for international and tax law. Gary is also a member of the U.S. Tax Court. Gary earned an undergraduate degree from Tufts University in 1990, graduating cum laude, with majors in Spanish Literature and Economics. Gary graduated from law school at the University of Florida in 1993 with honors. Gary earned the Masters in Taxation degree in 1994 from the University of Florida where he was a graduate fellow. Mr. Forster writes and lectures frequently on international tax, corporate law and asset protection issues. Gary speaks Spanish fluently.

Circular 230 Disclosure: PURSUANT TO INTERNAL REVENUE SERVICE CIRCULAR 230, WE ARE NOT PERMITTED TO RENDER CERTAIN TAX OPINIONS UNLESS WE CONDUCT AN INDEPENDENT INVESTIGATION OF THE RELEVANT FACTS OF A TRANSACTION. AS THE ABOVE NOTE WAS PREPARED TO PROVIDE GENERAL INFORMATION TO OUR CLIENTS AND CONTACTS, WE HAVE NOT COMPLETED THIS INDEPENDENT INVESTIGATION. THIS ARTICLE MAY NOT THEREFORE BE RELIED UPON AS LEGAL ADVISE OR FOR THE PURPOSE OF AVOIDING FEDERAL TAX PENALTIES OR PROMOTING, MARKETING, OR RECOMMENDING TO ANOTHER PARTY ANY TAX-RELATED MATTERS ADDRESSED HEREIN. ANY TAX ADVICE CONTAINED HEREIN IS NOT INTENDED OR WRITTEN TO BE USED AND CANNOT BE USED BY A TAXPAYER FOR SUCH PURPOSES.

Legal Note – Bankruptcy and the Loss of Asset Protection

2009-06-01T08:01:00.000-07:00

The danger of filing bankruptcy is the conversion of otherwise exempt assets to assets available to a bankruptcy trustee. Certain assets unavailable to creditors in state court may become available to the same creditors in bankruptcy. For example, creditors seeking to reach equity held by a Florida debtor in his or her home may not generally force the sale of the home through a state court collection action. If, however, the creditor(s) can force the debtor into bankruptcy and prove that the debtor purchased the home within 1, 215 days of the bankruptcy filing, the house will likely be sold as part of the bankruptcy estate, leaving the debtor with only $136,875 of protected proceeds.

Bankruptcy may therefore be a less friendly alternative to debtors attempting to retain assets protected under state law. Under certain circumstances, voluntary bankruptcy (even for the insolvent debtor) should therefore be avoided. Unfortunately, creditor(s) may force a debtor into involuntary bankruptcy to reach otherwise exempt assets. Only a single creditor is required to force a debtor into bankruptcy if the debtor has fewer than twelve creditors. If the debtor has more than twelve creditors, three creditors may force the debtor into bankruptcy. Ironically, bankruptcy can therefore sometimes be used as a creditor remedy to reach otherwise exempt assets.

Gary Forster is a Florida native practicing in all areas of business transactions, personal planning and tax matters, both domestic and international. Gary handles a variety of corporate, personal and tax planning matters, ranging from wealth protection and corporate structuring to complex business reorganizations. Mr. Forster has designed and drafted hundreds of asset protection plans involving domestic and foreign corporate and trust structures. Gary is a member of both the Florida Bar (admitted October 8, 1993) and District of Columbia Bars (admitted February 6, 1995), including bar sections for international and tax law. Gary is also a member of the U.S. Tax Court. Gary earned an undergraduate degree from Tufts University in 1990, graduating cum laude, with majors in Spanish Literature and Economics. Gary graduated from law school at the University of Florida in 1993 with honors. Gary earned the Masters in Taxation degree in 1994 from the University of Florida where he was a graduate fellow. Mr. Forster writes and lectures frequently on international tax, corporate law and asset protection issues. Gary speaks Spanish fluently.

Circular 230 Disclosure: PURSUANT TO INTERNAL REVENUE SERVICE CIRCULAR 230, WE ARE NOT PERMITTED TO RENDER CERTAIN TAX OPINIONS UNLESS WE CONDUCT AN INDEPENDENT INVESTIGATION OF THE RELEVANT FACTS OF A TRANSACTION. AS THE ABOVE NOTE WAS PREPARED TO PROVIDE GENERAL INFORMATION TO OUR CLIENTS AND CONTACTS, WE HAVE NOT COMPLETED THIS INDEPENDENT INVESTIGATION. THIS ARTICLE MAY NOT THEREFORE BE RELIED UPON AS LEGAL ADVISE OR FOR THE PURPOSE OF AVOIDING FEDERAL TAX PENALTIES OR PROMOTING, MARKETING, OR RECOMMENDING TO ANOTHER PARTY ANY TAX-RELATED MATTERS ADDRESSED HEREIN. ANY TAX ADVICE CONTAINED HEREIN IS NOT INTENDED OR WRITTEN TO BE USED AND CANNOT BE USED BY A TAXPAYER FOR SUCH PURPOSES.

Legal Note – Bankruptcy / General Overview

2009-05-01T06:53:00.000-07:00

In light of the frequency of calls we now receive inquiring as to the benefits of bankruptcy, the next few legal notes explain some of the costs and benefits of the bankruptcy option. This month we provide some general background.

The federal bankruptcy process generally provides a means of discharging indebtedness owned by an insolvent debtor. The assets of the debtor become the property of the “bankruptcy estate” paid to creditors based on rules of preference.

Generally three types of bankruptcy are utilized by individuals and businesses to discharge indebtedness. Chapter 7 contemplates a “snapshot” liquidation on the date of filing. Non-exempt assets are therefore compiled for the benefit of creditors whose debts are discharged. Money earned by the debtor after filing bankruptcy (i.e., after the snapshot) is not included in the bankruptcy estate available to creditors at the time of filing. The debtor is generally discharged from most all indebtedness within ninety (90) days of filing and provides a “fresh start”.

Chapter 13 affords individual debtors the ability to establish a repayment plan. Only individuals with unsecured debts less than $336,900 and secured debts of less than $1,010,650 are eligible for Chapter 13 bankruptcy. If a debtor is able to repay the restructured debt, the debtor may keep his or her assets.

Chapter 11 is generally only available to business entities and individuals with significant assets who owe debts exceeding the Chapter 13 limits. Under Chapter 11, the debtor remains “in possession” of its assets and proposes a debt payment plan. Under certain circumstances, the debtor may alternatively force the creditor(s) to accept (or “cram down”) a payment plan. At the end of the payment plan, if the debtor has complied with the plan, the debtor retains its assets.

Gary Forster is a Florida native practicing in all areas of business transactions, personal planning and tax matters, both domestic and international. Gary handles a variety of corporate, personal and tax planning matters, ranging from wealth protection and corporate structuring to complex business reorganizations. Mr. Forster has designed and drafted hundreds of asset protection plans involving domestic and foreign corporate and trust structures. Gary is a member of both the Florida Bar (admitted October 8, 1993) and District of Columbia Bars (admitted February 6, 1995), including bar sections for international and tax law. Gary is also a member of the U.S. Tax Court. Gary earned an undergraduate degree from Tufts University in 1990, graduating cum laude, with majors in Spanish Literature and Economics. Gary graduated from law school at the University of Florida in 1993 with honors. Gary earned the Masters in Taxation degree in 1994 from the University of Florida where he was a graduate fellow. Mr. Forster writes and lectures frequently on international tax, corporate law and asset protection issues. Gary speaks Spanish fluently.

Circular 230 Disclosure: PURSUANT TO INTERNAL REVENUE SERVICE CIRCULAR 230, WE ARE NOT PERMITTED TO RENDER CERTAIN TAX OPINIONS UNLESS WE CONDUCT AN INDEPENDENT INVESTIGATION OF THE RELEVANT FACTS OF A TRANSACTION. AS THE ABOVE NOTE WAS PREPARED TO PROVIDE GENERAL INFORMATION TO OUR CLIENTS AND CONTACTS, WE HAVE NOT COMPLETED THIS INDEPENDENT INVESTIGATION. THIS ARTICLE MAY NOT THEREFORE BE RELIED UPON AS LEGAL ADVISE OR FOR THE PURPOSE OF AVOIDING FEDERAL TAX PENALTIES OR PROMOTING, MARKETING, OR RECOMMENDING TO ANOTHER PARTY ANY TAX-RELATED MATTERS ADDRESSED HEREIN. ANY TAX ADVICE CONTAINED HEREIN IS NOT INTENDED OR WRITTEN TO BE USED AND CANNOT BE USED BY A TAXPAYER FOR SUCH PURPOSES.

Legal Note - Attribution of Auto Liability

2009-04-01T12:44:00.000-07:00

In Florida, the owner of the car may be responsible for its operation by another person. The attribution of liability regarding an automobile from one person to another is generally based in the theory of “strict liability.” According to Black’s Law Dictionary, strict liability means liability without fault.

