New Year, New Rules: Inheritance Tax and Asset Protection 2011


As we begin 2011, there is a lot of uncertainty in the areas of estate planning and asset protection. For much of 2010, we expected 2011 to welcome us with a 55 percent estate tax on all assets over $1 million. Towards the end of 2010, President Obama gave in to Republican demands for a suspension of this exorbitantly high estate tax and agreed to reduce the estate tax for 2011 and 2012 to 35 percent, with an exemption amount of $5 million. If you plan to die in the next two years, you may be relieved. However, if you plan to live much beyond 2012, uncertainty still lingers. Effective today, the 2013 estate tax rate will return to 55 percent, with only a $1 million exemption amount. We will hope for the best, but must plan for the worst, so we recommend that our clients establish irrevocable life insurance trusts for all life insurance policies over $250,000 and bypass trusts for all marital assets over $2 millions. As probate laws change, we’ll continue to update it so you can better serve your clients and protect yourself and your family.

The world of asset protection changed slightly in 2010 as well. On June 24, 2010, the Florida Supreme Court issued its long-awaited opinion in the case of Shaun Olmstead, et al., v. The Federal Trade Commission raised the issue of whether Florida limited liability companies (LLCs) will continue to have collection order protection. A collection order is a remedy that a creditor of a member of an LLC may receive from a court that directs the entity to award to the creditor any distributions that would otherwise be paid to the partner or member of the entity. Generally, a creditor who receives an order to collect in respect of a member’s interest in the entity does not have any authority to order distributions from the entity or to participate in the management and affairs of the entity, nor can it access the assets of the entity. the entity. the company.

Collection orders are governed by state law and, in many states, a collection order is the exclusive remedy for a creditor with respect to the debtor’s LLC membership. However, the Olmstead ruling allowed the creditor to “pierce the corporate veil” of the LLC and access the real assets of the LLC. While the LLC in question in Olmstead was a single-member LLC, many attorneys are concerned about the slippery slope that would allow the drilling of multi-member LLCs as well. It’s definitely something we’ll be keeping an eye on in the coming months.