How to Increase Sales Revenue and Keep Customers Happy

by Zach Haris

It can be challenging to increase sales revenue, but it’s not impossible.

Keeping profits high are the most important task of any organization.  Being able to consistently meet sales target and being able to increase sales revenue keep the lights on and hard-working staff employed.  Part of that equation though is always how a company can keep customers happy.  Despite a tough economy, you can increase sales revenue and keep customers happy with these tips.

Increase Sales Revenue Idea #1: Add Complementary Services to Existing Products
Businesses looking to increase sales revenue, one idea that can help you gain new clients is to offer a product or service that complements something you already offer.  For example, if the company you work for manufactures cookware consider adding cooking utensils or silverware.  In that scenario, if your customer is looking to buy your cookware, they would likely welcome the chance to possibly add cooking utensils to their online shopping cart.  If you need some ideas, look at your competitors’ websites and see what they offer.  Then take what they do, but do it better.

Increase Sales Revenue Idea #2: Enter Into Cooperative Sales Agreements
Using the sample from our first idea, if your company sell cookware seek out the organization that sells products like yours and request that they have the rights to also sell your products.  While it might take a while to find the right partner, it’s worth the effort.  At this point, if this is an idea that you proceed with be sure to work closely with your business development manager to ensure that you are contacting the right people and that the legal terms are satisfactory for both sides.

Increase Sales Revenue Idea #3: Raise or Lower Prices
The costs to your business to continue to fulfill your customers’ needs are constantly going up and down. As a result, you might be reluctant to potentially raise or lower your prices. Raising prices could increase sales revenue, but it also might lower prices due to customers being turned off by having to pay more for your products or services.  On the other hand, reducing prices might stimulate higher sales numbers and increased market share, but is that price sustainable in the long-term? Do your homework and check out what your competitors are doing as well, to ensure that your price is competitive to their prices.

Increase Sales Revenue Idea #4: Bundle Products
Consider looking at your products and services to see if you can bundle any of them together for your customers, at a cost savings of 10-25%. By putting this method of increasing sales revenue into place, you can potentially turn your customers or prospect into another product or service perhaps that they have never tried – and then might want to purchase again the future.

Increase Sales Revenue Idea #5: Add, Reduce, or Eliminate Shipping and Handling Charges
If your company prefers to not change prices, consider either lowering or offering free shipping on all orders above a certain dollar amount.  This approach can increase sales without the possible backlash of increasing prices.  Alternatively, could also add a shipping charge if you don’t already offer one to increase sales revenue.

Increase Sales Revenue Idea #6: Offer Special Discounts or Rebates
Who doesn’t like saving money?!  Offer a limited time discount of 20% or so on a product or service or possibly even a rebate that can be submitted and cashed in after a purchase.  This tactic demands the high level of marketing and promotion in order to be successful and profitable.  But when done right, it can increase sales revenue quite effectively.

Increase Sales Revenue Idea #7: Spruce Your Sales Collateral
Your sales collateral such as brochures, banners, overviews, product sheets, and presentations are often overlooked by business owners.  But consider this. If you’re the pieces that you are using to promote your products and services look old and have been used for years with little change, they likely won’t have much impact on being an effective part of the sales process.  Update them with the latest product information, bold professional images, and colors that attract attention while adhering to your brand guidelines.

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What Business Advisory Tools Do I Choose?

by Junita Jackson

With a growing number of business advisory software tools on and entering the accounting market, it is often difficult to know what to choose.

At Smithink we recommend following our EnablerTM Seven Step to Success process using the best software at the critical steps. It is not as easy as having one tool for each step. There are several great applications that can be used. In this article, we will look at some of the tools that are available for each step.

The first step in the EnablerTM process is preparing your firm to succeed with business advisory services. This is critical to the ongoing delivery of services and should include the appointment of a champion and analysis of the right clients to start with. Many firms are using Excel sheets and Word documents to plan out their service packages and strategies for implementation. Key to this step is the development of a Client Relationship Management (CRM) solution such as MYP's Arm and Arm Pro.