Liability for accidents involving a car in Florida may therefore expose the owner of the car even if the owner is otherwise unrelated to the accident. An individual owner of a vehicle is therefore strictly liable for the operation of the vehicle by a permissive user. Subject to certain limitations, if the owner therefore lends the auto to a friend in Florida, the owner then becomes liable for damages caused by the friend. [FL. Stat. §§ 324.021 (9)(b)(3)] The different state statutes include a variety of limitations and variations on the scope of strict liability.

Florida further attributes liability to the car owner through a doctrine known as negligent entrustment of a dangerous instrumentality. If (i) a vehicle owner knew, should have known, or should have reason to know that the borrower was incompetent, unfit, inexperienced or reckless, (ii) the entrustment of the vehicle created an appreciable risk of harm to others and (iii) the harm was caused by the negligence of the entrustor, the plaintiff may prove a case for negligent entrustment.

The most obvious step therefore in avoiding owner liability for operation by someone else is to avoid lending your car to others. Beyond the obvious, insurance policies are available nationally which cover the head of household, spouse and children (a common source of attribution). Additionally, umbrella liability coverage to augment auto and homeowners’ coverage is generally available from one to five million dollars. Such coverage may be reasonably priced and will eliminate much of the liability associated with car and home accidents. Moreover, the umbrella policy can be underwritten to cover sources of liability such as boats and RVs.

Gary Forster is a Florida native practicing in all areas of business transactions, personal planning and tax matters, both domestic and international. Gary handles a variety of corporate, personal and tax planning matters, ranging from wealth protection and corporate structuring to complex business reorganizations. Mr. Forster has designed and drafted hundreds of asset protection plans involving domestic and foreign corporate and trust structures. Gary is a member of both the Florida Bar (admitted October 8, 1993) and District of Columbia Bars (admitted February 6, 1995), including bar sections for international and tax law. Gary is also a member of the U.S. Tax Court. Gary earned an undergraduate degree from Tufts University in 1990, graduating cum laude, with majors in Spanish Literature and Economics. Gary graduated from law school at the University of Florida in 1993 with honors. Gary earned the Masters in Taxation degree in 1994 from the University of Florida where he was a graduate fellow. Mr. Forster writes and lectures frequently on international tax, corporate law and asset protection issues. Gary speaks Spanish fluently.

Circular 230 Disclosure: PURSUANT TO INTERNAL REVENUE SERVICE CIRCULAR 230, WE ARE NOT PERMITTED TO RENDER CERTAIN TAX OPINIONS UNLESS WE CONDUCT AN INDEPENDENT INVESTIGATION OF THE RELEVANT FACTS OF A TRANSACTION. AS THE ABOVE NOTE WAS PREPARED TO PROVIDE GENERAL INFORMATION TO OUR CLIENTS AND CONTACTS, WE HAVE NOT COMPLETED THIS INDEPENDENT INVESTIGATION. THIS ARTICLE MAY NOT THEREFORE BE RELIED UPON AS LEGAL ADVISE OR FOR THE PURPOSE OF AVOIDING FEDERAL TAX PENALTIES OR PROMOTING, MARKETING, OR RECOMMENDING TO ANOTHER PARTY ANY TAX-RELATED MATTERS ADDRESSED HEREIN. ANY TAX ADVICE CONTAINED HEREIN IS NOT INTENDED OR WRITTEN TO BE USED AND CANNOT BE USED BY A TAXPAYER FOR SUCH PURPOSES.

Legal Note – Reasons for Offshore Planning

2009-03-09T06:34:00.001-07:00

Several clients have recently inquired about the benefits of offshore planning. We below summarize some of the principle reasons for offshore planning:
1. U.S. courts generally have no authority to govern property beyond our borders. Without jurisdiction over foreign property, domestic courts cannot reach such property to satisfy U.S. debts.
2. Domestically, a judgment holder can overcome the jurisdictional obstacles of obtaining a judgment in one state and reaching the debtor’s property in a different state. The creditor simply records the judgment in the state where property may be attached. The judgment then becomes enforceable in the second state. U.S. judgments are, however, generally not recordable (or enforceable) in debtor friendly foreign jurisdictions. If foreign collection is required, the U.S. judgment creditor must actually again prove his or her case for damages in the foreign court to record a judgment in the offshore jurisdiction.
3. Offshore jurisdictions generally limit fraudulent transfer remedies available to creditors. Unlike U.S. states which generally allow creditors several years to file suit to recover assets fraudulently transferred, debtor havens limit fraudulent transfer claims to a very short recovery period. The short statute of limitations therefore quickly forecloses the creditor’s ability to reach assets previously transferred to avoid payment.
In light of the potential benefits of offshore planning, it should be considered as a facet of any sophisticated asset protection plan.

Gary Forster is a Florida native practicing in all areas of business transactions, personal planning and tax matters, both domestic and international. Gary handles a variety of corporate, personal and tax planning matters, ranging from wealth protection and corporate structuring to complex business reorganizations. Mr. Forster has designed and drafted hundreds of asset protection plans involving domestic and foreign corporate and trust structures. Gary is a member of both the Florida Bar (admitted October 8, 1993) and District of Columbia Bars (admitted February 6, 1995), including bar sections for international and tax law. Gary is also a member of the U.S. Tax Court. Gary earned an undergraduate degree from Tufts University in 1990, graduating cum laude, with majors in Spanish Literature and Economics. Gary graduated from law school at the University of Florida in 1993 with honors. Gary earned the Masters in Taxation degree in 1994 from the University of Florida where he was a graduate fellow. Mr. Forster writes and lectures frequently on international tax, corporate law and asset protection issues. Gary speaks Spanish fluently.

Circular 230 Disclosure: PURSUANT TO INTERNAL REVENUE SERVICE CIRCULAR 230, WE ARE NOT PERMITTED TO RENDER CERTAIN TAX OPINIONS UNLESS WE CONDUCT AN INDEPENDENT INVESTIGATION OF THE RELEVANT FACTS OF A TRANSACTION. AS THE ABOVE NOTE WAS PREPARED TO PROVIDE GENERAL INFORMATION TO OUR CLIENTS AND CONTACTS, WE HAVE NOT COMPLETED THIS INDEPENDENT INVESTIGATION. THIS ARTICLE MAY NOT THEREFORE BE RELIED UPON AS LEGAL ADVISE OR FOR THE PURPOSE OF AVOIDING FEDERAL TAX PENALTIES OR PROMOTING, MARKETING, OR RECOMMENDING TO ANOTHER PARTY ANY TAX-RELATED MATTERS ADDRESSED HEREIN. ANY TAX ADVICE CONTAINED HEREIN IS NOT INTENDED OR WRITTEN TO BE USED AND CANNOT BE USED BY A TAXPAYER FOR SUCH PURPOSES.

Legal Note – Race for Judgment

2009-02-03T11:41:00.000-08:00

Last month we discussed the “choice of law” issue. An additional issue raised by the choice of law question is: If the applicable law is clear, which state court will interpret the law governing a creditor’s claim? The establishment of a court’s jurisdiction to hear the case is based on the contacts of the parties to a particular state. Jurisdiction therefore often falls clearly in one state because all parties, the debt, etc., are based in that state. If, however, the litigants, contracts, trusts, etc. are in different states, the parties may engage in a “race for judgment” in the most favorable jurisdiction.

If, for example, a creditor has the opportunity (based on the contacts of the parties) to file suit in a creditor friendly state, the creditor would be well advised to do so. Depending on the facts of the case, the debtor would likely suffer a liberal interpretation of the law governing his plan. This can occur even though the law governing the applicable protections originates in a state distinct from the state court interpreting the law. The judgment (likely favoring the creditor) will become enforceable in every state pursuant to the Full Faith and Credit Clause of the U.S. Constitution (discussed last month). The potentially adverse interpretation would therefore govern all state courts, even the courts of the state whose laws govern the plan.
If you would like one or more prior legal notes, please visit our web site at: www.pohlshort.com (click “BLOGS” and “wealthprotectionnews”).

Gary Forster is a Florida native practicing in all areas of business transactions, personal planning and tax matters, both domestic and international. Gary handles a variety of corporate, personal and tax planning matters, ranging from wealth protection and corporate structuring to complex business reorganizations. Mr. Forster has designed and drafted hundreds of asset protection plans involving domestic and foreign corporate and trust structures. Gary is a member of both the Florida Bar (admitted October 8, 1993) and District of Columbia Bars (admitted February 6, 1995), including bar sections for international and tax law. Gary is also a member of the U.S. Tax Court. Gary earned an undergraduate degree from Tufts University in 1990, graduating cum laude, with majors in Spanish Literature and Economics. Gary graduated from law school at the University of Florida in 1993 with honors. Gary earned the Masters in Taxation degree in 1994 from the University of Florida where he was a graduate fellow. Mr. Forster writes and lectures frequently on international tax, corporate law and asset protection issues. Gary speaks Spanish fluently.

