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Offshore Financial Interests & Immigrants to The U.S.: Failure to Report Existence & Income May Lead to Deportation


This is a guest post by Chicago attorney Dan Janich. A little off the normal topic path for this blog, but Dan’s insights are worth sharing. This post is timely with the recent Panama Papers disclosures. 

The current firestorm surrounding the discovery of the Panama Papers is the most recent indication that U.S. taxpayers with undisclosed offshore financial interests are in the cross hairs of the Internal Revenue Service (IRS) and Department of Justice now more than ever. I often consult with individuals or their financial advisors about the consequences U.S. taxpayers face for concealing the existence of offshore financial interests and counsel them on their available options.

The issue of concealment of foreign assets is even of more concern to immigrants in the U.S., whether they are legal resident aliens with a substantial U.S. presence, green card holders or naturalized citizens, all of whom must report the existence of their offshore financial interests and pay taxes on the income they generate.  Their failure to do so places them in jeopardy of incurring significant financial penalties, possible criminal prosecution and being subject to deportation proceedings.

This discussion is intended to serve as an introductory guide on how such individuals may be able to minimize civil penalties and the risk of criminal prosecution, and perhaps of most importance, avoid the threat of deportation.

U.S. Taxpayers Must Report and Pay Taxes on Their Worldwide Income

Immigrants to the U.S. are frequently surprised to learn that U.S. tax laws are quite different from those in virtually any other country because U.S. taxpayers are required to report and pay income tax on their worldwide income regardless of where it was earned.  Income derived from foreign sources are taxable in the U.S. Therefore, Form 1040 at Part III of Schedule B requires taxpayers to check a box answering whether they had “an interest in or signature or other authority over a financial account in a foreign country, such as a bank account, securities account, or other financial account.”  This information is to be furnished to the U.S. government under penalty of perjury.

Disclosure of Foreign Bank and Financial Accounts (FBAR) 

The obligation of U.S. taxpayers to report foreign financial interests, however, exists even if no taxable income is generated.  U.S. taxpayers must file an annual report of foreign bank and financial accounts (FBAR) with the Treasury Department if they have foreign financial interests or accounts or signature authority on accounts exceeding $10,000 in the aggregate at any time during the year, even if that foreign interest or account does not generate taxable income in the year. Financial   interests include bank, securities, real estate interests, nonrenewable energy interests, collectibles and other non-cash assets held in a foreign account, foreign hedge funds or foreign private equity funds. The IRS may take any action reasonably necessary to enforce the FBAR rules, including investigation of potential violations, issuance of summonses and the assessment of civil penalties. U.S. taxpayers with foreign financial assets with an aggregate value exceeding $50,000 must also file an additional disclosure form, Form 8938, with their annual U.S. income tax return.

Civil and Criminal Penalties

A failure to disclose foreign accounts may lead to harsh civil and criminal penalties, back taxes, interest and where the violation is deemed “willful” quite possibly criminal prosecution for tax evasion or filing of a false tax return, among other crimes.

Civil and criminal penalties and charges for FBAR and tax violations are cumulative:

  • FBAR penalties can range from $100,000 or 50% of account balance; whichever is larger, to $500,000 or up to 10 years’ imprisonment or both.
  • IRS penalties can range from 75% of tax underpayment to conviction for filing a false income tax return and/or criminal tax evasion, resulting in a felony and fine up to $100,000 and a prison term of up to 3 years or both (false return) or up to 5 years or both (tax evasion).

In addition to the civil and criminal penalties, resident aliens with a substantial U.S. presence, green card holders and naturalized citizens who fail to disclose foreign financial interests or pay U.S. income tax on the income derived from such accounts also places their legal immigration status at risk.

Green Card Holders and Resident Aliens Convicted of an “Aggravated Felony”

Under U.S. immigration law, green card holders and resident aliens are subject to deportation upon conviction for certain crimes, including those classified as an “aggravated felony.”  An “aggravated felony” includes offenses that either (i) involve fraud or deceit in which the loss to the victim or victims exceeds $10,000; or (ii) relate to tax evasion in which revenue loss to the Government exceeds $10,000.

In the Kawashima v. Holder decision issued in 2012, the U.S. Supreme Court held that conviction of a willful filing of a false tax return or aiding and abetting the filing of such a return by a green card holder was a deportable offense because it involved “fraud or deceit,” and that conduct amounted to an “aggravated felony” involving a loss of $10,000 or more.   The fraud or deceit derives from the taxpayer’s signing off on a statement in a tax return that he did not believe to be true, or “willfully” aiding and assisting another in making a false or fraudulent return. Based on the rationale of Kawashima, a criminal conviction for failure to file a FBAR may also lead to deportation because it would most likely be deemed an “aggravated felony” involving fraud or deceit in an attempt to willfully hide financial information from the U.S. authorities.

