Paul Deloughery - Magellan Law - April 2019

Take a look at our newsletter this month.

MAGELLAN LAW PROTECTOR

602-443-4888 MagellanLawFirm.com

APRIL 2019

HOW TO AVOID LOSING EVERYTHING IN A LAWSUIT OR BANKRUPTCY

... EVENWHEN YOUWERE TOLD YOU HAD NOTHING TOWORRY ABOUT W elcome to the first edition of my monthly newsletter. • Assets are removed from your personal ownership and from any disclosure as your personal assets.

he ended up in bankruptcy court. The court applied federal bankruptcy law instead of Alaska law and, therefore, ruled that the trust assets were reachable by his creditors under Section 548 E of the federal bankruptcy code. The DAPT did him no good. DAPTs are also problematic if a potential lawsuit arises in a state that does not recognize or protect self-settled trusts (for example, Arizona). In Dexia Credit Local v. Rogan, the 7th Circuit Court ruled that Illinois law applied instead of the law of the DAPT state in which the asset protection trust was created, and the person concerned couldn’t protect their assets from the claim. This also happened in 2013 in Waldron v. Huber, in which, among other things, Washington state law applied rather than Alaska law, where the DAPT was formed. The result — again — was that the assets in the trust were not protected. What many do not know is that there is an alternative that has been around for over 100 years. But trust companies in Nevada and Alaska can’t make as much money off of this alternative, so it isn’t marketed. I call it an “asset vault trust,” and here are the advantages:

Each month, I’ll be sharing stories that will highlight how, over the past 20 years, I’ve seen both hardworking business owners and wealthy individuals put themselves at risk by being unprepared, badly advised, or both. This month, I’d like to uncover the truth about one of the most misunderstood but widely marketed “solutions” for protecting wealthy individuals from lawsuits — the Domestic Asset Protection Trust (DAPT). The premise of this scheme is that you can set up a trust for your own benefit that will protect your assets from your creditors. There are currently 17 states with legislation on the books that permit this kind of trust. So, what’s the problem with a DAPT? ANSWER: They create an expectation of rock solidness but have a history of failure when tested (challenged in a U.S. court). In other words, like everything that looks too good to be true ... they are! For example, federal bankruptcy law can defeat a DAPT — even in those 17 states that actually recognize, protect, and advocate their use. In one case from Alaska, a state resident created a self-settled trust under ideal circumstances and Alaska’s domestic asset protection trust statute. When he created it, he was solvent and there were no judgments against him. Several years later,

• It can protect any type of asset in any location from any type of liability, including lawsuits, bankruptcy, tax liens, divorce, or government actions. • Its terms, conditions, and beneficiaries can be changed, and the assets can be returned to you without any cost or tax effect at any time. • It can be set up quickly and requires no appraisals, no gift taxes, no extra tax returns, and no ongoing maintenance fees. You can transfer any asset into or out of the trust without any tax consequences. Our trusts do not increase or decrease your income taxes, and we will coordinate with your CPA to be sure they understand and agree with the tax treatment.

• It is supported by generations of legal precedent.

On the other hand — despite heavy marketing — both history and too many

court cases to list prove that offshore trusts and DAPTS fail to protect assets as promised.

• It is supported by state and federal statutes throughout the country.

• It is a private document and it cannot be discovered through any public records.

–Paul Deloughery, Esq.

602-443-4888 • 1

Published by The Newsletter Pro • www.TheNewsletterPro.com

On Feb. 13 of this year, a case occurred that should matter to you if you care about protecting your wealth from creditors. The law firm of Barry S. Franklin & Associates represented Daniel Pansky in a divorce proceeding in Florida. At some point, the law firm withdrew because Pansky wasn’t paying fees. The law firm then obtained a money judgment against Pansky and eventually got the court to award a charging order against Pansky’s interest in his company, Daniel PROTECTING YOUR WEALTH FROM CREDITORS

WHY YOU NEED LAYERS OF PROTECTION

afford (or decides not) to spend another $10,000–$20,000 on an appeal. Additionally, even if the case is appealed, the underlying case is usually settled before the appeal is heard. To phrase it more bluntly, in the real world, you’re often stuck trying to negotiate a settlement because the trial court doesn’t have a clue about Arizona’s charging order limitation or the difference between a legal issue (e.g., is a

Pansky, LLC. The law firm also asked the court to award the firm Pansky’s interest in Daniel Pansky, LLC.

creditor entitled to an award of a debtor’s interest in an LLC?) and a fact issue (e.g., do you wholly own your LLC?). And by the way, I’m not trying to disrespect

Pansky did not challenge the law firm’s charging order on his LLC interest. However, he did fight the law firm’s attempt to force him to turn over his interest in Daniel Pansky, LLC to the firm.

the overworked judges out there who cannot possibly have the entire body of statutes and case law memorized.