From there you need to unlock your client's business advisory needs with an interactive client needs analysis. This, in my opinion, is the most important step, as it will indicate where the client's strengths and weaknesses are, and allows a proposal to develop to address specific needs. Great cloud tools here include Cash Flow Story's simple four-chapter approach to business performance and My Yardstick What's Important to you (WITY) tool and E-Scope automated pricing system can assist here to understand client needs and develop innovative proposals.

The third step is to create a "disturbance" in your client's mind using business value assessments. Paramount to this step is establishing how much the client thinks their business is worth against the commercial value and linking this to the concept of a Business Value Gap (BVG). Some of the best applications here are Cash Flow Story's Business Value Indicator and Bastar's materials, tools and programs that will calculate a capitalization rate for the client's business off financial data and a risk and value assessment. Another new tool in this space to increase the sellability of your client's business is Sellability Score.

From there we introduce financial diagnostic software to fill the gaps by analyzing and managing the client's key macro drivers and results that will improve their financial performance. We will look at where the business is today, its strengths (green flags) and weaknesses (red flags) and where it can be in the future. There are many solutions here including Cash Flow Story's Power of One, PANALITX, Fathom and Profit Guardian.

 

Finally, generate new business by growing your business advisory specialization through profitable scenario planning and offering your "how would you like to see the financial impact of every business decision before you make it" service. This look into the future requires software that can simply show the client their pre and post position. Any of the financial diagnostic tools will adequately handle this task.

With this myriad of choices, a firm needs to be confident that they select the right application for their clients and staff.

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Asset Protection Planning

by Junita Jackson

Now that you are familiar with the most important asset protection and estate planning concepts how do you create the best plan? Protecting what you have from liability and preserving your estate for your family involves many new concepts for you and it’s not always easy deciding where to begin.

In this section, we will present a summary of the issues and options available-techniques to think about to frame the building of your overall plan. This is the approach we use with our clients to analyze their particular needs and to build an efficient program for asset protection, estate planning, and tax savings.

“Asset Protection and Estate Planning with the Family Savings Trust“

An increasingly popular tool used for asset protection and estate planning is known as The Family Savings Trust.  The term is broadly descriptive of a trust designed specifically to hold and protect a variety of assets against lawsuits and business risks.  It can be very flexible in form and allows for the accomplishment of most important asset protection and estate planning goals. 

“What is the Best Asset Protection Plan for Physicians?“

In our initial discussions with a client, these questions always come up “What’s the best asset protection plan?”  “Are there any plans which are completely bulletproof?”

Like any well-trained professional, I usually duck those kinds of direct and unconditional questions. After all, this is the legal system we’re talking about and when we compound the mixture of judges, jurors, and lawyers,  the results can be unexpected, to say the least.    Law is probably a lot like medicine in that respect.  So while we can’t honestly guarantee that the particular plan we design will produce the exact outcome we want, we do know what has happened before in similar situations.  If existing case law and legislation are clear and well developed then an asset protection plan that falls within the pre-set boundaries will have favorable and predictable results.

“Answers to Key Asset Protection Questions“

When I sit with clients to prepare or review their estate planning and asset protection goals a wide variety of questions and issues arise: What plan is most efficient? How are tax savings created?  How do we protect against the lawsuit and business risk?  Although I have addressed many these topics in detail in previous columns, here are a few starter questions which often arise and which may open the door for further thought and discussion. 

“Asset Protection: Needs Change Over Time“

The type of asset protection planning you need depends on where you are in your career. Because the amount and form of your investments and the particular risks you face will vary over time, your initial planning should be appropriately flexible and capable of adjusting to meet these changing needs. 

“When Is It Too Late For Asset Protection?”