Circular 230 Disclosure: PURSUANT TO INTERNAL REVENUE SERVICE CIRCULAR 230, WE ARE NOT PERMITTED TO RENDER CERTAIN TAX OPINIONS UNLESS WE CONDUCT AN INDEPENDENT INVESTIGATION OF THE RELEVANT FACTS OF A TRANSACTION. AS THE ABOVE NOTE WAS PREPARED TO PROVIDE GENERAL INFORMATION TO OUR CLIENTS AND CONTACTS, WE HAVE NOT COMPLETED THIS INDEPENDENT INVESTIGATION. THIS ARTICLE MAY NOT THEREFORE BE RELIED UPON AS LEGAL ADVISE OR FOR THE PURPOSE OF AVOIDING FEDERAL TAX PENALTIES OR PROMOTING, MARKETING, OR RECOMMENDING TO ANOTHER PARTY ANY TAX-RELATED MATTERS ADDRESSED HEREIN. ANY TAX ADVICE CONTAINED HEREIN IS NOT INTENDED OR WRITTEN TO BE USED AND CANNOT BE USED BY A TAXPAYER FOR SUCH PURPOSES.

Legal Note - Choice of Law

2009-01-12T09:45:00.000-08:00

One of the most powerful elements of asset protection planning is the right to choose from the variety of asset protection vehicles offered by the different states. For example, highly protective LLC and trust structures may be utilized outside the particular state offering the protection.

The ability to utilize the protections offered by the various states is derived from the “Full Faith and Credit” clause of the U.S. Constitution. The text of the Full Faith and Credit Clause generally requires the states to give full faith and credit to the public acts, records, and judicial proceedings of every other state.

The language of the clause, however, fails to mention the “laws” or “statutes” of other states. Although the full faith and credit clause forces states to respect the judgments of other states, the constitution is less clear in forcing states to apply the laws enacted outside the state of the presiding court. As the Constitution binds state courts only to “judgments”, other state courts may, under certain circumstances, apply the law of their home state in determining the validity of creditor protections. A poorly prepared asset protection plan may therefore become subject to the substantive law of a debtor friendly state. However, with the proper drafting, exposure to a court applying unfavorable law to an otherwise protective structure can be minimized. If only to avoid the “choice of law” issue, care should be taken in choosing a seasoned professional to organize an asset protection

Gary Forster is a Florida native practicing in all areas of business transactions, personal planning and tax matters, both domestic and international. Gary handles a variety of corporate, personal and tax planning matters, ranging from wealth protection and corporate structuring to complex business reorganizations. Mr. Forster has designed and drafted hundreds of asset protection plans involving domestic and foreign corporate and trust structures. Gary is a member of both the Florida Bar (admitted October 8, 1993) and District of Columbia Bars (admitted February 6, 1995), including bar sections for international and tax law. Gary is also a member of the U.S. Tax Court. Gary earned an undergraduate degree from Tufts University in 1990, graduating cum laude, with majors in Spanish Literature and Economics. Gary graduated from law school at the University of Florida in 1993 with honors. Gary earned the Masters in Taxation degree in 1994 from the University of Florida where he was a graduate fellow. Mr. Forster writes and lectures frequently on international tax, corporate law and asset protection issues. Gary speaks Spanish fluently.

Circular 230 Disclosure: PURSUANT TO INTERNAL REVENUE SERVICE CIRCULAR 230, WE ARE NOT PERMITTED TO RENDER CERTAIN TAX OPINIONS UNLESS WE CONDUCT AN INDEPENDENT INVESTIGATION OF THE RELEVANT FACTS OF A TRANSACTION. AS THE ABOVE NOTE WAS PREPARED TO PROVIDE GENERAL INFORMATION TO OUR CLIENTS AND CONTACTS, WE HAVE NOT COMPLETED THIS INDEPENDENT INVESTIGATION. THIS ARTICLE MAY NOT THEREFORE BE RELIED UPON AS LEGAL ADVISE OR FOR THE PURPOSE OF AVOIDING FEDERAL TAX PENALTIES OR PROMOTING, MARKETING, OR RECOMMENDING TO ANOTHER PARTY ANY TAX-RELATED MATTERS ADDRESSED HEREIN. ANY TAX ADVICE CONTAINED HEREIN IS NOT INTENDED OR WRITTEN TO BE USED AND CANNOT BE USED BY A TAXPAYER FOR SUCH PURPOSES.

Legal Note – Origins of Asset Protection

2008-12-01T06:57:00.000-08:00

We are often asked how asset protection began. Interestingly, the practice is generally thought to have begun as a reaction to the common law of England. In the middle ages, the feudal system imposed onerous financial burdens on holders of legal title to real estate. The feudal system entitled the lord of the land to “relief” which generally consisted of money payments by the owner (known as the “feoffor”) due upon the occurrence of certain events. Such events included, for example, the passage of the property to an heir, marriage of a daughter, the knighting of the eldest son or upon the holding of the “tenant” for ransom.

Owners of property in England would therefore transfer legal title to a “foeffee” or trustee, bound by agreement to direct profits and sales proceeds of the property to a “cestui que use” or beneficiary. The maneuver allowed the owner to escape the burdens of legal title. The act of vesting legal title in another, while controlling use of the property, also established an important additional benefit. The arrangement took advantage of the fact that the common law provided no remedy to a creditor of the beneficiary regarding property in trust. The fifteenth century beginnings of trust law are therefore generally attributed with having established the origins of modern asset protection.

Gary Forster is a Florida native practicing in all areas of business transactions, personal planning and tax matters, both domestic and international. Gary handles a variety of corporate, personal and tax planning matters, ranging from wealth protection and corporate structuring to complex business reorganizations. Mr. Forster has designed and drafted hundreds of asset protection plans involving domestic and foreign corporate and trust structures. Gary is a member of both the Florida Bar (admitted October 8, 1993) and District of Columbia Bars (admitted February 6, 1995), including bar sections for international and tax law. Gary is also a member of the U.S. Tax Court. Gary earned an undergraduate degree from Tufts University in 1990, graduating cum laude, with majors in Spanish Literature and Economics. Gary graduated from law school at the University of Florida in 1993 with honors. Gary earned the Masters in Taxation degree in 1994 from the University of Florida where he was a graduate fellow. Mr. Forster writes and lectures frequently on international tax, corporate law and asset protection issues. Gary speaks Spanish fluently.

Circular 230 Disclosure: PURSUANT TO INTERNAL REVENUE SERVICE CIRCULAR 230, WE ARE NOT PERMITTED TO RENDER CERTAIN TAX OPINIONS UNLESS WE CONDUCT AN INDEPENDENT INVESTIGATION OF THE RELEVANT FACTS OF A TRANSACTION. AS THE ABOVE NOTE WAS PREPARED TO PROVIDE GENERAL INFORMATION TO OUR CLIENTS AND CONTACTS, WE HAVE NOT COMPLETED THIS INDEPENDENT INVESTIGATION. THIS ARTICLE MAY NOT THEREFORE BE RELIED UPON AS LEGAL ADVISE OR FOR THE PURPOSE OF AVOIDING FEDERAL TAX PENALTIES OR PROMOTING, MARKETING, OR RECOMMENDING TO ANOTHER PARTY ANY TAX-RELATED MATTERS ADDRESSED HEREIN. ANY TAX ADVICE CONTAINED HEREIN IS NOT INTENDED OR WRITTEN TO BE USED AND CANNOT BE USED BY A TAXPAYER FOR SUCH PURPOSES.

Prenuptial Agreements

2008-11-01T10:43:00.000-07:00

Florida recently adopted the Florida Uniform Premarital Agreement Act. A couple intending to marry may now therefore agree to certain property rights under statutory protection. A Prenuptial Agreement may involve property, security interests, estate planning, spousal support, life insurance and any other matter involving personal property or obligations not in violation of public policy.

Premarital agreements will generally be upheld under the new statute unless a party can prove that execution of the agreement was not voluntary or was due to fraud, duress, coercion or overreaching. The agreement may also be challenged based upon unconscionability or inadequate disclosure by one party of financial obligations or assets.

Note that no consideration is required for enforcement of a Premarital Agreement except for the marriage itself. Moreover, even if the agreement is unconscionable, the agreement will generally be enforceable unless also lacking (i) fair and reasonable disclosure of property and financial obligations, (ii) a waiver of the disclosure or (iii) adequate knowledge by the challenger of the other party’s property and financial obligations.

