Covering Your Assets: A Complete Guide to Wealth Preservation and Asset Protection

By Leonard Critcher

COVERING YOUR ASSets is not a guide on how to accumulate assets. It is written specifically for people who have already accumulated assets, or are on their way to doing so, and wish to preserve and protect those assets. It is written in a unique format that will allow you to isolate your specific life situation and read only material applicable to you.

You will learn about what the Wealth Planning process should actually entail, the Thirteen Wealth Management Issues (twelve of which that are ignored by many Financial Planners), the synergy that should come from the integration of these oft-ignored issues, and how to properly build a Wealth Planning Team.

Twenty-seven complex strategies and techniques are explained in simple terms and presented in such a way that they can be easily understood by any layman.

COVERING YOUR ASSets is an informative, enjoyable and easy to read guide for anyone wishing to Preserve and Protect what they have accumulated.

• Language: English
• Publisher: AuthorHouse
• Release date: Feb 26, 2014
• ISBN: 9781491862834

Leonard Critcher

Leonard Critcher is married to his college sweetheart, and they reside in Dallas, TX. He is the author of three nonfiction books, numerous professional articles and is a frequent platform speaker. Drawing The Line is his first novel.

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2014 Leonard Critcher. All rights reserved.

No part of this book may be reproduced, stored in a retrieval system, or transmitted by any means without the written permission of the author.

Published by AuthorHouse 02/24/2014

ISBN: 978-1-4918-6285-8 (sc)

ISBN: 978-1-4918-6284-1 (hc)

ISBN: 978-1-4918-6283-4 (e)

Library of Congress Control Number: 2014902738

Any people depicted in stock imagery provided by Thinkstock are models,

and such images are being used for illustrative purposes only.

Certain stock imagery © Thinkstock.

Because of the dynamic nature of the Internet, any web addresses or links contained in this book may have changed since publication and may no longer be valid. The views expressed in this work are solely those of the author and do not necessarily reflect the views of the publisher, and the publisher hereby disclaims any responsibility for them.

Table of Contents

Disclaimer

Acknowledgements

Introduction

Section One— A Must Read

The Wealth Planning Process

Don’t Live in a Vacuum

The Thirteen Wealth Management Issues

Building A Wealth Planning Team

Section Two— Terms, Terminologies and Other Confusing Things Meant to Impress You

Terms, Terminologies and Other Confusing Things Meant to Impress You

Section Three— Real Life Situations and Strategies You Should Consider

Real Life Situations and Strategies You Should Consider

Single—Straight

Single—Gay/Lesbian

About to Get Married

Married

Separated

Divorced

Widowed

So You Own a Business

Section Four— Specific Strategies and Techniques

Introduction

Buy/Sell Agreement

Charitable Foundations

Charitable Lead Trust CLT

Charitable Remainder Annuity Trust CRAT

Charitable Remainder Unitrust CRUT

Delaware Trust DAPT

Donor Advised Funds

Family Limited Partnership FLP

Family Trust

Gifting

Grantor Retained Annuity Trust GRAT

Grantor Retained Unitrust GRUT

Irrevocable Life Insurance Trust ILIT

Intentionally Defective Grantor Irrevocable Trust IDGIT

Letter of Instruction

Life Insurance

Limiting Liability

Living Trust

Marital Trust

Offshore Trust

Private Annuity Trust PAT

Qualified Domestic Trust QDOT

Qualified Personal Residence Trust QPRT

Self-Cancelling Installment Note SCIN

Special Needs Trust

Trust

Trustee

Section Five— Things In My Head That Must Be Said

Introduction

Deal of the Day

Fake It ‘Till You Make It

Fixed Annuities

Index Funds

Investment Advisors

Life Insurance

Physician, Heal Thyself!

Proprietary Products

Variable Annuities

Disclaimer

The planning strategies and techniques presented in this book are complex. This complexity absolutely necessitates that anyone, who is considering using any of the strategies and/or techniques presented, seek and receive competent and professional legal and tax advice.

No part of this book should be construed as giving the reader legal or tax advice.

Every reader’s situation is unique, and while there may be similarities among readers and the life situations discussed, it is imperative that you seek and receive competent and professional legal and tax advice that is pertinent and applicable to your unique situation.