As if deportation was not enough punishment, deported green card holders who spent more than eight years in the U.S. are also subject to an “expatriation” tax (known as the “Exit Tax”) which treats the holder’s worldwide assets as having been sold at fair market value (even though no actual sale may have occurred), subjecting them to income tax on the “deemed gain.”

Kawashima may have increased the risk of deportation for green card holders and resident aliens with a substantial U.S. presence, but they are not the only U.S. taxpayers with a deportation risk.

Revocation of Naturalized U.S. Citizenship Due to Failure to Disclose Ownership of Offshore Financial Interests  

Naturalized citizens are also at risk of losing their U.S. citizenship by deliberately withholding or misrepresenting information given to immigration authorities when they became a permanent resident alien or when the application for citizenship was completed.  Individuals whose citizenship is revoked on this basis are subject to criminal prosecution and deportation proceedings.

How does this happen?  Individuals seeking naturalization must complete Form N-400, an application filed with the U.S. immigration service. Citizenship may be denied, among other reasons, if the applicant is determined to have lied on the Form N-400. One area of inquiry on the Form N-400 relates to the applicant’s satisfaction of his/her U.S. income tax responsibilities, namely, whether income taxes have been paid.  An applicant’s failure to pay taxes when due attributed to the nondisclosure of offshore accounts will result in a denial of citizenship insofar as  such conduct demonstrates that the applicant did not display “good moral character,” and is therefore rendered ineligible for U.S. citizenship.

Furthermore, U.S. citizenship that was previously granted may be revoked and lead to deportation if after the process is completed, U.S. immigration authorities discover that the citizenship was “illegally procured” because of the applicant’s deliberate failure to disclose to immigration authorities an interest in foreign financial assets and deliberate failure to pay income tax on the income derived from such assets when becoming a permanent U.S. resident or when filing for U.S. citizenship.

What Are the Options to Avoid Criminal Prosecution and Deportation?

Option 1:  The Offshore Voluntary Disclosure Program (OVDP) 

The Offshore Voluntary Disclosure Program (OVDP) provides eligible taxpayers with a means for correcting their failure to disclose and report foreign assets with the certainty of knowing exactly how much their civil penalties are going to be and the reassurance that they will not be subject to criminal prosecution for tax evasion. Participation in the OVDP is usually the best means to reach a resolution with the IRS whenever the circumstances surrounding the failure to disclose and report may be considered as “willful,” i.e., intentional.  And for the U.S. immigrant taxpayer, successful completion of the OVD Program will allow the taxpayer to avoid criminal prosecution for willful tax evasion or filing of fraudulent income tax returns, and thus minimize the risk of possible deportation proceedings.

Timing is of the essence when this option has been selected.  A taxpayer under audit or who has already been reported to the IRS is ineligible to participate in the OVDP.  Therefore, it is important for the affected taxpayer to act quickly to request participation in the OVD program, that is, before foreign financial institutions such as banks and brokerage firms unilaterally report the taxpayer to the IRS pursuant to the mandate under various international tax treaties. In addition to the foregoing, the IRS may close the OVDP at any time or renew it for a limited period of time with increased civil penalties.  That is why I advise clients that it is imperative that they move quickly to submit the papers necessary to establish their eligibility and obtain acceptance into the program.

Make no mistake about it.  Participation in the OVD program is costly—it is both time consuming and expensive.  It will require the assistance of an experienced tax attorney to guide the taxpayer through the process, which includes the completion and submission of voluminous paperwork, such as (1) filing of U.S. Forms 1040X for the last eight years; (2) payment of back taxes, 20% accuracy penalties, and interest charges with respect to the Forms 1040X, (3) filing of FBARs and all other required information returns for the last eight years, and (4) payment of a catch-all FBAR penalty equal to 27.5% of the highest aggregate value of the offshore assets during the eight-year period.

Option 2:  Quiet Disclosure

Some of my clients may choose to comply through a “back door approach” by making a so-called “quiet disclosure” in the hope of avoiding the penalties associated with delinquent FBAR filings and unreported income on tax returns. These taxpayers simply report their foreign accounts in the current year, file FBAR reports for previously delinquent years, amend previous income tax returns and hope that the statute of limitations expires before the IRS starts asking them questions.  I advise clients that this option is not at all suitable for U.S. immigrants as compliance using this approach will not avoid criminal prosecution and the risk of deportation proceedings.