Premarital Agreements in Florida are therefore generally enforceable to the extent voluntarily entered into with full disclosure by both parties. Note that legal representation by independent counsel of both parties will generally help to eliminate most or all of the issues associated with improper execution, fraud or unconscionability. In light of the very high divorce rate in Florida, in many cases, it may be prudent to protect martial assets by having an experienced attorney handle preparation and negotiation of a Premarital Agreement. - Gary A. Forster, Attorney at Law

Gary Forster is a Florida native practicing in all areas of business transactions, personal planning and tax matters, both domestic and international. Gary handles a variety of corporate, personal and tax planning matters, ranging from wealth protection and corporate structuring to complex business reorganizations. Mr. Forster has designed and drafted hundreds of asset protection plans involving domestic and foreign corporate and trust structures. Gary is a member of both the Florida Bar (admitted October 8, 1993) and District of Columbia Bars (admitted February 6, 1995), including bar sections for international and tax law. Gary is also a member of the U.S. Tax Court. Gary earned an undergraduate degree from Tufts University in 1990, graduating cum laude, with majors in Spanish Literature and Economics. Gary graduated from law school at the University of Florida in 1993 with honors. Gary earned the Masters in Taxation degree in 1994 from the University of Florida where he was a graduate fellow. Mr. Forster writes and lectures frequently on international tax, corporate law and asset protection issues. Gary speaks Spanish fluently.

Circular 230 Disclosure: PURSUANT TO INTERNAL REVENUE SERVICE CIRCULAR 230, WE ARE NOT PERMITTED TO RENDER CERTAIN TAX OPINIONS UNLESS WE CONDUCT AN INDEPENDENT INVESTIGATION OF THE RELEVANT FACTS OF A TRANSACTION. AS THE ABOVE NOTE WAS PREPARED TO PROVIDE GENERAL INFORMATION TO OUR CLIENTS AND CONTACTS, WE HAVE NOT COMPLETED THIS INDEPENDENT INVESTIGATION. THIS ARTICLE MAY NOT THEREFORE BE RELIED UPON AS LEGAL ADVISE OR FOR THE PURPOSE OF AVOIDING FEDERAL TAX PENALTIES OR PROMOTING, MARKETING, OR RECOMMENDING TO ANOTHER PARTY ANY TAX-RELATED MATTERS ADDRESSED HEREIN. ANY TAX ADVICE CONTAINED HEREIN IS NOT INTENDED OR WRITTEN TO BE USED AND CANNOT BE USED BY A TAXPAYER FOR SUCH PURPOSES.

Single Member LLC's

2008-10-01T10:04:00.000-07:00

Several states (including Florida) provide statutory creditor protection to single member LLCs. Such protections limit the legal remedies available to creditors attempting to attach equity in the LLC. Creditors are restricted to pursuing only the legal remedy known as a “charging order” against the debtor’s interest in the LLC. The charging order remedy generally limits the creditor to LLC distributions. The creditor may not therefore generally attach voting rights or force liquidation of the LLC.

The U.S. Bankruptcy Court has, however, apparently compromised the charging order protection for single member LLCs. The Court stated that a bankruptcy trustee may transfer the interest of the single bankrupt member and therefore liquidate the assets of the LLC to pay the debts of the member.

The Bankruptcy Court based its decision to disregard state statutory protections of the single member LLC on a historical partnership principle. The court determined that the charging order was historically established to protect the partnership and partners other than the debtor. In other words, the partnership charging order protection was implemented to shield partnership assets and the other non-debtor partners. In so ruling, the court negated the state charging order protections over solo LLCs in the bankruptcy context. The bankruptcy court therefore apparently invalidated state protections afforded single member LCCs (at least for bankruptcy purposes) even though the applicable state statutes specifically entitle single member LLCs to charging order protection.

In light of the bankruptcy court’s decision, most practitioners now recommend that LLCs have more than one member to improve the likelihood of charging order protection. - Gary A. Forster, Attorney at Law

Gary Forster is a Florida native practicing in all areas of business transactions, personal planning and tax matters, both domestic and international. Gary handles a variety of corporate, personal and tax planning matters, ranging from wealth protection and corporate structuring to complex business reorganizations. Mr. Forster has designed and drafted hundreds of asset protection plans involving domestic and foreign corporate and trust structures. Gary is a member of both the Florida Bar (admitted October 8, 1993) and District of Columbia Bars (admitted February 6, 1995), including bar sections for international and tax law. Gary is also a member of the U.S. Tax Court. Gary earned an undergraduate degree from Tufts University in 1990, graduating cum laude, with majors in Spanish Literature and Economics. Gary graduated from law school at the University of Florida in 1993 with honors. Gary earned the Masters in Taxation degree in 1994 from the University of Florida where he was a graduate fellow. Mr. Forster writes and lectures frequently on international tax, corporate law and asset protection issues. Gary speaks Spanish fluently.

Circular 230 Disclosure: PURSUANT TO INTERNAL REVENUE SERVICE CIRCULAR 230, WE ARE NOT PERMITTED TO RENDER CERTAIN TAX OPINIONS UNLESS WE CONDUCT AN INDEPENDENT INVESTIGATION OF THE RELEVANT FACTS OF A TRANSACTION. AS THE ABOVE NOTE WAS PREPARED TO PROVIDE GENERAL INFORMATION TO OUR CLIENTS AND CONTACTS, WE HAVE NOT COMPLETED THIS INDEPENDENT INVESTIGATION. THIS ARTICLE MAY NOT THEREFORE BE RELIED UPON AS LEGAL ADVISE OR FOR THE PURPOSE OF AVOIDING FEDERAL TAX PENALTIES OR PROMOTING, MARKETING, OR RECOMMENDING TO ANOTHER PARTY ANY TAX-RELATED MATTERS ADDRESSED HEREIN. ANY TAX ADVICE CONTAINED HEREIN IS NOT INTENDED OR WRITTEN TO BE USED AND CANNOT BE USED BY A TAXPAYER FOR SUCH PURPOSES.

Retirement Plans/ERISA - continuation

2008-09-01T10:18:00.000-07:00

We continue our discussion of the creditor protections afforded retirement plan assets. As discussed last month, ERISA protects only certain retirement plans. Certain non-ERISA plans for “owners-only” and IRAs, for instance, do not qualify for creditor protection under ERISA. Although the bankruptcy courts have produced mixed rulings on the issue, Florida arguably provides more expansive statutory creditor protection than ERISA over retirement plans. The language of the Florida Statutes protects certain non-ERISA pension, profit sharing and stock bonus plans as well as IRAs. Moreover, the Florida Statutes include language protecting distributions from such plans. The Florida Statutes also exempt from legal suit assets held in certain retirement plans for county officers, teachers, fire fighters, state employees and police officers.

Therefore, when choosing a retirement plan which may not qualify under ERISA, a potentially viable means of establishing creditor protection of the plan may be available under Florida law. The benefits and characteristics of the proposed plan as well as the applicable judicial interpretation of the applicable protections should therefore be carefully considered with legal, accounting and financial counsel. – Gary A. Forster, Attorney at Law

Gary Forster is a Florida native practicing in all areas of business transactions, personal planning and tax matters, both domestic and international. Gary handles a variety of corporate, personal and tax planning matters, ranging from wealth protection and corporate structuring to complex business reorganizations. Mr. Forster has designed and drafted hundreds of asset protection plans involving domestic and foreign corporate and trust structures. Gary is a member of both the Florida Bar (admitted October 8, 1993) and District of Columbia Bars (admitted February 6, 1995), including bar sections for international and tax law. Gary is also a member of the U.S. Tax Court. Gary earned an undergraduate degree from Tufts University in 1990, graduating cum laude, with majors in Spanish Literature and Economics. Gary graduated from law school at the University of Florida in 1993 with honors. Gary earned the Masters in Taxation degree in 1994 from the University of Florida where he was a graduate fellow. Mr. Forster writes and lectures frequently on international tax, corporate law and asset protection issues. Gary speaks Spanish fluently.

Circular 230 Disclosure: PURSUANT TO INTERNAL REVENUE SERVICE CIRCULAR 230, WE ARE NOT PERMITTED TO RENDER CERTAIN TAX OPINIONS UNLESS WE CONDUCT AN INDEPENDENT INVESTIGATION OF THE RELEVANT FACTS OF A TRANSACTION. AS THE ABOVE NOTE WAS PREPARED TO PROVIDE GENERAL INFORMATION TO OUR CLIENTS AND CONTACTS, WE HAVE NOT COMPLETED THIS INDEPENDENT INVESTIGATION. THIS ARTICLE MAY NOT THEREFORE BE RELIED UPON AS LEGAL ADVISE OR FOR THE PURPOSE OF AVOIDING FEDERAL TAX PENALTIES OR PROMOTING, MARKETING, OR RECOMMENDING TO ANOTHER PARTY ANY TAX-RELATED MATTERS ADDRESSED HEREIN. ANY TAX ADVICE CONTAINED HEREIN IS NOT INTENDED OR WRITTEN TO BE USED AND CANNOT BE USED BY A TAXPAYER FOR SUCH PURPOSES.

