“Six Secrets of How Wealthy Landowners Protect Themselves From Lawsuits”

I recently read that a lawsuit is filed every 13 minutes of every working day in California and this disease is proliferating throughout the country.

In addition, the toxic substance and mold litigation is on a rise with multi-million dollar verdicts against the landowners.

Over 80 million lawsuits are filed each year in the U.S. Each year trial attorneys create new causes of action aimed at the perceived deep pockets of businesses and individuals. For instance, most people are familiar with the infamous McDonald’s hot coffee case and lately, the mold cases. The San Francisco Chronicle reported on January 22, 2003, that tenants of an apartment building in Hayward are suing the owner for five million dollars for mold related injuries. Mold damage awards in recent cases have been so great that the major property insurance companies are reluctant to write policies in California. It may be a limitation or exclusion in your policy.

Mistake Number One – Not understanding the implications of how you own your real property.

The inexperienced landowner holds all their property as themselves, jointly, or as “joint tenants”. In some cases this can work, but in many cases it can be the cause of an expensive and devastating mistake.

With the proliferation of mold cases mounting, it is a best practice to not hold investment property in your own name because insurance will not cover these claims.

The wealthy and experienced real estate investor knows that they have to use a limited liability entity to hold the property creating a prophylactic between themselves and any liabilities stemming from the property.

Mistake Number Two – Not knowing which estate-planning document to use so you’ll avoid lawsuits

Should I use a revocable or irrevocable trust and should it be domestic or foreign?

A lot of folks don’t know that a revocable trust is only for avoiding probate but offers no creditor protection.

Depending on timing when a person is sued, there are great opportunities with the right irrevocable domestic trust. On the other hand, there are some really great offshore solutions that allow you to participate in the global equity markets and are experiencing much higher gains than the U.S. market.

There is also one super investment tool that is protected and avoids capital gains providing far better returns than mutual funds and independent stock investments.

The experienced real estate investor knows that they should put their home into a plan that will not affect their tax benefits but still render solid protection from a creditor by using the right tool.

Mistake Number Three – Holding Too Much Equity in Your Home.

If a creditor can’t get at cash, they go after real estate. The best place to start is with the roof over your head. Most states are experiencing record appreciation which means there is a lot of equity in many homes.

But how much interest is this equity earning? There are products where you could be investing some of the equity proceeds and earning more than you’re paying for the loan. The wealth minded landowner leverages everything, earns on that leverage and tries to reduce ownership.

Some superior mortgage products are on the market that will keep your equity down while you live in the home. At first blush, it sounds contrary to common thinking. Nonetheless, the wealthy person puts everything at their disposal to work to create extraordinary wealth, even home equity.

Doesn’t it make more sense to tie the money up in investments that earn and keep your home safe?

Mistake Number Four – Not Keeping Adequate Property Insurance

A good insurance policy can provide a solid first line of defense. However, you must be aware of its limitations.

General business insurance policies insure against accidents on the business property such as slip and falls and fire and equipment malfunction. These policies often exclude accidents occurring outside the scope of employment, an intentional act by an owner or employee, contract claims and working at home.

Liability policies for professionals such as doctors, dentists, attorneys, architects, engineers and accountants also have exclusions from coverage such as grossly negligent acts, willful or wanton misconduct, punitive damages and liability related to product liability.

Personal liability insurance policies include auto, homeowners and umbrella coverage. If a plaintiff’s damages exceed your auto policy limits, you will be personally liable for the balance. Homeowner’s insurance policies provide insurance for damage to the residence caused by acts of God, insects and often construction defects. The policies often exclude coverage for any business activities at the home. Umbrella insurance policies are a relatively inexpensive way to supplement auto and homeowners policy limits, but they are not complete. Umbrella policies generally exclude coverage for dangerous sports, dangerous equipment such as guns, trampolines, swimming pools and sometimes lawn mowers, chain saws and power tools. In addition, such policies may exclude dog bites, intentional acts and business activities.

Another problem with relying exclusively on insurance is the risk that your insurance company may not be in business when you file a claim. The Wall Street Journal reported on January 30, 2003, that a rash of insolvencies among insurers is resulting in hundreds of thousands of consumers at risk of not collecting on their claims. The problem is growing as more and more insurance companies are filing for bankruptcy.

While insurance is a good first step, it not always reliable. The experienced real estate investor never relies on one tool but uses all tools in their tool belt to protect themselves.

Mistake Number Five- Not Avoiding Probate

Multiple Probates. If you have real property in multiple states, then you will have to probate the property in each state.  That means attorney fees in each state, potentially larger probate fees in other states, and the administrative burden of multiple state probates. The average is 3% to 8% of the gross estate, if you compound this by five or more states your estate is in trouble.

