Tax, Estate & Asset Protection Planning for Physicians, Part 1

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Part 1: Family Trusts

By Robert L. Bolick, Esq.

This article is the first in a six-part series on tax, estate and asset protection planning for physicians. This issue focuses on the estate planning tool of family trusts. Upcoming issues will address generation-skipping trusts, captive insurance companies, professional limited liability companies and asset protection trusts.

Most people today are aware that a revocable family trust can avoid sending your heirs to court on a probate proceeding. A revocable family trust will not by itself provide any direct asset protection benefits during your life, but can enable you to create a limited partnership which can provide a great deal of asset protection during your life. It can also yield substantial tax benefits and asset protection to your children or other beneficiaries after you are gone.

What Are the Tax Benefits of a Family Trust?

A properly drafted A/B Family Trust can potentially save your beneficiaries hundreds of thousand of dollars of estate taxes after your demise. The estate tax exemption for 2009 is $3,500,000. Estate taxes are a flat 45% of all amounts in excess of the exemption. There is no estate tax for anyone dying in 2010. However, the current tax relief expires on December 31, 2010. Beginning January 1, 2011, the estate tax exemption plummets to a mere $1,000,000 and the maximum tax rate increases to 55%. While most anticipate that Congress will intervene and keep the exemption levels at or near the current amounts, it will quite literally take an act of Congress to do so.

Regardless of the amount of the exemption, an A/B trust can take full advantage of the exemptions offered to you and your spouse or partner, thereby protecting the maximum possible amount of assets from further tax or attachment by creditors. Without an A/B trust, the exemption of the first spouse or partner to die is wasted.

Can a Trust Help My Beneficiaries?

Yes. You can provide 100% asset protection to your beneficiaries throughout their lives. They can serve as a “built-in prenuptial agreement” to protect your children from financial losses in a dissolution of their marriage. They can give your children 100% protection over the assets bequeathed to them against any future lawsuits, car accidents, business failures or bankruptcies. In short they are a very powerful tool to protect your beneficiaries throughout their lives. They can fund your children’s education and provide any other worthwhile benefits you choose to provide for them.

Robert L. Bolick is the senior partner in the law firm of Durham Jones & Pinegar in Las Vegas, where he has practiced for over 24 years. His primary areas of practice are asset protection and estate planning. Mr. Bolick has an “A/V” rating from Martindale-Hubbell, the highest professional rating for an attorney. He is listed in “Nevada Super Attorneys” (top 5% in his field). He was named Outstanding Estate Planning Attorney of the Year by the Nevada Business Journal. He has authored numerous articles and publications on asset protection and estate planning, and is a frequent lecturer on these topics. Mr. Bolick is a member of the State Bars of Nevada, California, Arizona, Utah and Hawaii.