U.S. taxpayers with undisclosed foreign financial interests must take corrective steps immediately before the IRS comes knocking on their door.   Because of the risk of deportation faced by resident aliens with a substantial U.S. presence, green card holders and naturalized U.S. citizens they each have a compelling reason to participate in the OVD Program so as  to receive assurance they will not be criminally prosecuted for any tax violations relating to the nondisclosure of their foreign financial interests nor be at risk for deportation.

Daniel N. Janich is a Partner in the Chicago office of Holifield Janich & Associates, PLLC. He is nationally recognized for outstanding skills and knowledge in the fields of employee benefits, executive compensation and tax. Dan has successfully represented clients before the IRS and in tax litigation. He can be reached at djanich@holifieldlaw.com or (312) 332-4222. Check out Dan’s profile on LinkedIn.  Check out Dan’s prior contributions to this blog YOU RECEIVED A PINK SLIP AND SEPARATION AGREEMENT – NOW WHAT? and Is Your Noncompete Enforceable?

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Money Conversations – Caring for Aging Parents


Thanks to Cheryl J. Sherrard, CFP®, NAPFA Registered Advisor and Director of Planning for Clearview Wealth Management in Charlotte, NC for contributing this post.  

This post is a follow-up to my recent post Family Financial Conversations and to the post previously contributed by Cheryl’s colleague Megan Rindskopf Meaningful Family Conversations for the Holidays.

We all know that when we get married, we marry the entire family.  What we may not realize is that each of us comes into a marriage with expectations about how we will interact with and assist our families.  Most couples talk about and come to consensus on topics such as when to visit which set of parents and can usually resolve that by rotating holidays with their respective families.

However, the discussions you may not have had revolve around each of your expectations surrounding caring for aging parents and in-laws.  You may be fortunate if the prior generation has already dealt with planning for any needs that will arise in their later lives, but you and your spouse should consider what you know about their current situation, their preparedness for unexpected issues and your ability and willingness to help and supplement their care if needed. While we can’t control the specific course of events nor the time frame of how our parents age, married couples can and should proactively discuss what their expectations are and how they want to approach caring for aging parents should a need arise.

Stuck in the middle

Consider the following;   a married couple are in their fifties and are busy saving and preparing for their eventual retirement.  They both work outside the home in fulfilling careers and can finally see the end in sight for college tuition payments for their children.  Because they fully paid for their children’s educations, they believe that if they save aggressively over the next ten years, they can reach their retirement goals.   Suddenly, the husband’s mother experiences a stroke and needs extensive rehabilitation, which the husband automatically assumes they will assist with.  He doesn’t want his mom rehabbing in a facility; he wants to move her into their house and care for her there.  

However, because of the demands of his career, care and coordination for his mom would likely fall to his wife and would require her to work part-time or not at all.  The wife never considered moving parents into their home in the event of a need and although she loves her mother-in-law, she isn’t sure it would be good for their marriage or her relationship with her MIL to bring her into their home.  She is happy to coordinate care and assist on occasion, but she isn’t sure how their family can aggressively save for their own retirement if she has to scale back on work in order to provide care to her MIL.

Caring for aging parents takes planning

The example above illustrates a case where an in-depth discussion between husband and wife well in advance of any parental issues may have eliminated some misunderstandings and potential disagreements down the road.  Caring for aging parents can be stressful enough simply because it is difficult to see them struggling.  Combine that with the stressors of parents vs. in-laws, the demands of careers, teen or young adult children, saving for retirement and you have a recipe for stress and strain in a marriage.

What should you be talking about with your significant other, prior to the onset of any parental aging issues?

  • What are the expectations each of you have for how you want to care for your parents if they need your help?
  • Are the relationships (spouse, children, parents, in-laws) strong enough to withstand one of the parents being assisted by you?
  • What are your parent’s expectations for how they would want to handle a long-term care need if it occurred?
  • Do your parents have adequate resources, either assets or appropriate insurance, to cover the cost of paid caregivers?
  • Does your home have adequate space to accommodate the additional person, as well as provide some level of privacy for them and you?
  • Will daily care of a parent further inhibit your ability to adequately save for your own retirement?
  • If you decided to assist, which of you would be the likely caregiver and why? 