HERE’S THE SECOND POINT:

Let me pause here and explain how LLCs are supposed to work when it

The moral of the story is that you need to use layers. Don’t assume everything will work the way it’s supposed to. I’m reminded of a fishing trip I took with my mom, dad, and sister when I was 5. We took my dad’s Boston Whaler fishing boat out on Silver Lake in Washington. We were having a great time until black storm clouds started looming over the surrounding mountains.

comes to creditor protection. In Arizona, a charging order is the exclusive remedy by which a judgment creditor of a partner in a partnership — or a member in an LLC — may satisfy a judgment out of the judgment debtor’s transferable interest in the partnership or LLC (A.R.S. 29-1044). Florida, where the Pansky case arose, has altered their LLC statute to include what is known as an “Olmstead patch,” named after a case by that name. An Olmstead patch allows a court to transfer to the creditor a debtor’s interest in an LLC that he/she wholly owns. At trial, the law firm claimed that Pansky wholly owned Daniel Pansky, LLC, but Pansky claimed it was a two-member LLC. The court did not conduct a trial on that issue. Instead, it simply granted the law firm the relief that it requested — namely, an order transferring Pansky’s interest in the LLC to the law firm. The Florida Court of Appeals reversed the judgment on the basis that the trial court did not have the power to enter such an order without conducting an evidentiary hearing and making a factual finding that Pansky actually held the only interest in Daniel Pansky, LLC.

Before we were halfway back, the temperature had dropped 30 degrees and we were being pelted by cold rain and heavy winds. All the protection I had was a nylon windbreaker. Now, my dad had been a meteorologist in the Navy, and I have no idea why he didn’t check the weather forecast before taking the whole family out on the water that day. My mom was overly protective and always nagged me about dressing in layers. Despite all this background, a whole lot of assumptions led up to our predicament. We assumed the weather would stay the same, and we assumed that little windbreakers were all we needed. How does that relate to the Pansky story? It’s easy for all of us to “assume” that our LLC will protect us because the statute says we “should be” protected. But what if it turns out that’s not the case? What’s your Plan B, your Plan C? How financially hurt will you be if all of your assets in any of your business entities fail? What if your limited partnership fails? What if your liability insurance fails? At Magellan Law, we believe in using layered asset protection. We don’t just rely on one or two tricks that “should” work. Give us a call today to see how we can help!

HERE’S THE FIRST POINT:

I’m not raising this case to point out the obvious facts that a trial court got something wrong or that the case was corrected at the appellate court level. I’m mentioning this case because in the real world, the LLC often has little or no assets, and it either cannot

2 • MAGELLANLAWFIRM.COM

Published by The Newsletter Pro • www.TheNewsletterPro.com

WHEN SHOULD YOUR KIDS START WORKING? W hen the dolls and baseball cards get pushed to the wayside for cell phones and movie dates, it may be time to gently nudge your child out from under your wing and into the workplace. It doesn’t have to be pushing shopping carts or spinning signs on the corner; working in any capacity during formative years builds character and gives your child real-world experience. Summer jobs teach the value of a dollar and give kids lasting memories, and after-school gigs lead to more pocket change for the weekends and less worrying for Mom and Dad. The hard part isn’t asking yourself if they should work; it’s asking yourself when they should work. In the U.S., most of us have about four decades of working to look forward to. Many start working in late adolescence and continue until retirement age. Now, that’s a lot of work to be had. So why rush it? Well, idle hands often spell disaster. Sitting around all day is a burden on both child and parent, whether they realize it or not. Those few years between hitting puberty and graduating high school are the sweet spot for your child to start their part-time career.