Tax laws change, and the tax law referenced in this book may be different from what is actually in effect at the time you are reading the book.

The personal opinions of the author are just that—opinions. You should not base any planning decisions on opinions, just facts as they are verified, properly assessed, and implemented by competent and professional legal and tax counsel.

Leonard Critcher, B.A., M.A., ChFC, CLU, CWS

Acknowledgements

Editing a business-oriented book is a far departure from doing so with the two fictional novels that pre-ceded this effort. In some ways COVERING YOUR ASSets is a compilation of a working lifetime of professional education, experiences and experience. As such it was difficult at times to segregate myself from the written words that were describing things, people and situations very near and dear to me as a Financial Services Professional.

I was very fortunate to have three incredible talents lend their individual expertise to the editing of this book. Their much-solicited and welcomed comments, constructive criticism, and observations are greatly appreciated. Writing technical material definitely lends itself at times to not seeing the forest for the trees, and I appreciate other competent and professional eyes perusing my written words.

I want to thank and acknowledge the efforts of

Clark S. Willingham, JD, LLM

Thomas E. Ball, CPA

Linda McLendon Nolte, Literary Editor

Leonard Critcher

Introduction

The one thing that readers of this book will have in common is they have made it. If you’re looking for a roadmap to financial independence, this is not the book for you. There are plenty of well-written guides to investing in stocks, bonds, mutual funds, gold and silver, oil and gas, real estate and any number of other good ideas. Likewise, there is a multitude of qualified Financial Planners ready, willing and able to assist you in charting a course to wealth accumulation.

If you’re in the accumulation phase of your life you may find this book interesting but probably not pertinent at this point in your life.

The clients with whom I have had the privilege of working have all had the same basic concerns:

Preserving what they have, and

Protecting what they have.

This book is about preservation of wealth. Wealth is a very relative thing, and I have not predetermined exactly what constitutes being wealthy. If you have wealth, any degree of wealth, and you’re concerned about preserving and protecting that wealth, this book will probably help you. However, keep in mind that some of the strategies and techniques discussed here may not have any application whatsoever to you and your situation. This book explores many strategies that are available under current tax law to preserve and protect what you have accumulated, but it is written in such a way that you can hone in on those strategies most pertinent to your life and your uniqueness.

This book has five sections. The first section is entitled, "A Must Read." I strongly urge you to read the three chapters in this section before moving on. All are vitally important as you begin the process of preserving and protecting your assets. These chapters have vital importance to anyone taking the time to wade through the material included in the sections that follow.

The second section is a simple explanation of terms and acronyms that you will probably encounter when talking with know-it-all friends and family, cocktail party planners, and credentialed planning professionals that sometimes forget that their lingo isn’t always understood by everyone.

Unless you have a burning interest in learning more about a particular strategy covered in the fourth section, (which you may have heard about, or had been recommended to you,) I suggest that you begin your quest with the third section. This section is a compilation of real life situations and the issues unique to that particular situation. It will also recommend specific strategies you may want to consider. Chances are there will not be an exact rendering of your unique situation, but you should find something more than reasonably close. Keep in mind, as your life progresses there is one thing that is certain—things will change. As they do you may want to consider strategies that were not under consideration previously.

The fourth section delves into various planning strategies and techniques. Each strategy is described in, what I hope, is understandable language and includes some pros and cons to consider. Each of these strategies and techniques should be covered in detail with professional advisors, who can cover the legal and tax implications so you can consider these prior to implementing your Wealth Planning.

The fifth section is a potpourri of Things In My Head That Must Be Said. It contains a discussion of a variety of situations, concepts, ideas and approaches that simply did not fit anywhere else but may be of importance to you. Take a look at what is contained in this section.

From time to time you will encounter words and short phrases that will jump out in bold print. This has been done to get you to shake your head, clear the cobwebs that can come from reading what can become some pretty dry and boring stuff and concentrate on something I think is really important for you to understand and retain. Also, I have taken great pains to try and make this effort as entertaining as possible. Each section is written mostly in second person so YOU are the one involved in the strategy.

You will obviously find some personal prejudices woven into this material. After spending a working lifetime in the Financial Services Industry, it’s only natural that I have found it difficult to ignore some of the good, the bad and the ugly I have encountered. If you see a personal prejudice creep into something and you think that prejudice is an anomaly or just doesn’t apply to you, feel free to ignore what is written. I hope I have kept these prejudices to a minimum.