These are just a few of the questions that spouses/partners need to discuss, well in advance of any need on the part of a parent.  It is important to know that there is no right answer, as it will vary by the circumstances of each family and extent of the parent’s care needs.  Recognize that even if you do plan, things may change and you will have to be flexible to deal with whatever the situation presents.  However, having the discussion in advance will help to eliminate some of the stress on your relationship by bringing expectations out into the open and working to find common ground for the two of you.

Cheryl J. Sherrard, CFP®, NAPFA Registered Advisor is Director of Planning for Clearview Wealth Management in Charlotte, NC.  Cheryl can be reached at csherrard@cvwmgmt.com and via Twitter.  

Need a second opinion on where you stand financially? Concerned about your retirement readiness or your investments? Check out my Financial Review/Second Opinion for Individuals service.

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Family Financial Conversations


Family financial conversations dealing with retirement, estate planning, elder care issues and other important financial matters between parents and adult children can be difficult at best.  A recent article by Fidelity highlighted some of the key issues involved.

According to Fidelity:

“In life and money, timing is often everything. And that’s particularly true when it comes to sensitive family discussions about retirement security, eldercare, and estate planning.

According to Fidelity’s latest Intra-Family Generational Finance study,1 three-fourths of parents and their adult children agree it’s important to have frank conversations on such topics, but almost two-thirds (64%) can’t agree on when. While parents would prefer to wait until after retirement, their children want the conversations to take place well before their parents retire or experience health issues.” 

“These discussions aren’t always easy, but there can be real emotional and financial consequences when they don’t happen or lack sufficient depth,” says John Sweeney, executive vice president of retirement and investing strategies at Fidelity. “It’s absolutely critical that families come together to sort through important matters related to such things as retirement preparedness, caregiving responsibilities, estate planning, and the tax implications of an inheritance.”

Suggestions for successful family financial conversations


How to have key family discussions

While these steps suggested in the Fidelity piece are no guarantee of a successful dialog, I think you will agree these steps offer a solid framework for these often difficult conversations.

PREP for family financial conversations

 The Fidelity piece offered this outline (their PREP plan) to break the ice and get these family meetings going: 

Make family meetings on retirement issues easier

While every family and every family’s situation is different, this is a good framework from which to start.

What’s at stake?

These conversations can be difficult because there is a lot at stake.

  • How will your parents provide for their retirement?
  • Where will the money come from in the event of a Long-Term Care situation?
  • Who will take over your parent’s financial affairs in the event they become unable to do so?
  • What are your parent’s wishes in terms of a myriad of issues including disposition of their assets upon their death, burial, staying in their home, etc.? 

Besides these issues a lack of communication and planning can be costly to the family in terms of taxes and other issues in terms of transferring your parent’s wealth to the next generation.  While this might sound like it only pertains to the very wealthy this is not the case.

At the end of the day what is really at stake is the opportunity for parents to communicate their financial wishes to their adult children and for the children to help their parents make these desires come true.

There is nothing easy about discussing these issues and having these family financial conversations.  But any difficulties that might exist will be dwarfed by the potential guilt and regret felt by both parents and children later on if this dialog does not occur.

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Dangerous Myths About Asset Protection


This is post was written by Ike Devji, a Phoenix, AZ-based asset protection attorney and one of my oldest online friends.  I have spoken with Ike many times for advice on client asset protection issues and had the pleasure of meeting him in person a couple of years ago when he spoke to my financial advisor study group during a meeting we held in Phoenix.  Ike generally advises physicians and high income professionals, but these asset protection tips are relevant to all of us. 

I’ve spent the last eleven years of my practice helping successful Americans at all net worth levels protect and enjoy their hard earned wealth. A good part of that involves re-educating people about their money and their risks.  Below is a summary of the most common asset protection myths and mistakes top legal and financial planners want their clients to be concerned about.

Trumbull County Courthouse, Courthouse Square ...

I can do it later 

Asset Protection it best analogized to “net worth insurance” and like insurance you have the best, most effective and legally supportable options available to you when you implement the planning before a crisis exists. Transfer of assets into plans after you have specific exposures is costly, ineffective and some cases illegal (fraudulent conveyance). The best time to act is always now and every day that passes makes your planning stronger.

I’m not rich enough to worry about asset protection  

This is a sin I see committed on a weekly basis, often by professionals like lawyers, CPAs and financial advisors. These advisors often tell clients that they are not rich enough to do any planning and that that they should have a net worth north of five or even ten million dollars to consider it. Nothing could be further from the truth, especially if you are in the “Fall” of your earning career. Of course high net worth individuals must implement this kind of planning and always have, but all you have is important to you and there are precautions that can be taken at any net worth level. When should you start?

