“Asset protection is alive and well” as professionals and wealthy families rush to lock out an increasingly uncertain outlook.
Whole sectors of the global economy are shut down right now. Investors have either buckled in for the wildest ride in our lifetime or they’ve pulled the rip cord for the foreseeable future.
Meanwhile, doctors and other medical professionals are working harder than ever. They aren’t necessarily making mistakes but their attention and decisions are stretched to the limit.
There’s a lot of liability in the air and not a lot of immediate upside to compensate anyone for the risk. And as economic desperation circulates, opportunistic lawsuits multiply.
But some businesses have more clients than they can handle. Rich people who recognize the way the wind is blowing are crowding into estate planning offices to protect what they have before things have the chance to get worse.
We’re holding a webinar on estate planning in the COVID era tomorrow afternoon. It focuses on the emergent medical necessities of locking down paperwork for your clients before the pandemic puts them at risk.
It’s on the level of legal triage, routing scarce resources (client attention and in some cases access around the quarantine wall) to the most essential tasks. We want to make sure your clients have at least the rudiments in place.
After that, of course, you’ll have the luxury to use this moment to reflect, rethink and refine your relationships. Of course the challenge there is having the right players on your extended team, and that’s where things are getting tight.
The estate planners have more business than they can handle right now. It makes sense. Older people have amassed more significant wealth and they’re also at much higher risk as the virus rips through the world.
If they don’t have end-of-life plans in place now, they need them NOW. And just like the hospitals straining to cope with the usual load as well as COVID patients, they’re competing for limited legal support.
Steve Oshins, one of the most prominent players in the Nevada trust scene, tells us his office is slammed.
“Asset protection is alive and well when people are scared,” he explains. “Business as usual. Rich people are still rich and the $2 million to $10 million people are more scared of losing assets,”
It makes sense. There’s an election coming and wealth tax proposals are getting more traction than they have in generations. The rich are in a precarious situation.
And with stocks still down 15% YTD, now is the time to move assets out of the personal liability shadow into a trust where they can rebound on their own terms.
If lifetime transfer limits were a problem, temporarily distressed valuations allow bigger gifts and ultimately bigger trusts once the world recovers.
Investors love to buy low and sell high. A newly funded trust is effectively “buying” at a deep discount. Naturally, we all hope the assets will return to their former book value . . . but at that point, they’ll be in the trust, which gains the benefit of their recovery.
Furthermore, if more advanced techniques are in play to smooth the impact of declining asset prices and overcome those transfer limits, interest rates will realistically never get much lower.
The trust can simply write a promissory note to “acquire” the assets and then pay the money back at prevailing interest rates. Right now that’s close to zero.
And fair value on those assets is depressed. The more depressed the assets, the better these deals get. Think start-up businesses with theoretically endless potential in the long term but nothing to show for it in the current economic environment.
What’s a world-class restaurant group worth right now? Put it in a trust while it’s shut down. When it recovers, it will be worth something again and the right trust will protect that wealth from taxes and creditors.
Remember Mitt Romney’s infamous IRA bursting at the seams with early-stage venture capital. That’s what a trust funded today can become.
Wait too long and wealthy families may see opportunities shut down in the uncertain future. Either those assets will continue to appreciate on their own and make a transfer difficult down the road, or an even cloudier economy will drive “creative” tax policy.
As the great estate planners like Oshins always tell me, the time to lock in a tax break is before it closes. After the assets are safe, you have the luxury of being able to reflect and refine your plan as circumstances change.
Life and death are like that too. The time to move is now. We’ll see you tomorrow. I hope you can join us on the call.
And of course it's remarkable that the estate planners are busy while the markets have stalled a lot of conventional financial planning. If you're bored and not finding a way to add value right now, this is the place.