EASY BACON AND SPINACH STIR-FRY There’s no shame in flipping burgers, stocking shelves, or mowing lawns. As of 2014, there were 16 million workers in the retail and food service industries, and the numbers have only gone up from there. But work ethic is changing among American teenagers. Just one-third of individuals aged 16–19 had a job lined up for last summer, compared to 51.2 percent for the same age range in 1997. While surviving on minimum wage as an adult is a topic of great debate, raking in around $10 an hour as a 14-year-old can seem like a king’s ransom. A few working hours here and there will do your grown baby a world of good and prepare them for the next chapter of their lives.

WORD SEARCH

This super easy stir-fry is the perfect weekday dinner. It manages to pack a ton of flavor using just a handful of ingredients.

INGREDIENTS • 3 slices bacon • 3 cloves garlic,

• 1 teaspoon crushed red pepper • Salt and black pepper, to taste

coarsely chopped • 2 bunches spinach

INSTRUCTIONS

1. Heat a large skillet to medium. 2. While skillet is warming, cut bacon into squares.

3. Cook bacon until fat is rendered and bacon is almost to your desired doneness. If desired, you can remove bacon fat from skillet and replace with 1 tablespoon oil. However, keeping the fat is recommended for flavor. 4. Add garlic and cook for 1–2 minutes. 5. Add spinach and crushed red pepper and stir-fry for 10 minutes. 6. Season with salt and pepper, and serve. Inspired by OhSnapLetsEat.com

RAINBOW EASTER PRANK PASSOVER FOOL SHOWERS

TAURUS HOAX SPRING BUTTERFLY DANDELION MISCHIEF

602-443-4888 • 3

Published by The Newsletter Pro • www.TheNewsletterPro.com

Magellan Law, PLC 10617 North Hayden Road #100 Scottsdale, AZ 85260

PRST STD US POSTAGE PAID BOISE, ID PERMIT 411

602-443-4888 MagellanLawFirm.com

As Seen On…

INSIDE THIS ISSUE

The Shocking Truth About DAPTs! page 1

Why You Need Layers of Protection Against Creditors page 2

Is It Time for Your Child’s First Part-Time Job?

Easy Bacon and Spinach Stir-Fry page 3 The Basis for Magellan Law Firm page 4

FIGHTING THE GOOD FIGHT

THE BASIS FOR MAGELLAN LAW FIRM

large sum of money. I was befriended by con artists who convinced me that they had legitimate investments. The result was that, over a five- year period, what started at $14 million had dwindled to $500,000. In my practice, I’ve met numerous clients who have found themselves in similar predicaments. The fact is, it’s very difficult to successfully pass wealth from one generation to the next. While there are a lot of transactional solutions for families — wills, CPAs, life insurance, and other products — there are few that can actually help move the wealth the way it was intended to be moved. The people I most enjoy working with are those who have assets to protect. One of the first things I noticed, however, is that that they have no real and effective protection against lawsuits and other avoidable losses. After having gone through my own experiences, I know how to best provide help to my clients, and I’ve dedicated my life to fighting the good fight and helping families who need it. If you want information about solutions that will protect your assets, don’t hesitate to give my office a call!

In 2009, I found myself standing in my biological father’s house for the very first time. His identity had been kept a secret from me for 35 years, but after I discovered who he was, I flew up to Vancouver to meet him. Unfortunately, when I arrived there, he was in hospice; his health was failing. Standing in his room, I started looking around to get a feel for who he was. I noticed that he had a giant computer screen surrounded by at least six enormous speakers — I was told that he liked to listen to classical music while trading stocks. As I looked around, I saw the previous year’s tax return showing $1.5 million dollars in passive income. That was the moment I realized that he had a significant estate. He passed away shortly after that first encounter, leaving me a large sum of money. Unfortunately, due to a lack of proper planning, I ended up losing approximately 50 percent to taxes and legal issues. Later on, I made some really unwise investment choices. I quickly learned the hard way that there are no legal protections for people who inherit a

4 • MAGELLANLAWFIRM.COM

Published by The Newsletter Pro • www.TheNewsletterPro.com

Page 1 Page 2 Page 3 Page 4

magellanlawfirm.com

Made with FlippingBook Learn more on our blog