There are many simple ways to analyze this but here is an easy one, answer these questions: 

  • If you lost what you have today, or some significant portion of it, are you at an age, earning level and financial condition that will allow you to maintain your family’s goals and expenses?
  • Do you have assets that would be difficult or impossible to replace given your age, health and economic conditions?
  • Are you financially and legally prepared for a lawsuit that is either not covered by liability insurance or which often produces verdicts above the limit you are carrying?

No one can touch me because I have a “Trust”

Not a week passes when I don’t talk to someone who says, “I’ve got this covered, I think. I have my home, cars, and investments all titled in my Trust.” A little more probing on my part reveals what I expected, that the layperson I am speaking to feels that a transfer of these assets to a vehicle like an estate planning trust, commonly a Revocable Living Trust, is effective protection; it’s not. The first word in the trust is “revocable” and in most cases a judge will simply order you to revoke the trust and tender the assets for a judgment. I’m all in favor of estate planning, the huge new looming estate tax exposure is one of the issues on my client exposure checklist we address every day, but  that is death planning. What has been done about your life planning and the exposures you face every day practicing your profession, driving a car, having children (some driving your car), or having employees…?

I lease all my vehicles through my business and get an awesome tax deduction in addition to asset protection 

Similarly, we often see dangerous articles of personal property like your personal vehicles moved into this structure or others like an LLC or S-Corp that is your primary business, or equally dangerous, into an entity like an FLP that is holding safe and attractive assets like cash, stocks, bonds and other liquid assets. Think about it, if you lease or own your vehicle through your business, you have linked the most dangerous thing you likely do on a daily basis, drive a car, and linked it to either the source of your wealth, your business or in the case of your FLP, the place you keep your wealth. 

I don’t own anything – I gave it all to my wife and kids 

Transferring all of your assets to your spouse and/or children, especially after something has happened, will not protect your assets from a lawsuit. Even if it did protect you from your lawsuits, transferring your assets to your spouse and/or children opens up another Pandora’s Box. Keeping in mind that there are thousands of lawsuits filed daily due to employment grievances, “slip and fall” and auto accidents, consider this scenario:

Let’s suppose that you transfer all of your assets to your 18-year old son who causes an auto accident. Several other cars are involved in the accident and several injuries are incurred. Chances are high that the other parties will come looking for the driver with the deepest pockets. If your son “owns” your house and business, a sympathetic jury will undoubtedly take the possession away from your son in order to teach him a lesson for his reckless driving. The same holds true for spouses, parents and even friends. Also, gifting is limited to about $14K annually, per spouse, per donee. Gifts over that amount must be documented with a gift tax return. Failing to do so will result in you having to answer the question, “Are you lying now re: the date and validity of this transfer or did you cheat the IRS?” A bad place to be in a time of need.

I’m insured and have an umbrella

This is a reasonable and common question we get from clients and advisors alike. In the most egregious cases of arm-chair quarterback misinformation, we actually see uninformed advisors telling their clients that the only Asset Protection they need is a good umbrella policy – THIS IS FLAT OUT WRONG for the kind of successful people we protect. Why? Because they are successful, visible and typically have assets above and beyond just the insurance policy itself, they are good targets from a net-worth perspective.

Our position on Liability Insurance (as distinct from Life Insurance) is pretty simple: Buy as much liability insurance as you can afford, assume it won’t be adequate and have a plan B. Asset protection planning is about layers, redundancy and backstops.

What about my “umbrella” policy? – It is a great idea to have an umbrella policy, in fact, I insist on it for my clients as one of several layers.  You and your liability carrier have different ideas about what umbrella means. To you it means everything, to your carrier it means specific events in the base policy, covered to specific increased limits, and governed by a specific set of exclusions detailed in the fine print of your policy. Clearly two very different definitions. The lesson here is that there is no real way to insure yourself against a universe of possible exposures and have every single one covered to an unlimited dollar amount, nor is this reasonable to expect of your liability coverage.

Some real examples of the “impossible” that actually happened and resulted in large claims: 

  • Parents away for the weekend return to find that a teenager died at their home during a party their child had from the drugs he brought with him results in multi-million dollar wrongful death lawsuit;
  • Chiropractor adjusts a patient’s hip and the woman dies on table from cardiac arrest-he is sued for wrongful death;
  • Long time, most trusted employee of medical practice molests a minor female patient during treatment;
  • Employees of moving company get drunk and severely beat another employee and lock him in company truck in company yard over weekend;
  • LLC for real estate development is pierced and a passive member is held jointly and severally liable for the actions of the other members;
  • Dentist works on elderly patient who goes home and dies of unrelated heart attack hours later, dentist sued for wrongful death. 