Retirement Plans/ERISA

2008-08-01T10:22:00.000-07:00

In response to several inquires, we discuss certain protections afforded by retirement plans in this and the next few legal notes.

In 1974, Congress enacted the Employment Retirement Income Security Act (“ERISA”) to address several high profile pension collapses of the 1960 and 70’s. ERISA was drafted to encourage employers to fund qualified plans by providing an income tax deduction for plan contributions. ERISA qualification generally requires federal compliance with an array of financial and legal requirements.

Among the plan protections required by ERISA is that plan assets be held in an irrevocable trust. The trust arrangement generally prevents plan participants from transferring any interest in the plan. Such prohibition on transfers generally removes plan assets from the reach of the creditors of participants. Moreover, the Bankruptcy Code generally excludes from the bankruptcy estate (available to creditors) assets subject to a transfer restriction, such as the trust fund restriction required by ERISA. Qualified plan assets are therefore afforded substantial creditor protection. - Gary A. Forster, Attorney at Law

Gary Forster is a Florida native practicing in all areas of business transactions, personal planning and tax matters, both domestic and international. Gary handles a variety of corporate, personal and tax planning matters, ranging from wealth protection and corporate structuring to complex business reorganizations. Mr. Forster has designed and drafted hundreds of asset protection plans involving domestic and foreign corporate and trust structures. Gary is a member of both the Florida Bar (admitted October 8, 1993) and District of Columbia Bars (admitted February 6, 1995), including bar sections for international and tax law. Gary is also a member of the U.S. Tax Court. Gary earned an undergraduate degree from Tufts University in 1990, graduating cum laude, with majors in Spanish Literature and Economics. Gary graduated from law school at the University of Florida in 1993 with honors. Gary earned the Masters in Taxation degree in 1994 from the University of Florida where he was a graduate fellow. Mr. Forster writes and lectures frequently on international tax, corporate law and asset protection issues. Gary speaks Spanish fluently.

Circular 230 Disclosure: PURSUANT TO INTERNAL REVENUE SERVICE CIRCULAR 230, WE ARE NOT PERMITTED TO RENDER CERTAIN TAX OPINIONS UNLESS WE CONDUCT AN INDEPENDENT INVESTIGATION OF THE RELEVANT FACTS OF A TRANSACTION. AS THE ABOVE NOTE WAS PREPARED TO PROVIDE GENERAL INFORMATION TO OUR CLIENTS AND CONTACTS, WE HAVE NOT COMPLETED THIS INDEPENDENT INVESTIGATION. THIS ARTICLE MAY NOT THEREFORE BE RELIED UPON AS LEGAL ADVISE OR FOR THE PURPOSE OF AVOIDING FEDERAL TAX PENALTIES OR PROMOTING, MARKETING, OR RECOMMENDING TO ANOTHER PARTY ANY TAX-RELATED MATTERS ADDRESSED HEREIN. ANY TAX ADVICE CONTAINED HEREIN IS NOT INTENDED OR WRITTEN TO BE USED AND CANNOT BE USED BY A TAXPAYER FOR SUCH PURPOSES.

Equity Stripping

2008-07-01T10:27:00.001-07:00

Non-liquid assets, such as real estate, are highly vulnerable to creditor claims. Such assets cannot be easily converted to statutorily protected assets or moved beyond the reach of creditors. Moreover, the title transfer of real property offshore to avoid local court jurisdiction is likely to be ignored or compromise a good faith attempt to retain the property.

As certain real estate may not practically be held in a protective entity, a simple protective strategy known as “equity stripping” may be implemented, to deplete the property of value exposed to creditors. To implement the strategy, the property owner borrows money, the repayment of which is secured by the creditor’s lien on the property. The borrowed money is then invested in a statutorily protected asset such as whole life insurance, an annuity or the owner’s homestead.

Many of our clients are receptive to equity stripping because it both (i) protects otherwise exposed property value and (ii) permits the productive investment of otherwise stagnant equity. Care must, however, be taken to ensure that the value transferred to a protected asset does not eliminate the borrower’s ability to make payments on the loan. Although often ignored, the issue becomes prevalent during collection litigation which may limit access to other cash reserves.

If interested in the concept of equity stripping, the client should consult an attorney. - Gary A. Forster, Attorney at Law

Gary Forster is a Florida native practicing in all areas of business transactions, personal planning and tax matters, both domestic and international. Gary handles a variety of corporate, personal and tax planning matters, ranging from wealth protection and corporate structuring to complex business reorganizations. Mr. Forster has designed and drafted hundreds of asset protection plans involving domestic and foreign corporate and trust structures. Gary is a member of both the Florida Bar (admitted October 8, 1993) and District of Columbia Bars (admitted February 6, 1995), including bar sections for international and tax law. Gary is also a member of the U.S. Tax Court. Gary earned an undergraduate degree from Tufts University in 1990, graduating cum laude, with majors in Spanish Literature and Economics. Gary graduated from law school at the University of Florida in 1993 with honors. Gary earned the Masters in Taxation degree in 1994 from the University of Florida where he was a graduate fellow. Mr. Forster writes and lectures frequently on international tax, corporate law and asset protection issues. Gary speaks Spanish fluently.

Circular 230 Disclosure: PURSUANT TO INTERNAL REVENUE SERVICE CIRCULAR 230, WE ARE NOT PERMITTED TO RENDER CERTAIN TAX OPINIONS UNLESS WE CONDUCT AN INDEPENDENT INVESTIGATION OF THE RELEVANT FACTS OF A TRANSACTION. AS THE ABOVE NOTE WAS PREPARED TO PROVIDE GENERAL INFORMATION TO OUR CLIENTS AND CONTACTS, WE HAVE NOT COMPLETED THIS INDEPENDENT INVESTIGATION. THIS ARTICLE MAY NOT THEREFORE BE RELIED UPON AS LEGAL ADVISE OR FOR THE PURPOSE OF AVOIDING FEDERAL TAX PENALTIES OR PROMOTING, MARKETING, OR RECOMMENDING TO ANOTHER PARTY ANY TAX-RELATED MATTERS ADDRESSED HEREIN. ANY TAX ADVICE CONTAINED HEREIN IS NOT INTENDED OR WRITTEN TO BE USED AND CANNOT BE USED BY A TAXPAYER FOR SUCH PURPOSES.

Fraudulent Transfers

2008-06-01T10:30:00.000-07:00

Over the past several months, we have discussed some of the legal structures available to hold and protect valuable assets. Even the most established structures will, however, be undermined if improperly funded.

All states have adopted legislation permitting a creditor to reach otherwise protected assets if the assets are the subject of a “fraudulent transfer.” Such legislation not only permits suit against the debtor but also generally authorizes action against the transferee of such assets.

Such creditor remedies to reach fraudulently transferred assets generally require the creditor to prove (within the applicable limitations period) one or more fraudulent transfer criteria. Such criteria generally require proof that the debtor (i) intended to avoid the creditor to hinder collection, (ii) did not receive reasonable value for the asset transferred and/or (iii) became insolvent (i.e., unable to pay debt) as a result of the transfer. The precise criteria for recovery of the assets will depend on the applicable law and may hinge on further subtleties such as (i) whether the transfer occurred before the existence of the debt and (ii) whether the creditor was a current or future (foreseeable) creditor. - Gary A. Forster, Attorney at Law

Gary Forster is a Florida native practicing in all areas of business transactions, personal planning and tax matters, both domestic and international. Gary handles a variety of corporate, personal and tax planning matters, ranging from wealth protection and corporate structuring to complex business reorganizations. Mr. Forster has designed and drafted hundreds of asset protection plans involving domestic and foreign corporate and trust structures. Gary is a member of both the Florida Bar (admitted October 8, 1993) and District of Columbia Bars (admitted February 6, 1995), including bar sections for international and tax law. Gary is also a member of the U.S. Tax Court. Gary earned an undergraduate degree from Tufts University in 1990, graduating cum laude, with majors in Spanish Literature and Economics. Gary graduated from law school at the University of Florida in 1993 with honors. Gary earned the Masters in Taxation degree in 1994 from the University of Florida where he was a graduate fellow. Mr. Forster writes and lectures frequently on international tax, corporate law and asset protection issues. Gary speaks Spanish fluently.

