Helping Clients Protect What They HaveLiz Gold
March 6, 2012 — 1,427 views
Robert Keebler CPA, MST, AEP, works with clients who have a net worth of $5 million to more than $100 million. Many have complex financial situations, and all want to protect what they have.
Keebler, who is a partner at Keebler & Associates, LLP, a boutique tax advisory and CPA firm located in Green Bay, Wisconsin, provides family wealth transfer and estate tax planning as well as retirement distribution planning. But while the firm doesn't offer any asset protection products, they do help guide clients along in the process of getting protected.
"The philosophy is to reduce risk before you have a problem," Keebler said. "We want to have clients with the right amount of insurance, and then we want to further compartmentalize business interests, so if you had ten different manufacturing businesses, we would want those all in separate entities rather than all in one entity."
The goal of asset protection is to keep creditors and predators at bay and, for Keebler, many indicators of how to proceed come up through the tax and estate planning process.
"For many physicians, architects, and lawyers who come to see us, there are areas where they need to reduce their risk," he said. "Sometimes it's about getting dollars into pension plans, sometimes it might be how Roth IRA conversions can reduce exposure to creditors, other times it may be domestic asset protection trusts in Nevada, Delaware, Alaska, or South Dakota. [But] almost any asset protection is laden with tax consequences."
Domestic asset protection trusts are self-settled trusts enacted in domestic jurisdictions, which have enacted the requisite legislation.
"In most states, if you create a trust where you're the beneficiary of the trust you're not getting protected from the claims of your creditors," Keebler said. "But what's very clear is if you, for example, are an Alaska resident and you created an Alaska asset protection trust you'll have protection from the claims of your creditors, provided you meet the statute of limitations under the law."
Keebler said it's his job to evaluate where his clients are financially, get a solid balance sheet together, and then work collaboratively with their lawyers on what steps can be taken from an asset protection standpoint.
Most of his clients are facing three main issues - eliminating or reducing business risk, positioning assets to reduce claims of malpractice and other creditors, and prenuptials and asset protection trusts for premarital planning.
"The core for most of these people is tax planning," he said. "If someone came to us and said we don't want to do any tax planning just asset protection planning, I would probably put together a good balance sheet, get them a good asset protection attorney, and let the attorney take the lead. We'd work with them to make sure they understand all the tax implications of moving their assets."
Issues vary for clients, and so do the options depending on their location. One, for example, is evaluating creating a domestic asset protection trust, bringing up the question of how to report for gift tax and income tax purposes. He pointed to the state of Texas, where physicians are converting to the Roth IRA because they can use outside funds to pay the taxes on the Roth conversion.
"These are funds that would be normally subjected to claims of their creditors and the dollars of the Roth IRA are exempt from claims of their creditors," he said.
The most common misconception in asset protection according to Keebler? That you can move assets after a liability is established or a potential liability occurs - and you can't.
"If a person is involved in a terrible traffic accident where there are clearly going to be some liabilities, at that point in time, moving property is going to be what's called a fraudulent conveyance. My job when doing income tax and financial planning is to encourage them to work with their lawyer to establish some solid asset protection planning."
This should always be done in a timely fashion as planning done too late can be, well, too late and considered fraudulent.
Though the lawyer usually facilitates this process, the role of the accountant is expanding as the tax law allows, Keebler said, pointing to single person LLCs as an example.
"So for the person with ten apartment buildings, there is just no good reason why ten apartment buildings can't be held in ten different LLCs - and it's well within the province of the accountant to encourage a client to talk with his or her lawyer about it. We're doing income tax, financial planning and estate planning but you can't do those things and totally ignore the asset protection side of things."
In light of today's economic and litigious culture, more and more clients have come to Keebler to iron out a strategy for asset protection.
"Everybody has a friend who has been wiped out in this economy," he said. "Clients are taking a hard look."
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Liz Gold owns Rhino Girl Media, offering writing and editing services to companies of all sizes. A published journalist for sixteen years, Liz writes about business and culture. She can be reached at [email protected]