One of the life’s ironies is that the worst time for asset protection planning is when you really feel like you need it the most. Although the law favors and encourages asset protection in most circumstances, there comes a point in financial transactions and legal proceedings when it is no longer permitted. In some cases, this boundary is clearly defined, but often the question of when the remedy of asset protection is still permissible is fuzzy. Experienced planners can follow several guidelines and make some educated guesses about where the line should be drawn in situations that physicians may encounter in their practice. 

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Do You Owe State Taxes?

by Megan Kunis

As a United States (US) citizen, everyone owes state taxes. The real question is: how many states do you owe?

Many people think that they are only obligated to pay state taxes in the state in which they reside. The truth is it’s possible to owe state taxes in multiple states. There are mainly two reasons why one would have to pay state taxes in multiple states:

  1. Relocation

Wherever you live in the US, each state has you recorded as a resident. If you were a homeowner or a renter, and/or collecting wages, that state has the record of you residing in there. Your duty as a US citizen, it is not only to pay federal taxes, but also the state taxes.

Think of it this way: If you’re residing in Florida, then you expect certain things to be well maintained like public parks and beaches. You expect the protection of law enforcement and firefighters to put out fires, the streets to be well taken care of, etc. Taxes take care of all of these things and as a residing citizen, you will be expected to pay your share, whether you own property or not.

So, if you live in Texas this year, but expect to move to Louisiana next month, then when the 2018 tax filing season approaches, you will be expected to file state taxes for both Texas and Louisiana. Now, there is a possibility that you may not have to pay any state taxes depending on how much was taken out of your paycheck throughout the year. In most cases, many people receive a state refund.

  1. Conducting business in that state.

As a business owner, it’s becoming quite common to take care of taxes in multiple states, especially with so many eCommerce businesses competing with each other. Whether you have a brick and mortar location in just one or several states, or selling a product in a state other than where you live, you may be obligated to pay sales tax on the item where you sold the product in. This means that you need to be informed about the different sales tax in each state that you conduct business in.

This is why a tax lawyer is so important to have on your team when conducting business on this level. Many business owners find out all too soon that they’re in over their head when it comes to conducting business in multiple states. While the business itself is the same, where they’re located may have to be operated slightly different according to the tax laws of that state. This might be intimidating for a business owner, but old hat to a seasoned tax lawyer.

Worlds Forum Taxation and Advisory not only have an experienced tax lawyer on hand to manage your business tax obligations, we also have professional tax preparers, and CPAs at your service.

 

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4 Different Types Of IRS Audits And How To Deal With Them

by Selina Stewart

Here’s what you need to know about different types of IRS audits and how to deal with them as a self-employed entrepreneur.

What is an IRS Audit?

An IRS audit is a thorough examination of your tax account and financial information to ensure that figures are reported correctly and that you’re adhering to tax laws. As tax returns are filed they are compared to the average figures for other accounts in this category.

If your figures seem to be elevated, or show anomalies, your return is put into a pool of other returns and randomly picked for more in-depth review by an experienced auditor. After a review, your return may be accepted and filed away, or the return is forwarded to an examining group for further analysis.

There are a few types of IRS audits:

  1. Correspondence Audit

A correspondence audit is the most common and simplest of the IRS auditing processes. The IRS will send you a letter in the mail requesting answers to specific questions or needed clarifications related to your tax return.

You will likely have to perform a correction of your tax return that may either result in paying in more money or receiving a refund for an accounting error. Either way, the correspondence letter will state the reason for the inquiry and often offer a simple resolution via an exchange of papers.

If you have data or receipts to back up specific claims, this is the time to send them in to help make your case. This type of audit is usually solved within a short time period once all the information has been collected. Be sure to keep copies of all correspondence in case anything comes into question again in the future.

  1. Office Audit

If the IRS has further questions about your return that extend beyond the normal correspondence letter, you’ll receive an invitation for an in-person audit meeting at one of their local offices.