Circular 230 Disclosure: PURSUANT TO INTERNAL REVENUE SERVICE CIRCULAR 230, WE ARE NOT PERMITTED TO RENDER CERTAIN TAX OPINIONS UNLESS WE CONDUCT AN INDEPENDENT INVESTIGATION OF THE RELEVANT FACTS OF A TRANSACTION. AS THE ABOVE NOTE WAS PREPARED TO PROVIDE GENERAL INFORMATION TO OUR CLIENTS AND CONTACTS, WE HAVE NOT COMPLETED THIS INDEPENDENT INVESTIGATION. THIS ARTICLE MAY NOT THEREFORE BE RELIED UPON AS LEGAL ADVISE OR FOR THE PURPOSE OF AVOIDING FEDERAL TAX PENALTIES OR PROMOTING, MARKETING, OR RECOMMENDING TO ANOTHER PARTY ANY TAX-RELATED MATTERS ADDRESSED HEREIN. ANY TAX ADVICE CONTAINED HEREIN IS NOT INTENDED OR WRITTEN TO BE USED AND CANNOT BE USED BY A TAXPAYER FOR SUCH PURPOSES.

Tenancy by the Entirety

2008-05-01T10:32:00.000-07:00

Tenancy by the Entirety (“TBE”) is one of three forms of joint property ownership and may serve as a simple means of asset protection. TBE is, however, available only to married couples. TBE provides significant legal protection not available to tenants in common or joint tenants (the other two forms of joint ownership). As long as the marital “entireties” of TBE are maintained, each spouse is legally deemed to own the entire TBE property. Excluding the IRS, a creditor of only one spouse may not generally reach property held TBE.

Florida permits both personal property and real property to be held TBE. The Florida courts also recognize a presumption that real estate purchased by a married couple is held TBE. Contrary to several other states, personal property (with the possible exception of bank accounts) held by Floridians, is however, not generally presumed as held TBE.

Couples intending to benefit from TBE status should therefore ensure that all accounts and valuable personal property is titled as Tenants by the Entirety. Bank and investment house statements and account applications should reflect the account holder as husband and wife “TBE.” Moreover, couples intending to benefit from the protections afforded TBE assets should avoid joint obligations arising from joint guarantees and ownership of active assets (such as automobiles and certain active businesses). - Gary A. Forster, Attorney at Law

Gary Forster is a Florida native practicing in all areas of business transactions, personal planning and tax matters, both domestic and international. Gary handles a variety of corporate, personal and tax planning matters, ranging from wealth protection and corporate structuring to complex business reorganizations. Mr. Forster has designed and drafted hundreds of asset protection plans involving domestic and foreign corporate and trust structures. Gary is a member of both the Florida Bar (admitted October 8, 1993) and District of Columbia Bars (admitted February 6, 1995), including bar sections for international and tax law. Gary is also a member of the U.S. Tax Court. Gary earned an undergraduate degree from Tufts University in 1990, graduating cum laude, with majors in Spanish Literature and Economics. Gary graduated from law school at the University of Florida in 1993 with honors. Gary earned the Masters in Taxation degree in 1994 from the University of Florida where he was a graduate fellow. Mr. Forster writes and lectures frequently on international tax, corporate law and asset protection issues. Gary speaks Spanish fluently.

Circular 230 Disclosure: PURSUANT TO INTERNAL REVENUE SERVICE CIRCULAR 230, WE ARE NOT PERMITTED TO RENDER CERTAIN TAX OPINIONS UNLESS WE CONDUCT AN INDEPENDENT INVESTIGATION OF THE RELEVANT FACTS OF A TRANSACTION. AS THE ABOVE NOTE WAS PREPARED TO PROVIDE GENERAL INFORMATION TO OUR CLIENTS AND CONTACTS, WE HAVE NOT COMPLETED THIS INDEPENDENT INVESTIGATION. THIS ARTICLE MAY NOT THEREFORE BE RELIED UPON AS LEGAL ADVISE OR FOR THE PURPOSE OF AVOIDING FEDERAL TAX PENALTIES OR PROMOTING, MARKETING, OR RECOMMENDING TO ANOTHER PARTY ANY TAX-RELATED MATTERS ADDRESSED HEREIN. ANY TAX ADVICE CONTAINED HEREIN IS NOT INTENDED OR WRITTEN TO BE USED AND CANNOT BE USED BY A TAXPAYER FOR SUCH PURPOSES.

Capital Gains/Non-Resident Aliens

2008-04-01T10:33:00.000-07:00

In recognition of our hardworking CPAs, we this month enter the tax arena.
Many of our clients are surprised to find that the U.S. tax code, under certain circumstances, favors foreign investors over U.S. citizens and residents. If an individual is not a tax resident of the United States and not physically present in the United States for at least 183 days during the tax year, U.S. source capital gains (unrelated to real estate) are generally not taxed to the foreigner. Therefore, although certain periodic income and U.S. business income are taxable to the non-resident alien, capital gains (unrelated to the real estate) are not taxed to the foreigner who spends most of the year abroad. Such rule provides for substantial planning opportunities for foreign individuals who intend to move to the United States. For example, such individuals may have the opportunity to sell U.S. stocks and bonds without incurring U.S. tax prior to establishing residence in the U.S. - Gary A. Forster, Attorney at Law

Gary Forster is a Florida native practicing in all areas of business transactions, personal planning and tax matters, both domestic and international. Gary handles a variety of corporate, personal and tax planning matters, ranging from wealth protection and corporate structuring to complex business reorganizations. Mr. Forster has designed and drafted hundreds of asset protection plans involving domestic and foreign corporate and trust structures. Gary is a member of both the Florida Bar (admitted October 8, 1993) and District of Columbia Bars (admitted February 6, 1995), including bar sections for international and tax law. Gary is also a member of the U.S. Tax Court. Gary earned an undergraduate degree from Tufts University in 1990, graduating cum laude, with majors in Spanish Literature and Economics. Gary graduated from law school at the University of Florida in 1993 with honors. Gary earned the Masters in Taxation degree in 1994 from the University of Florida where he was a graduate fellow. Mr. Forster writes and lectures frequently on international tax, corporate law and asset protection issues. Gary speaks Spanish fluently.

Circular 230 Disclosure: PURSUANT TO INTERNAL REVENUE SERVICE CIRCULAR 230, WE ARE NOT PERMITTED TO RENDER CERTAIN TAX OPINIONS UNLESS WE CONDUCT AN INDEPENDENT INVESTIGATION OF THE RELEVANT FACTS OF A TRANSACTION. AS THE ABOVE NOTE WAS PREPARED TO PROVIDE GENERAL INFORMATION TO OUR CLIENTS AND CONTACTS, WE HAVE NOT COMPLETED THIS INDEPENDENT INVESTIGATION. THIS ARTICLE MAY NOT THEREFORE BE RELIED UPON AS LEGAL ADVISE OR FOR THE PURPOSE OF AVOIDING FEDERAL TAX PENALTIES OR PROMOTING, MARKETING, OR RECOMMENDING TO ANOTHER PARTY ANY TAX-RELATED MATTERS ADDRESSED HEREIN. ANY TAX ADVICE CONTAINED HEREIN IS NOT INTENDED OR WRITTEN TO BE USED AND CANNOT BE USED BY A TAXPAYER FOR SUCH PURPOSES.

Delaware Series LLC

2008-03-01T10:34:00.000-08:00

The assets held in a single business entity are generally exposed to all creditors of the entity.
Prudent real estate investors and business owners therefore generally segregate real estate assets (i) from active business assets and (ii) from other real estate. Such segregation generally insulates each parcel of real estate from claims unrelated to the particular property. The use of multiple entities to segregate real estate from business and investment liabilities can, however, be cumbersome and expensive. Moreover, the expense associated with reorganizing an existing business or investment company to a conglomerate (separating various business and real estate assets) may be considerable and potentially complex from a tax prospective.

Delaware has attempted to address the issue of efficient liability segregation by creating the Delaware “Series” LLC. The Delaware legislation establishes an LLC which operates through one or several individual “series.” According to the statute, the debts and liabilities associated with one series are collectable only against the assets held by that particular series. The owner of the Series LLC (which may have more than one owner) may therefore operate independent businesses (or hold several properties) within a single LLC, while statutorily segregating the assets and liabilities of each business (or property). The series LLC therefore, avoids the complexity and cost associated with a conglomerate of entities. Moreover, new series (i.e., additional independent units) may be added and deleted by simply amending the LLC organizational documents.

