GTH Estate Planning Blog

We're back to the meeting of CPA Lars, lawyer Duncan, and real estate developer Bernie, on asset protection for Bernie and his wife Liza. Duncan has just wrapped up the insurance discussion by calling for overall review by a good broker. Duncan will move now to the subject of fraudulent conveyances, the second in what he indicated were 6-8 topics for today that are supposed to take a couple hours. He's good at taking charge of agendas and meetings. Then Duncan will write a letter, then the three will meet again to start applying the ideas to Bernie's situation.

The insurance discussion had gone quickly, about ten minutes. Even though he finds the subject interesting, Lars is doing an over/under thing in his mind about the length of the meeting, and making marks on it indecipherable to others. Duncan offers a recent local case that went to the State Supreme Court, to give the basic notion of fraudulent conveyances: Thompson v. Hanson. The plaintiffs had a judgment for about $70,000 against a development company. Seemingly unfortunate for the plaintiffs, the company was insolvent (had no net value) by the time the judgment was obtained, partly because it had distributed some of its remaining real estate to the individual owner of the company. The plaintiffs then sued the owner on the notion he had received a fraudulent conveyance from the company, and won in Superior Court and the Court of Appeals, but then the owner appealed the case to the Supreme Court.

Uncle Nils was the winner for the quarter just past. His mix of gold, silver, palladium, and platinum roared back from an overall negative at mid-year, to almost 14% year-to-date. Silver was the biggest gainer, up 25% in just three months. Gold, overweighted at half the total mix, was up more than 10%.

Lars, investing for a family trust in a more diversified way, had a good third quarter but not as strong as Nils's. The trust's combination of stocks, real estate, and intermediate bonds (with also a dose of Nils's own mix) is up more than 12% for the year, doubling the increase it had mid-year. Stocks and real estate have been good performers, comparable with Nils's metals, but a 6% YTD return on bonds, while good, holds back Lars's overall average.

Wednesday afternoon rolls around and Lars arrives at the meeting at lawyer Duncan's office, with client Bernie who is seeking asset protection for his real estate empire. Lars gets to the little round table first, so he can position himself to look out the window. He learned long ago, in college, that he feels and works better with a leafy view. He felt so stifled in that one brightly lit interior room, with fellow students and an instructor who could all interpret literature better than he.

Lars hands out a financial statement for Bernie that Duncan has asked him to bring. Duncan says they'll begin by talking about insurance. This seems a little abstract and boring to Lars, who had thought they would play a sort of board game with Bernie's assets. Duncan: "Who's your insurance agent, Bernie?" "Well, I've got several. I started with one guy but found I could do better by having my office gal check around each time we had a new project. She's gone now. I mean she didn't die, I just didn't need her any more, when I was through building."

Duncan doesn't seem to like this answer. In silence while the lawyer is formulating his next question, Lars takes a draw on the Starbucks dark roast he has brought.

Lawyer Duncan has told CPA Lars a little cryptically that, for them to meet with shared client Bernie and talk about protecting assets, Duncan needs to hire him specially for this engagement. Lars has some familiarity with this idea from tax cases he's worked on. A couple of times he's had clients audited by the IRS, in one case with heavy penalties assessed where the client's attorney mentioned an apparently well-known case called Kovel, and did an engagement letter making Lars his (the lawyer's) advisor rather than the client's.

For some reason Lars had just accepted the prior arrangements without thinking much about them. Now even though he's 55, he's finding himself more curious about the reasons for things rather than less. That Saturday night they and their wives are having drinks at Lars's before going out to dinner, and Duncan explains that his hiring Lars has to do with the attorney-client privilege.