This type of audit is a bit more serious than a correspondence audit and requires more of your time. However, an office audit is usually completed within one day since most information will be supplied on demand, and you’ll have time to supply any additional information that’s requested.

  1. Field Audit

A field audit is the most serious situation as the solutions to the issues could not be resolved with a simple letter or office visit. The IRS will visit your place of business and may look around to verify the legitimacy of your workplace, employees, and other business expenses.

It’s strongly encouraged, in the case of a field audit, that you hire a professional Enrolled Agent, tax professional, or CPA to be an advocate for you and your business. They will be able to answer questions on your behalf and ensure you’re getting fair processing.

  1. Random Reviews

In addition to traditional audits, you may be subject to a random review of your tax situation. The IRS isn’t looking for anything in particular when they perform these random reviews and will simply look at your return for inaccuracies.

These reviews are generally performed via a correspondence letter with notice that your account is being looked over. Usually, you won’t receive a follow-up letter if the review of the return doesn’t result in any red flags. In this case, you shouldn’t be too alarmed as the IRS agent isn’t looking for anything in particular.

How Far Back Can the IRS Audit?

The IRS tries to audit tax returns soon after they are filed, but can sometimes be as far back as the last three years. If there are additional errors or substantial mistakes, the IRS usually won’t go back more than the last six years.

To back up any business deductions, credits, and other income information, it’s recommended that you keep all tax receipts and information for at least seven years. Or in the case of an asset, save the records for as long as you own the asset, plus three additional years.

If you are notified you’re being audited, remain calm and have a talk with your tax professional. Usually, these situations resolve themselves quickly and easily so you likely don’t have anything to worry about.

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10 Frequently Asked Questions About Payroll Processing

by Megan Kunis

Processing payroll is one of the most complex and time-consuming tasks a business must complete. If you’re new to the process, payroll can be confusing. Here are answers to some of the most frequently asked questions about payroll.

What Is an EIN?

The IRS issues employee identification number (EIN) numbers. This 9-digit number is used on federal and state tax filings for businesses, including payroll tax reporting documents. You can apply for an EIN through IRS.gov.

The EIN number can be used for a variety of business entities, including sole proprietorships, S corporations, and C corporations. Assume, for example, that you operate a C corporation, Ganz Manufacturing. Your corporation can operate under more than one fictitious name, and you can use the same EIN number. Ganz Furniture and Ganz Tool and Die, for example, could be fictitious names used by the same corporation.

This policy simplifies the tax filing process. You’ll need to register your fictitious names in the state where your business is headquartered.

What Is an I-9 Form?

Employers use Form I-9 to verify the identity and employment authorization of individuals. Every U.S. employer must have a completed Form I-9 for each worker hired, whether or not the individual is a U.S. citizen. To complete the form, an employee provides documents as evidence of their identities, such as a driver’s license, birth certificate, or passport.

An employer must retain each Form I-9 for a specific period of time, and a state or federal government official may ask to inspect the forms. Government agencies review I-9 forms to verify that each employee is authorized to work in the U.S.

What Is a W-4 Form?

Each worker completes IRS Form W-4 to indicate the amount of tax withheld from gross pay for federal income taxes. Employees complete similar forms for state income tax withholding.

How Do I Determine Payroll Taxes?

Once a W-4 is completed, the employer uses IRS guidelines to calculate the dollar amount of federal income taxes withheld. Each state has similar guidelines to calculate state tax withholdings.

The payment schedules are published in IRS Publication 15.

What Does Withholding Actually Mean?

Withholding refers to the dollar amount of federal and state income taxes that an employer collects from a worker’s gross pay. The dollar amount is determined based on the IRS W-4 form and the state’s withholding form. The company sends the taxes withheld to the IRS and the state’s department of revenue.