Along with protective features, a good plan should tie into your estate plan so that you avoid multiple probates. Our office and the tools we use on a daily basis to take care of clients can accomplish this very easily.

Mistake Number Six - Procrastinating

This is likely the biggest and most costly mistake the novice real property investor makes. The wealthy real property investor always takes out time to do proper planning because the alternative could be catastrophic.

If you want to avoid these outcomes, you need to take a little bit of time out of your schedule and plan.

The truth is with proper planning almost anyone can dramatically improve their estate, business and retirement plan.

Due to the complexities of estate preservation planning (“Asset Protection”) and the many changes slated to occur, it’s extremely difficult to explain each application of these strategies here in print.

While one client may be able to benefit from a strategy by using it one way, another client may be able to benefit from a different application of the same strategy. Everyone’s situation is like a snowflake, no two are alike.

If any of these strategies make as much sense to you as they have for America’s wealthiest landowners, then we invite you to contact us for more information on how to do the same.

You can also find out more by reading the “The 3 Secret Pillars of Wealth” which is sold at Amazon, Barnes & Noble, Borders and other fine book stores.

James Burns, Esq.

www.jamesgburns.com

Extension on Offshore Account Disclosure

The US Internal Revenue Service has announced an extension of the deadline for special voluntary disclosures by taxpayers with unreported income from offshore accounts.

The extension, announced by the IRS on September 21, gives taxpayers until October 15, 2009, to make a disclosure.

Under special provisions issued in March, taxpayers with undisclosed offshore accounts originally had until September 23, 2009 to come forward. Those taxpayers who do not voluntarily disclose their hidden accounts by the new deadline face much harsher civil penalties and possible criminal prosecution.

Usually if  the IRS  discovers that a taxpayer has not reported an interest in an offshore account or income on such accounts, the IRS may impose penalties of up to 50% of the balance of each offshore account for each year the account remains undisclosed. The taxpayer will also be liable for additional tax on income earned by the foreign account plus interest on the additional tax. Additional penalties may include a fraud penalty of up to 75% of unpaid taxes and a penalty equal to the greater of $100,000 or 50% of the offshore account balance for willful failure to file a Report of Foreign Bank and Financial Accounts form for each offshore account.

Making a disclosure under this program, the taxpayer will be liable for a reduced single penalty equal to 20% of the amount of the offshore account for the one day in the past six years in which the account had the highest aggregate value. However, this penalty could be reduced to just 5% under certain circumstances.

The IRS warned that it has no intention of extending the deadline and those who do not voluntarily disclose shall face the fullest of the penalties.

Untaxingly,

James Burns, Esq.

“The Sensation with Inflation”

There is a lot of confusion as to where we are headed right now so I thought I would break down the different flations and maybe we can all decide which one is the fit right now.

Inflation is a where your currency buys less due to a rise in the price of goods and services; accordingly, inflation is the erosion in the purchasing power of money. Over time, as the cost of goods and services increase, the value of a dollar is going to fall because a person won’t be able to purchase as much with that dollar as he/she previously could.

What cost $29,900 in 2000 would cost $37031.75 in 2008. Also, if you were to buy exactly the same products in 2008 and 2000, they would cost you $29900 and $24235.11 respectively.

As a harbinger, gold recently rallied above $1,000 an ounce and many experts think that this is partly due to the Fed’s continued money-printing campaign over the past year will cause the dollar to weaken even further than it already has.

That’s putting upward pressure on other commodities. Oil is trading around $71.50 a barrel, an increase of about 20% over the past six months. The prices of sugar and copper have shot up.

Deflation: A decline in price levels caused by a decline in the supply of money or credit. Deflation often includes the side-effect of enlarged unemployment because of the lower demand for goods and services in the financial system.

Stagflation: High inflation and high unemployment occurring simultaneously.

Taxflation: aka bracket creep the gradual movement of income into a higher federal income-tax bracket as a result of wage and income increases intended to help offset inflation. It can also affect the liquidity of an estate by increasing the estate tax burden.

Example – single person with estate worth $5,000,000 and in 2009 that would cost the estate $1,200,000 or represent shrinkage of 24%.

If they pass away in 5 years or 2014- and was growing at 8% per year. The estate will have grown to approximately $7,346,640.38 the federal estate taxes would be $3,893,719 and represent shrinkage of about 53%.

It looks like we have a combination of them all but I would say Taxflation and stagflation are a good fit but it really is anyone’s guess.

It’s A Shame For You Not To Find Money — When These People Do It So Easily

Times are tough and without money it can be a long cold winter until we have economic recovery in this country.

