By Patrick O’Neill
Few would disagree that preemptive asset protection is a necessary financial strategy that needs to be addressed if you would like to safely transfer assets to your legacy. However, despite how serious the practice is, very few adults are willing to face the understandably grim subject matter in order to secure their accumulated wealth for their beneficiaries.
The public has been able to witness the full effects of weak asset protection, with the estates of figures like James Gandolfini and Bill Davidson being the subjects of heated battles between inheritors and the IRS. Millions – and in Davdson’s case, billions – in assets are being seized by the government due to the lack of a strong posthumous asset protection plan.
“Everyone acknowledges the importance of protecting your estate, but far fewer are willing to actualy sit down with their attorney, and enact a strong plan for securing assets for their children, or other benificiaries,” remarked Dallas tax and asset protection attorney, Joe Garza at Garza & Harris LTD. Garza goes on, “Failure to prepare for the unexpected can, and always will, result in an enormous loss of assets to relentless estate tax laws. [Davidson’s and Gandolfini’s] cases are perfect illustrations of the IRS’ determination to acquire anything that isn’t protected by strong, legal wealth preservation plans.”
Garza later points out that in Bill Davidson’s case, the IRS spent over three years investigating his actual asset value, specifically that of Guardian Industries, Davidson’s multi-billion dollar automotive equipment manufacturing corporation. Rather than gradually implementing preventative financial measures against the estate tax his assets would certainly face following his death, Davidson and his consultants relied on eleventh-hour attempts to safely transfer his assets to his beneficiaries. These hasty transfers were largely done in the form of SCINs, which were bequeathed at allegedly lower values than they should have been, causing an enormous wealth disparity between his reported and actual estate value.
With James Gandolfini, the New York Daily News reported that roughly 80% of his $70 million was left completely unprotected against the estate tax, something that could ultimately add up to around 55% when combining both the state and federal laws. While a life insurance policy to his son will circumvent the estate tax, only 20% of his wealth was transferred to his wife (which will be secured as a gift made to a spouse), leaving the remainder essentially in the hands of tax-collecting forces.
“Whether it’s simply carelessness, or a genuine reluctance to discuss a person’s mortality from a serious, financial standpoint, it’s costing these people’s families very large sums of money,” continued Garza. “Even some of the most basic practices of asset protection, when executed properly, can preserve millions in wealth for these people. These are all legal financial behaviors that safeguard considerable sums of money from governmental acquisition.”