Note, however, that very specific organizational requirements must be satisfied to properly organize a Series LLC. Moreover, although the Series LLC offers administrative simplicity and general cost savings, the protection offered by the Delaware statutes has not been tested by Florida courts. Also, the IRS has not provided dependable guidance regarding the tax status of the Delaware Series, LLC. The tax issues become especially complex when multiple parties own different interests in the various series. - Gary A. Forster, Attorney at Law

Gary Forster is a Florida native practicing in all areas of business transactions, personal planning and tax matters, both domestic and international. Gary handles a variety of corporate, personal and tax planning matters, ranging from wealth protection and corporate structuring to complex business reorganizations. Mr. Forster has designed and drafted hundreds of asset protection plans involving domestic and foreign corporate and trust structures. Gary is a member of both the Florida Bar (admitted October 8, 1993) and District of Columbia Bars (admitted February 6, 1995), including bar sections for international and tax law. Gary is also a member of the U.S. Tax Court. Gary earned an undergraduate degree from Tufts University in 1990, graduating cum laude, with majors in Spanish Literature and Economics. Gary graduated from law school at the University of Florida in 1993 with honors. Gary earned the Masters in Taxation degree in 1994 from the University of Florida where he was a graduate fellow. Mr. Forster writes and lectures frequently on international tax, corporate law and asset protection issues. Gary speaks Spanish fluently.

Circular 230 Disclosure: PURSUANT TO INTERNAL REVENUE SERVICE CIRCULAR 230, WE ARE NOT PERMITTED TO RENDER CERTAIN TAX OPINIONS UNLESS WE CONDUCT AN INDEPENDENT INVESTIGATION OF THE RELEVANT FACTS OF A TRANSACTION. AS THE ABOVE NOTE WAS PREPARED TO PROVIDE GENERAL INFORMATION TO OUR CLIENTS AND CONTACTS, WE HAVE NOT COMPLETED THIS INDEPENDENT INVESTIGATION. THIS ARTICLE MAY NOT THEREFORE BE RELIED UPON AS LEGAL ADVISE OR FOR THE PURPOSE OF AVOIDING FEDERAL TAX PENALTIES OR PROMOTING, MARKETING, OR RECOMMENDING TO ANOTHER PARTY ANY TAX-RELATED MATTERS ADDRESSED HEREIN. ANY TAX ADVICE CONTAINED HEREIN IS NOT INTENDED OR WRITTEN TO BE USED AND CANNOT BE USED BY A TAXPAYER FOR SUCH PURPOSES.

Foreign LLC's

2008-02-01T10:35:00.000-08:00

As discussed in a prior column, domestic limited liability companies generally provide substantial protection from creditors of LLC members. Specifically, several state LLC statutes offer so called “charging order” protection. Such protection generally limits the creditors of a member to company distributions paid to the debtor member. Unlike corporate stock, which may be attached by the creditors of a shareholder, claims on LLC interests are generally limited to a charging order. Such statutory protection therefore generally prevents involuntary transfers of LLC equity or voting rights.

A few foreign countries have also adopted limited liability company statutes. Several such foreign laws include the protections afforded by domestic LLCs, with enhanced creditor protection. Such countries, in addition to offering charging order protection, further restrict the collection rights of creditors. Such laws generally allow for redemption of the charged membership interest and prevent the foreign court (with jurisdiction over the off-shore entity) from recognizing U.S. judgments as the basis for a claim to a membership interest.

Foreign entities also usually facilitate the holding of assets off-shore. Assets held off-shore are usually not within the jurisdiction of a U.S. court and are therefore generally farther from the reach of creditors. - Gary A. Forster, Attorney at Law

Gary Forster is a Florida native practicing in all areas of business transactions, personal planning and tax matters, both domestic and international. Gary handles a variety of corporate, personal and tax planning matters, ranging from wealth protection and corporate structuring to complex business reorganizations. Mr. Forster has designed and drafted hundreds of asset protection plans involving domestic and foreign corporate and trust structures. Gary is a member of both the Florida Bar (admitted October 8, 1993) and District of Columbia Bars (admitted February 6, 1995), including bar sections for international and tax law. Gary is also a member of the U.S. Tax Court. Gary earned an undergraduate degree from Tufts University in 1990, graduating cum laude, with majors in Spanish Literature and Economics. Gary graduated from law school at the University of Florida in 1993 with honors. Gary earned the Masters in Taxation degree in 1994 from the University of Florida where he was a graduate fellow. Mr. Forster writes and lectures frequently on international tax, corporate law and asset protection issues. Gary speaks Spanish fluently.

Circular 230 Disclosure: PURSUANT TO INTERNAL REVENUE SERVICE CIRCULAR 230, WE ARE NOT PERMITTED TO RENDER CERTAIN TAX OPINIONS UNLESS WE CONDUCT AN INDEPENDENT INVESTIGATION OF THE RELEVANT FACTS OF A TRANSACTION. AS THE ABOVE NOTE WAS PREPARED TO PROVIDE GENERAL INFORMATION TO OUR CLIENTS AND CONTACTS, WE HAVE NOT COMPLETED THIS INDEPENDENT INVESTIGATION. THIS ARTICLE MAY NOT THEREFORE BE RELIED UPON AS LEGAL ADVISE OR FOR THE PURPOSE OF AVOIDING FEDERAL TAX PENALTIES OR PROMOTING, MARKETING, OR RECOMMENDING TO ANOTHER PARTY ANY TAX-RELATED MATTERS ADDRESSED HEREIN. ANY TAX ADVICE CONTAINED HEREIN IS NOT INTENDED OR WRITTEN TO BE USED AND CANNOT BE USED BY A TAXPAYER FOR SUCH PURPOSES.

Domestic Asset Protection Trusts

2008-01-01T10:37:00.000-08:00

Trusts generally offer a highly protective means of creditor protection. The protective benefits afforded by domestic trusts have, however, generally applied only to persons other than the grantor. Therefore, clients seeking trust protection over personal assets have historically been forced to seek protection through off-shore trusts. The prohibitive costs of maintaining an offshore trust have, however, generally precluded all but the very wealthy from utilizing such a “self-settled” trust.

Beginning in 1997, Alaska, and later Delaware, established the statutory framework for domestic self-settled trusts. Such trusts permit a grantor to fund a trust for himself and take advantage of statutory asset protection. Statutory requirements for settlor protection generally include irrevocability of the trust, relinquishment of certain control over trust assets and the absence of mandatory distributions to the grantor. Such trusts may also be used for a variety of tax planning techniques. - Gary A. Forster, Attorney at Law

Gary Forster is a Florida native practicing in all areas of business transactions, personal planning and tax matters, both domestic and international. Gary handles a variety of corporate, personal and tax planning matters, ranging from wealth protection and corporate structuring to complex business reorganizations. Mr. Forster has designed and drafted hundreds of asset protection plans involving domestic and foreign corporate and trust structures. Gary is a member of both the Florida Bar (admitted October 8, 1993) and District of Columbia Bars (admitted February 6, 1995), including bar sections for international and tax law. Gary is also a member of the U.S. Tax Court. Gary earned an undergraduate degree from Tufts University in 1990, graduating cum laude, with majors in Spanish Literature and Economics. Gary graduated from law school at the University of Florida in 1993 with honors. Gary earned the Masters in Taxation degree in 1994 from the University of Florida where he was a graduate fellow. Mr. Forster writes and lectures frequently on international tax, corporate law and asset protection issues. Gary speaks Spanish fluently.

Circular 230 Disclosure: PURSUANT TO INTERNAL REVENUE SERVICE CIRCULAR 230, WE ARE NOT PERMITTED TO RENDER CERTAIN TAX OPINIONS UNLESS WE CONDUCT AN INDEPENDENT INVESTIGATION OF THE RELEVANT FACTS OF A TRANSACTION. AS THE ABOVE NOTE WAS PREPARED TO PROVIDE GENERAL INFORMATION TO OUR CLIENTS AND CONTACTS, WE HAVE NOT COMPLETED THIS INDEPENDENT INVESTIGATION. THIS ARTICLE MAY NOT THEREFORE BE RELIED UPON AS LEGAL ADVISE OR FOR THE PURPOSE OF AVOIDING FEDERAL TAX PENALTIES OR PROMOTING, MARKETING, OR RECOMMENDING TO ANOTHER PARTY ANY TAX-RELATED MATTERS ADDRESSED HEREIN. ANY TAX ADVICE CONTAINED HEREIN IS NOT INTENDED OR WRITTEN TO BE USED AND CANNOT BE USED BY A TAXPAYER FOR SUCH PURPOSES.

