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I attended an old-fashioned medicine show in the guise of an asset protection program at the Grand Traverse
Resort recently. Some of you may have received the announcement from a firm in Salt Lake City, Utah of their
procession of workshops through the State of Michigan on "Asset Protection and Wealth Creation". Out of
curiosity, I decided to attend.
Texas Talker. The presenter was a featured attorney from Dallas, Texas (not licensed in Michigan), who
turned out to be promoting a series of legal services, including Trusts, Limited Partnerships, Corporations,
Foundations and Charitable Remainder Trusts. That he was giving legal advice in Michigan without being
licensed here, called the "unauthorized practice of law" did not seem to bother him.
Fear and Greed. Two of the strongest human emotions that are tapped by promoters are fear and greed.
Some of the casino billboards, for example, are aimed at the greed in all of us. In this case, the presenter
offered strategies to reduce income taxes by creating C-Corporations to conduct people’s affairs, thereby, in
his analysis, converting personal expenditures to business deductions. Do any of you have clients who have
tried this ruse? According to the presenter, all that is involved is filling out a simple form and "presto" you have
shaved dollars off your income tax bill. He didn’t mention Form 1120, IRS audits, verifications, or what
happens when formalities are not followed.
Fear. The fear element was tapped repeatedly throughout the presentation. Insurance was disparaged and
Family Limited Partnerships on a "patented foolproof form" were the answer to creditor claims. Basically, the
assertion was that everybody was going to get sued and have seven figure judgments against them (even
though you did nothing wrong). This reminded me of the lightning rod salesmen who traveled the Midwest
and West decades ago making sure that every house had a lightning rod. (The odds of lightning striking a
house on the plains was probably greater than the seven figure judgment. Plus the lightning rod cost less.)
Greed. The FLP was also the solution to estate taxes. Without explanation, the presenter stated that he could
make sure that a $4-$5 million estate paid no estate taxes through the use of discounts, again with the magic
patented form. Of course, Texas is the never-never land for discounts, taxpayer oriented courts, and of course,
large plaintiff’s judgments.
Clean-up. My guess is that many of you will be called upon to "clean up" the mess that the presenter and his
firm may create for us poor trusting Michigan folks. Many of you know the technicalities and the benefits of
incorporating (and the disadvantages) and are aware of the tax and practical hazards in putting all of one
assets into a FLP.
Medicine Show. The whole proceeding reminded me of the movie versions of the traveling patent medicine
selling. Do you hurt? Has your doctor made you feel better? You can feel better now with my patented Dr.
Smith elixir. The presenter was very skilled in eliciting responses as one would expect at a revival show. Do
you pay too much in taxes? Would you like to pay less? Do you think the rich pay as much as you do? Do the
rich know tricks that you don’t know? Shouldn’t you use all the tricks that the rich do to reduce your taxes?
I can imagine how many of the attendees would be taken in by a Texas surgeon’s presentation. Does your
back hurt? Has your doctor fixed your sore back? Do you think rich people have sore backs? Sign up now for a
$2000 operation which I will perform right upstairs.
Living Trusts. Everybody should have a Living Trust to avoid probate. The presenter said that attorneys (or
their secretaries) just stick names in a form, and he had a better form valid in all 50 states, which anyone can
complete with a few clicks and typed insertions.
Texas Beware. The presenter was very skilled and experienced in doing these programs and eliciting
audience response. I have had clients who have had trusts prepared by another (or the same) company in
Dallas that solicits direct mail responses. It must be the Modern Maturity mailing list, but I get at least three of
these announcements a year. Clients who have responded to these find that there is a trust salesman on
their front porch within days after the card is sent back. The Michigan attorney, if there is one, never sees the
client to find out their needs. The client never stops to think who will be around to service the trust, answer
questions, etc., when the need arises. Some of you may have had clients who attended this workshop. I
hope they consult with you before they swallow the Texas bait and come to you for clean-up, consultation or
handling IRS problems. By that time they will have had at least two sets of fees, yours and the Texas folks.
Conclusion. I am sure that you have dealt with one or more of these techniques in counseling your clients
and know that they are not to be tackled lightly. As we have discussed in prior newsletters, Family Limited
Partnerships or LLCs, Charitable Remainder Trust and Private Foundations all have a place in certain estate
plans. With the substantial increases in the lifetime exemption, we are finding that saving estate taxes is of
concern to fewer and fewer of our clients, as long as married couples have some sort of property division and
a by-pass trust. Liability protection is much easier in Michigan than in some other states, and not everybody
needs a Family Limited Partnership. (Some clients need multiple entities for liability protection, as you well
know.)
If we can be of any assistance in the clean-up or in counseling your client on asset protection, estate planning
and related business organizations, please do not hesitate to call Jim Modrall (231) 941-9660 for a no-
obligation consultation.
©BRANDT, FISHER, ALWARD & ROY, P.C.
This newsletter is provided for informational purposes and should not be acted upon without professional
advice.
| WEALTH CONSERVATION: PROFESSIONAL ALERT Brandt, Fisher, Alward & Roy, P.C. |
| June 2003 SNAKE OIL by James R. Modrall III, J.D., C.P.A. |
| If you would like to receive future editions of the monthly Wealth Conservation Newsletter directly to your e-mail account, please e-mail our office using the following link: Estate Planning Newsletter |
| Brandt, Fisher, Alward & Roy, P.C. Attorneys at Law |