Asset protection for Bernie (cont'd), and certain assets specially treated.

November 8, 2012, by

TE BLOG. Country woods paths. 11.2012.iStock_000016650751XSmall[1].jpg
Lawyer Duncan, CPA Lars, and client and developer Bernie move on to the next topic in their meeting on asset protection for Bernie: certain assets with statutory protection from claims. The sun is just hitting the horizon out Lars's window. About halfway through the agenda.

Duncan says life insurance proceeds and retirement plans may not be taken by a creditor. These are among the most important exempt assets generally, but this isn't all that great for Bernie, who has skimped on life insurance and retirement plans, putting everything he has into real estate. He could take some of his liquidity now and invest it in a big life insurance policy, even one with a significant current cash value. Duncan says the statute actually only talks about proceeds of life insurance, not cash value, but he believes the investment element of a policy on a person still living, would have protection. This idea doesn't thrill Bernie or at least he doesn't respond to it. Lars guesses that Bernie is either uninsurable, or doesn't want to invest in life insurance (or both).

Bernie: "Isn't my house exempt? Isn't that what saved O. J. Simpson, at least for a while?" Duncan: "That's in Florida. In Washington only a certain amount of equity qualifies. I think it's $125,000."

There are other statutory exemptions, like 529 education accounts and GET college credits. Bernie does show a little interest in these. He has a lot of descendants.


Lars was already aware that retirement plans are exempt. This is important to him; a lot of his net worth is in his 401(k). He also knows that the protection for it and life insurance are undermined if they are made payable to the owner's estate.

A CPA can always get sued some day. He starts to wonder, though, whether the money will still be exempt as he takes it out of his 401(k) later. He wants to ask this but it would be patently self-serving at this moment, since the meeting is about Bernie who doesn't have the same concern. So Lars makes another note unintelligible to the others, to ask Duncan this question later.

This part of the meeting went quickly (nine minutes) since it didn't promise much for Bernie. With just two or three topics to go, they should come in way under two hours. Despite the sidetracks going on in his mind, Duncan has taken good simple notes to bring to the next meeting, on application of the concepts to Bernie's particular situation.