One last word. This book is designed to be an educational resource and a catalyst for you to seek professional advice. It is not in any way providing you with tax and/or legal advice; only a competent professional can guide you through the complexities of those worlds. However, if you have a basic knowledge of what may be applicable to your situation and what you are trying to accomplish, it will result in a more meaningful and fruitful dialogue with your advisors.

B. Leonard Critcher, B.A., M.A., ChFC, CLU, CWS

www.leonardcritcher.com

www.coveringassets.com

Section One

A Must Read

The Wealth Planning Process

Let’s start with the obvious; everyone has an agenda. Attorneys and CPAs are looking for billable hours. Stock Jockeys want to make commissions from selling you the latest deal of the day. Life Insurance agents want the commissions that come from the sale of their products. Trust Officers want to manage the trusts you create and have the trust fees flow into the financial institution they work for. Private Bankers want to lend you money at the highest rate you will accept. Portfolio Managers want to capture the investible assets you have and get paid a fee for allocating, investing and watching out for your money. And, banks don’t invite you to their stadium suites just because you can make good conversation in a crowd.

There’s nothing wrong with having an agenda, the end result of which is someone makes some money. Just be sure that the agenda starts and ends with you.

There’s an old joke that in most major cities in the US there is a Financial Planner for every checkbook. Open the phone book, if you still use one, and see the pages and pages of people who want to help you plan your financial affairs. Try Googling Financial Planners and your geographical location and see what pops up. It is highly probable that hardly a week goes by that you don’t get at least one invitation to a Financial Planning Seminar offering a free dinner to those who attend with, of course, no obligation. The airwaves are inundated with ads and seemingly neutral and valuable information all designed to set a hook in your assets and slowly reel them in.

It may sound like Financial Planners, or anyone wanting to offer you their expertise and advice for a fee and/or commission, are not well-intended. For the most part, they truly are trying to balance your needs with their own need to make money. No one with office rent, staff salaries, office supplies, equipment purchase and maintenance, phones, internet and website development, hosting as well as everything else that goes into running a business can ill afford to give you advice without getting something back in return. Even missionaries have to have food, clothing and shelter.

The reason for going through the above is to make sure you understand that no one works for free, and this includes banks. However you want to cut it, fees and commissions will reduce your assets. But this is not necessarily a bad thing if the end result is an increase in assets as a result of planning.

The College of Financial Planning in Denver, CO has done a remarkable job in educating Financial Planners with extensive course work and stringent testing. Someone who has been granted the Certified Financial Planner (CFP) designation by the college has proven their ability to grasp and communicate advanced planning concepts as well as agreeing to abide by the professional principles associated with the designation. Likewise, the American College in Bryn Mawr, PA has done an equally good job of educating practitioners through the stringent Chartered Financial Consultant (ChFC) program and designation. And, the Cannon Financial Institute in Atlanta, GA has experienced great success in giving Wealth Management professionals, working primarily in banks and financial institutions, a working knowledge of Wealth Management Issues and how to integrate this knowledge in the real life world. The Certified Wealth Strategist (CWS) designation is granted after a grueling amount of course work and on-line and face-to-face assessments.

In today’s complex financial world there is a plethora of impressive-sounding designations, but when it comes to working with someone in the financial planning realm, the CFP, ChFC and CWS designations at least show the individual’s endurance, persistence and ability to pass exams!

There is a big difference between perception and reality. There is the perception that all Financial Planners are going to address a wide range of planning issues when working with you. The reality is that there are many Financial Planners whose sole intent is to handle the investment of your assets. Initially, the planner will go through the motions of fact finding by filling out a questionnaire. This information will be run through a computer loaded with some version of planning software. Out comes a Financial Plan that usually is nothing more than a Cash Flow Analysis and Retirement Income Analysis, both of which are designed to show you why you need to save more money and hand it over to the planner. But wait a minute. You’re saying this sounds like someone who is still in the accumulation phase of his/her life. That’s true because many planners are really just investment people who are looking to capture assets. For those clients who have moved on past the Accumulation Stage, they want to capture the assets through investing the assets for retirement income purposes.