The dollar amounts withheld are reported to the worker on Form W-2 after year-end. It’s the employee’s responsibility to file their personal tax return and calculate their tax liability. The worker subtracts the W-2 taxes withholdings from the tax liability, and any remaining amount of taxes owed should be paid when the tax return is filed. This process applied to both federal and state taxes.

What Are Third-Party Liabilities?

In addition to withholding taxes, employers may also withhold the worker’s share of payments for insurance premiums, retirement plan investments, and other benefits. The worker decides on the amounts withheld for the payments. Once these payments are withheld from gross pay, the employer forwards the payments to each third party (insurance company, an investment firm, etc.).

When Do I Need to File W-2s and 1099s?

W-2 and 1099 forms are issued for different reasons. A W-2 is issued to an employee to report gross wages earned, tax withholdings, and other withholdings from gross pay. If you have wages withheld to pay for insurance premiums or to fund a retirement plan, those amounts are reported on a W-2.

The IRS requires employers to mail W-2 forms to workers no later than January 31st of the year following the end of the tax year. So, 2017 W-2s must be mailed by January 31st of 2018.

If your firm has paid at least $600 to a vendor for a product or service, you must issue a 1099-MISC form to that vendor. Freelance workers are considered vendors and are issued a 1099-MISC form. The IRS also requires employers to mail 1099-MISC forms to vendors no later than January 31st of the year following the end of the tax year. The employer combines all of 1099 issued and reports them to the IRS on Form 1096.

What Is Workers’ Comp Insurance?

Businesses purchase workers’ comp (compensation) insurance policies to pay for medical care and other costs if a worker is injured or killed while working on the job. The insurance policy pays for medical expenses and makes payments to the injured party based on a state’s workers’ compensation laws.

The insurance premiums are based on the total dollar amount of payroll a company pays, and the type of work performed the employees. If workers perform manual labor or work in jobs that expose them to physical injury (such as construction), the insurance premiums will be higher.

Construction, engineering and other firms that have a higher risk for worker injury need to have safety plans in place to reduce the risk of workplace injuries. If you can limit worker injuries, you can keep your insurance premiums at a reasonable level.

Am I Required to Have Labor Law Posters?

There are state and federal labor law poster requirements for businesses. The posters address worker rights related to the federal minimum wage, equal employment rights, and worker safety, among others. Companies can purchase “all-in-one” posters for both federal and state labor law requirements. The posters should be displayed so that employees can see them each day. The posters are typically posted in a break room.

What Does a Payroll Company Do?

A payroll company can perform many of the complex tasks required to process payroll accurately. To get started with a payroll company, a business provides the gross pay and withholding amounts for each employee. The payroll company uses current tax laws to calculate the correct tax withholdings and also withholds any benefit payments.

You can give a payroll company access to your corporate bank account so that the company can send each net pay amount to employees. This outside firm submits the payments withheld to the IRS, state revenue departments, and any other third parties. The company will complete all payroll reports and create W-2s and 1099s at year-end.

Every business should consider using a payroll company. This decision will help you save time and ensure that your payroll processing is accurate.

QuickBooks offers a number of payroll solutions ranging from simply cutting checks to full-service payroll. All payroll products integrate directly with your accounting software to keep your books in order with less work.

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Don’t Leave Money On The Table! Access Your Education Tax Benefits.

by Junita Jackson

A report by the Government Accountability Office found that nearly 14 percent of all tax filers failed to claim a credit for which they were eligible. Tax credits help us afford higher education expenses by reducing the amount of income tax we have to pay or by issuing a refund. Unfortunately, millions of students and their families are unaware or don’t apply for the correct tax benefits, leaving much-needed dollars on the table—an average of $466 for each qualified filer!

Are you one of them?

Recently, NCLR joined Rep. Danny Davis (D–Ill.) and others on a campaign to get more people to apply for their education tax benefits. The Tax Breaks 4Students campaign encourages eligible students and families to apply for tax credits.

