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The Seventh Circuit Court of Appeals has sustained a Bankruptcy Court decision holding that annuities qualifying for income tax deferral under Section 72 of the Internal Revenue Code (“IRC”) are exempt assets and therefore cannot be executed upon by the debtor’s judgment creditors. Continue Reading

One of the inevitable problems facing suspects in a criminal proceeding is the availability of funds to pay for a legal defense. Frequently, applicable laws authorize government seizure of defendants’ assets which effectively impoverishes them. Obtaining private counsel then becomes problematic. However, the Supreme Court recently decided in Luis v. United States that criminal defendants should be allowed to use untainted assets; that is, assets unrelated to their alleged crimes, to pay for their criminal defense. Continue Reading

For a decade and a half there were no court opinions upholding challenges to domestic asset protection trusts (“DAPT’s”). Indeed, there were no decisions at all. This lack of jurisprudence gave asset protection planners renewed confidence to consider using DAPT’s when clients sought protection against future creditor claims.
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Asset protection planners invariably deal with insurance and discuss its place in the asset protection plan. No legitimate asset protection planner, irrespective of the elegance of the plan he or she may have conceived, will advise a client to forego obtaining and maintaining auto insurance, home insurance or malpractice insurance coverage. There is no such thing as establishing a structure that is one hundred percent invulnerable to creditor claims; therefore, having liability insurance as the first level of defense just makes good sense. It is in this context that I am going to discuss whether consumers are adequately represented by their insurance agents. And why it is so important for consumers to thoroughly investigate their insurance needs and the products offered to satisfy those needs.
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As an asset protection planning attorney, it is interesting how often other attorneys ask me about the exposure of their clients’ social security and pension monies to creditors’ claims. The frequency is probably directly correlated to the fact that social security benefits and pension benefits are ubiquitous and so the question comes up all the time. While the law is clear on the debtors’ and creditors’ rights in these situations, unless the attorney practices in the asset protection planning arena, he or she may not be aware of the specific rules. Therefore, a brief summary may be helpful to the readers of my blog.
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The bankruptcy case of Running v. Miller (In re Miller) is one of those cases where the Trustee in bankruptcy, in a zealous effort to grab the debtor’s assets, ignores the Internal Revenue Code (“Tax Code”), common practice and common sense. Here, the debtor filed a Chapter 7 bankruptcy case and scheduled an individual retirement annuity as exempt under 522(b)(3)(C) of the Bankruptcy Code. If an individual retirement annuity meets the Tax Code 408(b) definition, the annuity is not part of the bankruptcy estate and is exempt from creditor claims.
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Asset protection planning attorneys are often asked about protections that are available for qualified retirement plans and whether retirement plan assets are subject to claims of creditors. As a general rule the account of a participant in a qualified retirement plan, such as a profit sharing plan or 401(k) plan, is exempt from creditor claims with limited exceptions. For example, a spouse in a divorce can seek a qualified domestic relations order to reach the participant spouse’s interest in the account and the IRS can access the account for unpaid taxes. But typically banks and judgment creditors cannot reach the debtor’s interest in a qualified plan.

A 2013 Bankruptcy Case has now identified a set of circumstances where the general rule is not applicable and where the debtor’s interest in the plan is fully accessible by his general creditors (Daniels v. Agin, 736 F.3d 70 (2013)).
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As an asset protection planning attorney who practices in Michigan and Ohio, I am well aware that this area of the law is very fluid. Recent cases remind us that the law changes from time to time and that there are frequent exceptions to the general rules.
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An article on the front page of the August 22, 2011, Wall Street Journal describes the government’s expanding rights to seize a person’s assets. The article is replete with examples of how innocent parties are destroyed if they are simply in the wrong place at the wrong time. Some 400 federal statutes empower the government to take assets from convicted criminals as well as people never charged with a crime.
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Clients visit Michigan asset protection planning attorneys for a variety of reasons. Some have no creditor issues whatsoever but wish to be prophylactic regarding future unknown creditors. Others are enmeshed in severe financial distress and are desperate to find ways to salvage assets. Most of my clients are honest and reputable persons with legitimate legal inquiries. However, on occasion, a crook will show up seeking information regarding not only how to shield assets from creditors but how to hide assets. Regardless of the circumstances, the client expects that communications between client and attorney will be confidential and protected from forced disclosure. Indeed, the attorney-client privilege is one of the oldest of the privileges for confidential communications.
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