SOLUTION – So how do we help make sure that the coverage is enough? Pretty simple – we buy all the insurance we can reasonably afford, make sure we have the appropriate riders and umbrellas in place then we present a hard, uncollectible target beyond the limits of the policy. Most, if not all, lawsuits are motivated by the potential financial gain to the plaintiff and their attorney. In most cases, plaintiffs and their attorneys don’t chase people beyond the limits of the policy if there is nothing else to take or if there is nothing that they can get their hands on with any reasonable certainty.

This article just scratches the surface of what you need to consider when evaluating your exposures, Asset Protection planning and the countless options available. I encourage you to act today, seek experienced counsel, and remember that information in forums like this is not specific to you, is written in the broadest terms and is never a substitute for consulting with an experienced professional.

Attorney Ike Devji has a decade of practice devoted exclusively to Asset Protection and Wealth Preservation planning. He works with a national client base including 1000’s of physicians and business owners often through their local attorney, CPA or financial advisor. Together, he and his associates protect billions of dollars in personal assets for these clients. Ike also regularly writes, teaches and speaks on these issues to executives, physicians and other professionals nationally. See his work in WORTH, Advisor Today, Physician’s Practice and at www.ProAssetProtection.Com.

As always, the information presented here is general and educational and can never replace the advice of experienced counsel specific to your assets or situation. 

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Meaningful Family Conversations for the Holidays


This post was written by fellow NAPFA-Registered fee-only financial advisor Megan Rindskopf.

With Christmas less than a week away and the streets abuzz with holiday spirit, it is easy to get consumed by the busyness of the holidays. We encourage you this season, amidst the shopping shuffle and the corporate holiday parties, to pause. Take time this year to reflect on the people and the relationships that are most important to you.

Every family is different and there is no one-size-fits-all solution to a family’s situation – whether family members are estranged or everyone is “thick as thieves,” take the opportunity this year to have meaningful conversations with your loved ones. Reflect on memories – appreciate the tough moments that have made your relationships stronger and be grateful for the memories that make you laugh. Most importantly though, share your thoughts and feelings with the ones you love, because we never know how short life might be.

As you enjoy the company of family and friends during the holidays, pause for a moment to consider the following: 

If something happens to me, will my loved ones be taken care of?

While this thought may seem a bit morbid around the holidays, in reality, what better time than when we are surrounded by family and friends to remind us to have the appropriate insurance coverage in place to protect the ones we care about most.

If you or your spouse become disabled, do you have the right coverage(s) in place to make sure you can still support your family? Retirement, college and other savings goals become much more difficult to accomplish when your income stream is greatly reduced or eliminated entirely.  Proper disability insurance can help supplement the loss of income associated with a long term disability. My colleague Cheryl Sherrard was recently quoted in Financial Planning Magazine regarding group disability insurance. Click here to read the article (free registration may be required).

If you or your spouse become ill and needs skilled nursing care, do you have Long Term Care insurance or adequate additional resources in place to cover in-home care or a skilled nursing facility?  Equally as important – have you had those conversations with your family members so they know what type of care you desire in the event a long term care need arises? It is important to have these discussions before an issue arises.

If you or your spouse passes away unexpectedly, do you have the right life insurance in place to support your family? Depending on your family and financial situation, you may or may not need life insurance coverage. It is important to understand both the amount and type of life insurance you need, in order to assess whether any adjustment is necessary. Work with a financial professional who knows you and thoroughly understands your needs and your goals when assessing your family’s needs.

Do I have current estate planning documents and have I communicated my wishes to my family?

It is imperative to have the essential legal documents in place to protect against the unexpected. In order to avoid family turmoil once you are no longer living, it is also helpful if you have discussed your wishes with the friends and family members involved. While these conversations can be difficult to initiate, they can bring clarity to a situation and help reduce family conflict once you are gone. If the conversations are too difficult to have, a hand-written letter or video can accompany the Last Will and Testament explaining your decisions.

If you are unsure if your documents are still adequate, consult your estate planning attorney to see if you need to establish new estate documents or update your existing documents.

The holidays present opportunities for family members to spend quality time together and create lasting memories. Show your gratitude this season by making sure your loved ones are properly protected financially and by having open, honest conversations with your family members before issues arise. Being proactive for the benefit of those you love is the best gift you can give this season.