While eligibility criteria vary for each credit, there are a number of options available for students and families. The two largest tax credits available are the American Opportunity Tax Credit (AOTC) and the Lifetime Learning Credit (LLC), although there are many others.

American Opportunity Tax Credit

The AOTC can be claimed for the first four years of post-secondary education if a student is enrolled at least part time in courses. The maximum tax credit for AOTC is $2,500, and up to $1,000 is available as a refund if you owe no taxes. If you are a current graduate student, you are not eligible for AOTC; however, you may be eligible for the Lifetime Learning Credit.

Lifetime Learning Credit

The LLC provides up to $2,000 per year for a student enrolled at least part time. Unlike the AOTC, the LLC has no limit on the number of years it can be claimed, meaning it is available to graduate students and those in continuing education programs. However, if the credit is greater than the total amount owed in taxes, it will not be issued as a refund.

How do I claim these credits?

The IRS provides an interactive guide to help you determine whether you qualify for a tax credit. Only students who attend schools participating in federal student aid programs can qualify for the AOTC. Once you confirm eligibility, the IRS provides Form 8863 to help you calculate the education tax credit. Most education institutions will mail you Form 1098T, which provides this information for you.

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Beware Of Domestic Asset Protection Trusts

by Jason Kelley

The Domestic Asset Protection Trust ("DAPT") is an irrevocable trust that allows the settlor (or creator) of a trust to be a discretionary beneficiary.  While this trust has some advantages, it should not be used for Asset Protection as recent litigation has highlighted concerns about the DAPT, as it is often an inadequate entity to protect assets.  The DAPT is often referred to as a "self-settled trust" because the settlor is one of the beneficiaries.  Self-settled trusts allow the trustee to have the discretion of whether to make distributions to the settlor, while simultaneously protecting the assets from the settlor's creditors.The primary goal of the DAPT is to protect the assets of the settlor from their creditors.  The DAPT may also allow a settlor to transfer assets to a trust, preventing these assets from being included in the settlor's gross estate.

The major disadvantages of using the DAPT as a personal asset protector are as follows:

  • In creating a DAPT, you are more susceptible to litigation on your trust (fraudulent transfer claim) as Creditor's use this argument often to break through DAPT trusts to get to debtor assets.
  • The laws of the state where the DAPT is formed will not necessarily apply where the settlor, beneficiaries, or the trust's assets are not subject to the jurisdiction of the state.  In other words, a DAPT is only valid if the settlor and beneficiaries, as well as the trust assets, are all in the DAPT state.  Further, only twelve jurisdictions recognize the DAPT – so there is little uniformity across the United States.
  • State law pursuant to the Supremacy Clause of the US Constitution does not always bind federal courts.  Therefore, DAPT statutes may not protect the settlor against judgments in federal courts or by federal administrative agencies.
  • DAPT, as self-settled trusts, have a longer statute of limitations for creditors to sue on than most other Asset Protection Tools.

On the other hand, the limited liability company (LLC) and limited partnership (LP) are far more adequate entities for Asset Protection planning.

See more on these entities at the following links:

  • Limited liability companies
  • Limited partnerships

If you have any more questions regarding DAPT's or any other Asset Protection Planning tools, feel free to contact our Attorneys.

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Income Tax Liability In Bankruptcy For Appreciated Property

by Zach Haris

People avoid filing Chapter 7 bankruptcy if they have the nonexempt property with significant equity. Yet, consider a debtor who owns real estate that has appreciated and therefore has a built in liability for capital gain. If that debtor files bankruptcy could the IRS hold him personally liable after bankruptcy for the income tax liability associated with the gain on the property?

When a person files bankruptcy all of his property interest is transferred to the Chapter 7 trustee and the property constitutes the bankruptcy estate. The trustee acquires the debtor’s property with its tax characteristics including gain and character. The trustee controls the sale of the property, and the trustee receives the sales proceeds for the benefit of creditors.