Segregation of Real Estate from an Operating Business

2007-12-01T10:46:00.000-08:00

Although usually ill advised, many clients hold commercial real estate in their business entity. This arrangement will generally expose any equity held in the real estate to the claims of business creditors. Unfortunately, the transfer of the real estate to a separate entity (to insulate the equity from business claims) is highly restricted by the Internal Revenue Code and often triggers the imposition of documentary transfer taxes. Corporate and professional clients are therefore often left with few options to protect the value held by the business in its office or industrial space. Fortunately, many “S” and “C” corporations may now, in many circumstances, segregate real estate held by the business through a tax neutral corporate reorganization. The structure generally involves the use of a parent entity and various subsidiaries, which include a business subsidiary and a separate real estate subsidiary. The reorganization generally avoids any federal tax impact, allows the operating entity to retain its Federal tax identification number, requires no additional tax return filings and potentially avoids documentary stamp taxes. - Gary A. Forster, Attorney at Law

Gary Forster is a Florida native practicing in all areas of business transactions, personal planning and tax matters, both domestic and international. Gary handles a variety of corporate, personal and tax planning matters, ranging from wealth protection and corporate structuring to complex business reorganizations. Mr. Forster has designed and drafted hundreds of asset protection plans involving domestic and foreign corporate and trust structures. Gary is a member of both the Florida Bar (admitted October 8, 1993) and District of Columbia Bars (admitted February 6, 1995), including bar sections for international and tax law. Gary is also a member of the U.S. Tax Court. Gary earned an undergraduate degree from Tufts University in 1990, graduating cum laude, with majors in Spanish Literature and Economics. Gary graduated from law school at the University of Florida in 1993 with honors. Gary earned the Masters in Taxation degree in 1994 from the University of Florida where he was a graduate fellow. Mr. Forster writes and lectures frequently on international tax, corporate law and asset protection issues. Gary speaks Spanish fluently.

Circular 230 Disclosure: PURSUANT TO INTERNAL REVENUE SERVICE CIRCULAR 230, WE ARE NOT PERMITTED TO RENDER CERTAIN TAX OPINIONS UNLESS WE CONDUCT AN INDEPENDENT INVESTIGATION OF THE RELEVANT FACTS OF A TRANSACTION. AS THE ABOVE NOTE WAS PREPARED TO PROVIDE GENERAL INFORMATION TO OUR CLIENTS AND CONTACTS, WE HAVE NOT COMPLETED THIS INDEPENDENT INVESTIGATION. THIS ARTICLE MAY NOT THEREFORE BE RELIED UPON AS LEGAL ADVISE OR FOR THE PURPOSE OF AVOIDING FEDERAL TAX PENALTIES OR PROMOTING, MARKETING, OR RECOMMENDING TO ANOTHER PARTY ANY TAX-RELATED MATTERS ADDRESSED HEREIN. ANY TAX ADVICE CONTAINED HEREIN IS NOT INTENDED OR WRITTEN TO BE USED AND CANNOT BE USED BY A TAXPAYER FOR SUCH PURPOSES.

Limited Liability Partnerships

2007-11-01T10:44:00.000-07:00

Modern business entities are seldom organized as general partnerships in light of the generally unlimited liability of the partners for the debts of the partnership. Similarly, the general partner of a limited partnership is liable for the debts and liabilities of the limited partnership. Unlike corporations and limited liability companies, which generally insulate owners from the liabilities of the entity, general partners remain liable for entity obligations. Surprisingly, however, we continue to see active Florida partnerships.

Fortunately, limited and general partnerships may (in many states) convert to a more protective entities (such as the LLC), generally insulating the prior general partner from liabilities of the business. Moreover, if conversion is not legally available or practically feasible, several states, including Florida, permit a general partnership to become a limited liability partnership (“LLP”) at minimal expense and complexity. Once authorized, the general partnership may file a “statement of qualification” with the Department of State to seamlessly transform the general partnership to an LLP. Once filed, obligations incurred by the partnership after filing are solely obligations of the entity. - Gary A. Forster, Attorney at Law

Gary Forster is a Florida native practicing in all areas of business transactions, personal planning and tax matters, both domestic and international. Gary handles a variety of corporate, personal and tax planning matters, ranging from wealth protection and corporate structuring to complex business reorganizations. Mr. Forster has designed and drafted hundreds of asset protection plans involving domestic and foreign corporate and trust structures. Gary is a member of both the Florida Bar (admitted October 8, 1993) and District of Columbia Bars (admitted February 6, 1995), including bar sections for international and tax law. Gary is also a member of the U.S. Tax Court. Gary earned an undergraduate degree from Tufts University in 1990, graduating cum laude, with majors in Spanish Literature and Economics. Gary graduated from law school at the University of Florida in 1993 with honors. Gary earned the Masters in Taxation degree in 1994 from the University of Florida where he was a graduate fellow. Mr. Forster writes and lectures frequently on international tax, corporate law and asset protection issues. Gary speaks Spanish fluently.

Circular 230 Disclosure: PURSUANT TO INTERNAL REVENUE SERVICE CIRCULAR 230, WE ARE NOT PERMITTED TO RENDER CERTAIN TAX OPINIONS UNLESS WE CONDUCT AN INDEPENDENT INVESTIGATION OF THE RELEVANT FACTS OF A TRANSACTION. AS THE ABOVE NOTE WAS PREPARED TO PROVIDE GENERAL INFORMATION TO OUR CLIENTS AND CONTACTS, WE HAVE NOT COMPLETED THIS INDEPENDENT INVESTIGATION. THIS ARTICLE MAY NOT THEREFORE BE RELIED UPON AS LEGAL ADVISE OR FOR THE PURPOSE OF AVOIDING FEDERAL TAX PENALTIES OR PROMOTING, MARKETING, OR RECOMMENDING TO ANOTHER PARTY ANY TAX-RELATED MATTERS ADDRESSED HEREIN. ANY TAX ADVICE CONTAINED HEREIN IS NOT INTENDED OR WRITTEN TO BE USED AND CANNOT BE USED BY A TAXPAYER FOR SUCH PURPOSES.

Conversion of Corporations

2007-10-01T10:47:00.000-07:00

Owners of closely held corporations should consider converting the corporation to a limited liability company. The principle advantage of conversion is the protection of business assets. Moreover, if structured property, the conversion will generally not create a taxable event.

Corporate shareholders sued on matters unrelated to corporate business are subject to the loss of their stock as an asset available to creditors. A shareholder subject to a judgment must therefore generally surrender his or her stock to a judgment holder. The judgment holder then becomes a shareholder with all shareholder voting and liquidation rights. As the number of shareholders in a corporation increases, litigation involving a shareholder (exposing the shareholder to loss of his or her stock and potential liquidation of the corporation) usually becomes more likely.

LLC organizational statutes generally offer so called “charging order” protection of LLC membership interests. Such protection generally limits the creditor of a member to LLC distributions to such member. Unlike corporate stock, which may be attached by the creditors of a shareholder, claims on LLC interests are generally limited to a charging order. Such statutory protection therefore generally prevents involuntary transfers of LLC equity or voting rights.

Conversion of a corporation to an LLC will generally therefore avoid the business disruption and loss of equity associated with an action against a shareholder. The conversion of a corporation with valuable assets to an LLC is therefore typically very advantageous. - Gary A. Forster, Attorney at Law

Gary Forster is a Florida native practicing in all areas of business transactions, personal planning and tax matters, both domestic and international. Gary handles a variety of corporate, personal and tax planning matters, ranging from wealth protection and corporate structuring to complex business reorganizations. Mr. Forster has designed and drafted hundreds of asset protection plans involving domestic and foreign corporate and trust structures. Gary is a member of both the Florida Bar (admitted October 8, 1993) and District of Columbia Bars (admitted February 6, 1995), including bar sections for international and tax law. Gary is also a member of the U.S. Tax Court. Gary earned an undergraduate degree from Tufts University in 1990, graduating cum laude, with majors in Spanish Literature and Economics. Gary graduated from law school at the University of Florida in 1993 with honors. Gary earned the Masters in Taxation degree in 1994 from the University of Florida where he was a graduate fellow. Mr. Forster writes and lectures frequently on international tax, corporate law and asset protection issues. Gary speaks Spanish fluently.

Circular 230 Disclosure: PURSUANT TO INTERNAL REVENUE SERVICE CIRCULAR 230, WE ARE NOT PERMITTED TO RENDER CERTAIN TAX OPINIONS UNLESS WE CONDUCT AN INDEPENDENT INVESTIGATION OF THE RELEVANT FACTS OF A TRANSACTION. AS THE ABOVE NOTE WAS PREPARED TO PROVIDE GENERAL INFORMATION TO OUR CLIENTS AND CONTACTS, WE HAVE NOT COMPLETED THIS INDEPENDENT INVESTIGATION. THIS ARTICLE MAY NOT THEREFORE BE RELIED UPON AS LEGAL ADVISE OR FOR THE PURPOSE OF AVOIDING FEDERAL TAX PENALTIES OR PROMOTING, MARKETING, OR RECOMMENDING TO ANOTHER PARTY ANY TAX-RELATED MATTERS ADDRESSED HEREIN. ANY TAX ADVICE CONTAINED HEREIN IS NOT INTENDED OR WRITTEN TO BE USED AND CANNOT BE USED BY A TAXPAYER FOR SUCH PURPOSES.