Megan Rindskopf is a Financial Advisor for Clearview Wealth Management in Charlotte, NC. As a NAPFA-Registered Financial Advisor and CERTIFIED FINANCIAL PLANNER™ professional, Megan helps individuals and families reach their goals through a holistic and customized approach to financial planning. Much of her time is spent helping young, high earning professionals prioritize competing demands so that they may successfully achieve financial clarity and independence, along with a healthy work-life balance for the long term. Clearview Wealth Management is an independent, fee-only Registered Investment Advisor firm that cares deeply about each relationship and is committed to lifelong partnerships with clients and their successive generations. Megan can be reached at mrindskopf@cvwmgmt.com, or connect with her on LinkedIn. If you would like to learn more about Clearview Wealth Management and the people they work with, check out their website at www.clearviewwealthmgmt.com 

Thanks to Megan and her firm for these excellent thoughts and tips for addressing these difficult issues.

As always please feel free to contact me  at 847-506-9827 for a complimentary 30-minute consultation to discuss all of your investing and financial planning questions. Check out our Financial Planning and Investment Advice for Individuals page to learn more about our services.  

Photo credit:  Flickr

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Avoid These 6 Serious Estate Planning Mistakes


serious estate planning mistakes

This is a guest post by Dagmar M. Pollex, J.D, an estate planning attorney based in Braintree, MA.  

Putting together a life and estate plan designed to protect you from “Murphy’s Law” – those unexpected but not uncommon events that can upset your hopes for the future – is not really difficult at all. Nevertheless, I  see many of the same mistakes made over and over again. The truth is that without experienced guidance, you can lose a lot more than you save by using DIY estate planning software or going for the cheapest alternative.  The consequences of making any of these six serious estate planning mistakes can be devastating to your loved ones after your death.

The most frequent mistakes that I see – over and over again

1.  Not checking beneficiary designations and making sure you have named contingent backup beneficiaries. This is especially true for your retirement accounts.

2.  Not considering that your personal possessions may have more than their monetary value to your children and making a plan to distribute fairly and equitably.

3.  Not naming backup executors and trustees. A less than perfect backup is usually better than not having someone at all and leaving it to the courts to decide.

4.  Working with an estate planner who doesn’t take the time to make sure the ownership of your accounts and beneficiary designations are properly coordinated to make sure what you own passes on in accordance with your wishes and your estate plan.

5.   Acting as though estate planning is a once and done event. Update your estate plan periodically to protect yourself and your family as life circumstances, your assets, and the laws change.

6.  Leaving your family to conduct a morbid scavenger hunt by not leaving written documentation of your assets, including a list of your online accounts and passwords and where to find important estate planning documents.

My comment:  Estate planning is an often neglected piece of a comprehensive financial plan.  The items listed above and others can have dire consequences for your loved one’s if you pass away without having taken care of them.  Please make sure that you have your estate planning issues in order.  Whether your estate is modest or large, leaving your loved ones with a mess to clean-up after you are gone is not how you want to be remembered.  

Check out Dagmar’s blog and her Facebook page.  Follow her on Twitter as well.  

Please feel free to contact me with your questions.  

Check out an online service like Personal Capital  to manage all of your investment and retirement accounts all in one place. Please check out our Resources page for more tools and services that you might find useful.

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Protecting Your Savings from the Cost of a Long-Term Care Illness


Nursing Home

This is a guest post by Dagmar M. Pollex, J.D, an estate planning attorney based in Quincy, MA.  

The topic of protecting one’s savings from the cost of a long-term care situation is a key retirement planning issue for Baby Boomers approaching retirement and those already in retirement.  Additionally it is a major concern for those with aging parents as well.

Today, the risk of losing your life savings to a long term care illness looms as the largest threat to your future security. That’s why one of the biggest questions and concerns many people have about their lifetime financial security is what would happen if they suffer a long term disabling illness, such as Parkinson’s disease or Alzheimer’s.

The reason for this concern is clear. The cost of long term care varies according to where you live. Last year private room nursing home rates jumped 3.8 percent to a nationwide average of $90,520. In some parts of the country like Massachusetts and New York, the average cost is $120,000.00 to $150,000.00 a year – and increasing rapidly.

Long-Term Care Insurance

Medicare does not cover this cost so without long term care insurance, it wouldn’t take long for most families to lose all of their hard-earned life savings. If you are in your 60’s and in reasonably good health, it’s a wise idea to consult with a long term care insurance specialist. A long term care advisor can show you a variety of options tailored to your budget. But what if you can’t get long term care insurance because of a medical condition? What if your income and savings, especially after retirement, just won’t be enough to afford complete coverage?