The trustee and the bankruptcy estate is liable to pay the tax liability created by the sale of the debtor’s property. The tax is an administrative expense. The debtor is not liable for tax on the sale of property he had conveyed to the bankruptcy estate upon filing bankruptcy. A trustee may avoid tax liability by abandoning the property instead of selling it.

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Protecting Your Wealth With A Domestic Asset Protection Trust

by Jason Kelley

Just what is a Domestic Asset Protection Trust, or what is more commonly referred to as a DAPT? It’s a type of irrevocable trust that is self-settled and acts like a spendthrift trust which doesn’t allow for the appointment of the trust assets to your creditors and permits you to be a beneficiary. In more plain English, it’s a trust you can set up in certain states to protect assets from your future creditors and lawsuits against you.

There are presently 13 states (14 if you include Colorado’s limited state statute) that allow for self-settled Domestic Asset Protection Trusts. California is not one of them. However, that doesn’t mean that you can’t set one up in another state that allows them such as Nevada, Delaware, South Dakota, or Alaska, just to name a few.

Although this asset protection device has been around for a decade and a half, it has yet to be rung up the Court system except in the case of a bankruptcy. Most cases settle out of court for some lesser negotiated amount due to the expense in litigating to get to the assets. Other than in the case of a bankruptcy, DAPTs have proven to be quite effective bargaining chips for settling debts for a lesser amount and protecting assets from the reach of creditors and lawsuits.

There are various state statutes for DAPTs across the country that govern how the trust needs to set up and how and from whom the assets can be protected. Most DAPT state statutes allow the DAPT to be a “Grantor” trust. This means among other things that the Grantor of the trust can pay the income tax on the income that the trust generates. Many types of assets can be transferred to a DAPT including cash, securities, real estate, and business interests, just to name a few.

So just who is a good candidate for this type of planning? Liability concerns doctors, lawyers, high risk professionals, and other people of high net-worth. The best protection is to set this structure up far in advance of any creditor problem. This is because each state has a statutory waiting period until the assets are protected. You also don’t want to get caught in the snare of a fraudulent transfer. A court could consider the transfer to a DAPT fraudulent if you transferred property to the trust after the threat of a creditor action or lawsuit has arisen. Each state has its own statutory waiting period from the date the asset is transferred to the DAPT and when the asset is protected from a creditor’s claim. For example, Nevada’s statutory waiting period is two years.

Today there is a definite increase in liability exposure. We live in a victim mentality world where the revelation that someone has deep pockets can spur on a lawsuit or a threat of one. The plaintiffs’ attorneys are partly to blame in this regard as well with their TV commercials making it appear to be the norm to sue sue sue! Many professionals are fearful of malpractice lawsuits today because of the notoriety of malpractice and errors and omissions legal actions. For instance, in 2006, there were over 633,000 malpractice claims against physicians and surgeons alone! This was reported by the Physician Insurers Association, 2007 Report.

There is also a statute of limitations that differs depending upon whether the creditor is a preexisting creditor or a non-preexisting creditor. If there is a preexisting creditor, there is a tolling of the statute of limitations period in order to protect those creditors.

Nearly all of the states that allow for DAPTs also have exception creditor statutes. These statutes protect certain classes of creditors by allowing them access to a DAPT’s assets. One common exception creditor is a divorcing spouse. There is one state that doesn’t have exception creditors and that is Nevada.

Even though just implementing a Domestic Asset Protection Trust would stifle most plaintiffs, there are additional asset protection strategies that can be utilized to significantly increase your asset protection if used in conjunction with the DAPT. By adding one or more Limited Liability Companies (LLCs) to the mix, you can limit a creditor’s remedy to a “charging order” in some jurisdictions. A charging order, as discussed in Chapter 9, limits the creditor to the LLC member’s share of distributions and doesn’t confer any voting or management rights to the creditor in the LLC. This charging order protection offers an additional barrier when it is combined with the DAPT in a well-crafted asset protection plan.

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