Enter the life Settlement – this is a strategy to take a non-productive or useless insurance policy and turn it into cash today so you can get in on the opportunity that is out there.

WHO BUYS THESE LIFE INSURANCE POLICIES?

Institutions continue to provide the majority of funds to purchase life settlement contracts.  Some more notable players who have participated include Berkshire Hathaway (Warren Buffett’s firm), Citibank, Credit Suisse, Goldman Sachs, Deutsche Bank, and Morgan Stanley.

WHAT KIND OF LIFE INSURANCE POLICIES ARE THE MOST DESIRABLE?

Universal life and term life insurance policies are the most desirable.

Term policies should still be within their conversion period for maximum value.  Whole life policies are also considered.

HOW SMALL CAN THE POLICY AMOUNT BE?

An amount of $250,000 and greater is preferred, however.

WHAT CAN I EXPECT TO RECEIVE FOR MY POLICY?

Life settlement offers have ranged between 10% and 40% of the policy’s face value. Some offers have been less and some higher—always dependent upon the health of the insured and premium costs.

WHO’S ELIGIBLE?

Eligibility is fairly straightforward:

• The insured must be at least 65 years of age (Age 62 if health is significantly impaired).
• The insured is not terminally ill or have a catastrophic illness.

HOW LONG DOES IT TAKE TO COMPLETE A LIFE SETTLEMENT?

It generally takes 6-8 weeks from the time a completed application package is received until funds are wired into the policy owner’s account.

If you would like to have your policy assessed for settlement please contact my office.

Some of the most common reasons for a life settlement are:

• The premium payments have become too costly
• You may no longer require the policy
• You may be considering the surrender of the policy or the policy may be about to lapse
• There may be a change in your estate planning needs
• You may have a need for liquidity
• You want to give a gift to a family member
• You may need to retire other debt
• You may want to purchase a new less expensive policy
• You may want to generate funds for charitable giving

Common Business Reasons:

• The “Key Man” insurance no longer needed
• The Buy/Sell insurance taken out for the business partners is no longer needed
• Increase liquidity needs for the business
• Eliminate company debt

Untaxingly,

James Burns, Esq.

Consumers Get Insult to Injury in a Worsening Economy

I was paying my T-mobile bill today when I noticed that if I didn’t sign up for electronic billing and kept the hard copies coming in the mail I am now going to be charged $1.50 per month for the luxury of getting a bill sent to me.

As if it wasn’t bad enough, now you have companies trying to stick it to you even for the bills they need to send to you. I’m not a fan of receiving the electronic bills because I receive so many e-mails and a lot of them are junk and might miss the bill or delete it by accident. I’m old school on my billing and want it in hard copy so I can organize it in a file with dates and make sure they get paid.

This is akin to the airline practice of hitting you up extra for a bag. It started out with no more meals. OK we said, we had enough of that cardboard food anyway but it was nice to get it offered or included in the outrageous price for flying. Now they are charging you not just for an additional bag, but every bag you check; even if it is one. We need to rebel Americans and show them we’re not going to take it. Forget sending a tea bag to your public representatives, start sending tea bags to these company CEOs who allow such caustic policies to be deployed that are not consumer friendly.

If we as consumers don’t work together to show them what is unacceptable they will continue to push us down and before you know it they be billing us for our carry on bag and to bring your own meal on the flight and there will be no stop to their adverse creative ideas to bilk you.

Sincerely,

James Burns, Esq.

“THREE WAYS YOU CAN AVOID GOING BROKE IN THE NEW ECONOMY”

The first thing you can do as illustrated in “The 3 Secret Pillars of Wealth” book is take ownership of your monthly expenditures by having a family budget and a family balance sheet you observe with conviction. If you’re desirous of change, you have to do the work since the only place success comes before work is the dictionary.

Number two, if your home payments are too high because you’re job or industry has fallen off, seek a loan workout with your lender or use a law firm to assist you that has a success rate.

Mr. Burns also states that if you are carrying too much bad debt like credit cards and you’re slowing sinking into the quicksand, think about debt settlement or management services that don’t have an upfront cost and can get you from point A to point B in terms of eliminating this debt. While it may have a temporary blemish on your credit score, at least you get back to the surface where you can breathe.

Lastly, if you’re crunched for cash to invest or pay down bills, look if you or your parents have an old universal life or convertible term life insurance policy that has underperformed or is not really needed and consider having it sold in the secondary market as a life settlement.

More power solutions are available right here so stay tuned, get involved and please send in comments so we can save or pick up lives in this down economy. In numbers we are strong.

James Burns, Esq.