Understand that this is not necessarily bad. You may only need planning that involves investment advice, and there’s nothing wrong with that. However, there are many, many people who need comprehensive and cohesive planning that goes far beyond advice on how to invest their money.

What is The Wealth Planning Process and how does it differ from typical Financial Planning? The basic building blocks of any Wealth Plan are:

Asset Protection

Succession Planning, and

Saving Taxes

To begin with they both start at the same place, the gathering of facts like name, rank and serial number. The facts will probably include questions about what’s coming in and what’s going out, a listing of your assets and liabilities and probably even a few subjective questions. Basically, both Wealth Planning and Financial Planning start at the same place: where you are.

The next step is to determine where you want to be at some point in the future. That point may be a comfortable retirement, which most Financial Planners can assist you with. Or it may include a myriad of liability issues, estate issues, business continuation issues, insurance or titling issues or any of the Thirteen Wealth Management Issues discussed in the next chapter. Many Financial Planners can get over their heads here because their practices are designed to capture assets, manage those assets and keep the clients happy with what they are paying for. This is not to say that there aren’t Financial Planners who give significant attention to issues other than those relating to investments, but a true Wealth Planning Process presents you with strategies not products.

One very successful Wealth Planner, long tenured in the field, describes his process like this:

"Just like a Financial Planner I begin with finding out where you are and then help you determine where you want to be. The difference in what I do is that I develop strategies to get you there. Many Financial Planners use plans to get you to buy something. Let me use a metaphor as an example.

"My wife and I own a weekend home an hour and a half south of Dallas, and we go there most every weekend. When Friday rolls around, we know where we are, in Dallas. We know where we want to get to, the lake home. Now, there are three routes we can take. One stays pretty much on the interstate and goes through Hillsboro. One goes through Cleburne, TX, and one goes through the country. On any given day each has plusses and minuses.

"Before we hit the highway my wife and I discuss the best route to take based on those plusses and minuses. There may be construction on the interstate. We may need to stop at the outlet mall in Hillsboro or pick up some garden supplies at Lowe’s in Cleburne, or we may just want to enjoy the scenery of the country roads when the weather is nice.

My job as a Wealth Planner is to determine where you are and help you determine where you want to be relative to the wealth you have accumulated and then develop strategies to get you there. Part of the process is to give you the plusses and minuses of those strategies and then work with your other advisors to make sure the strategies selected are actually implemented. I will never approach something in a vacuum, because everything you do, or consider doing, has a cause and effect on other issues.

This Wealth Planner goes on to explain in great detail the following:

WHAT he does.

HOW he does what he does.

The RESOURCES he has at his disposal.

And, what DIFFERENTIATES what he does from others.

If the person with whom you are working or those that you are thinking about working with don’t or can’t give you answers to the above four critical elements of how he/she runs his/her operation, you might want to look elsewhere.

It is absolutely critical that you not approach planning in a vacuum. Most people address financial issues precisely in this manner. You may have a trip coming up that will take you overseas and all of a sudden you want to get a Will done or amend the Will you have. Uncle Harry just died and you witnessed first hand the turmoil that his family had to endure because he had not given proper direction toward his feelings about being taken off life support, so you call up your attorney and have him draft some documents. You finally let your Kiwanis buddy into your office to talk to you about life insurance, mainly because another friend was just diagnosed with terminal cancer. You wind up buying some life insurance.

The list of triggering events can go on and on, but it is just natural to have something happen in your life that will trigger the need or desire to address a singular issue. This can be good because you get something addressed that needs to be addressed. It can also be bad and ugly because you are probably ignoring how what you do with the singular issue is going to affect other vital areas as well as how what you have or have not done in other vital areas will, or should, affect what you are doing with the issue being addressed.

A simple example will show you what can happen. You have wealth but feel like you probably could use some more life insurance. This, again, comes to the forefront because one of your friends in your Kiwanis Club was just diagnosed with terminal cancer. You make your spouse the beneficiary and your children contingent beneficiaries. You pay the premium, file the policy away, and you feel all is well with your world.

Or, is it? In your haste to give your family added financial security you may have inadvertently created financial security for the IRS by ignoring Estate Issues. If you were to die your spouse would, in fact, receive the $1,000,000 death benefit of the policy you bought free of income taxes and free of Federal Estate Taxes. That’s good. But if there’s anything left of the million dollars at her death it will be in her taxable estate and