First of all, don’t assume you need to purchase lifetime coverage. Even three to five years of coverage has provided important value to many of my clients.  To fill in the gap if insurance is not enough or if it’s just not obtainable, there is an increasingly popular asset planning technique for middle-class families today. With people living much longer these days comes the growing concern that some of the later years will eat up a lifetime of savings.

If you can’t get long term care insurance or can’t afford it or even if you have just a few years of coverage, this type of planning can protect assets from the worst case scenario of needing long term nursing home care for a substantial period of time.

Using a Trust

Planning ahead by using an irrevocable trust to preserve some of your assets helps you avoid the devastating loss of your life savings to a catastrophic illness. This type of trust which I call a Long Term Care Asset Protection Trust is also sometimes called a Medicaid Trust or an Income Only Irrevocable Trust.

The use of this kind of planning has increased in the last few years, especially since changes federal Medicaid law enacted in 2006 eliminated last minute planning opportunities. As a result, people who want preserve assets now need to plan before the need for care arises.

Many people have heard about this kind of planning but want to know more about how it works, when it should be used and the practical differences between an irrevocable asset protection trust and a revocable trust.

The Long Term Care Asset Protection Trust is a legal planning tool that is designed to protect some or all of your assets in case there is a need for an extended period of long term care in the future.

As the name implies, these trusts are irrevocable and require you to give up a certain degree of control over the assets transferred to the trust.  In exchange for protecting your assets from the astronomical cost of nursing home care, Long Term Care Asset Protection Trusts have some conditions attached to the use of the assets in the trust.

Under the terms of these trusts, the transferor (“grantor”) can receive all of the income produced by the assets in the trust for the grantor’s lifetime.  So by using a Long Term Care Asset Protection Trust, you can still reserve some control and retain some interest in the transferred assets – advantages that are not available when transfers are made outright to individuals.

You receive the income from the trust assets, but not the principal.  If you transfer your home to the trust, you can continue to live there.

Because Long Term Care Asset Protection Trusts are irrevocable, the grantor cannot revoke the trust and reacquire the assets; therefore, the assets are protected for long term care Medicaid eligibility purposes.

Long Term Care Asset Protection Trusts can be written to provide income tax advantages, and to allow the grantor some flexibility to change his or her beneficiaries. The trusts can also be drafted to allow the trust assets to obtain a “step-up” in value so your beneficiaries will not have to pay additional capital gains tax.

Dagmar’s is an estate planning attorney based in Quincy, MA.  Follow her on Twitter. 

Please contact me with any thoughts or suggestions about anything you’ve read here at The Chicago Financial Planner. Don’t miss any future posts, please subscribe via email. Please check out our resources page as well.  

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Asset Protection Tips for Real Estate Investors & Owners


This is a guest post by Ike Devji, a Phoenix, AZ-based asset protection attorney and one of my oldest online friends.  I have spoken with Ike many times for advice on client asset protection issues and had the pleasure of meeting him in person a couple of years ago when he spoke to my financial advisor study group during a meeting we held in Phoenix.  Though Ike focuses on high net worth professionals and physicians as clients, his advice for “real estate owners, flippers, and developers” is applicable to anyone involved in the ownership of real estate.

Real estate management issues fall into several basic categories: debt, liability, and loss. We provide an introduction to these issues to help you get your house in order below. As many business owners and professionals also have investment in real estate outside their business itself, I’ve included issues of wide applicably.


The nature of real estate debt and the significant guarantees that often accompany it can have grave consequences. We’ve covered some of these in detail including the effects of real-estate investments on financial solvency.

Make sure you clearly understand the limits and extents of the personal guarantees you sign. Many investors are signing as “jointly and severally liable” for 100 percent of the total debt when they only own 20 percent of the deal, as one example. Limit your liability share to your ownership share and understand if the loan you are signing for is a “non-recourse” loan or not.

Have your leases, indemnity agreements, and other legal docs drafted by a lawyer, or at least reviewed by a lawyer BEFORE you use them. Asking us what we think after the fact is useless. Always have these agreements reviewed by an experienced real estate attorney. Having your brother-in-law the DUI lawyer look at it could be the most expensive $500 you ever saved.

Don’t sign blanket personal guarantees, be specific in what you agree to collateralize as much as possible or the bank will value what you own at pennies on the dollar and try to take it all.

Get professional accounting help to maximize tax deductions. Use strategies like energy studies and cost segregation studies to reduce your fixed long term costs and maximize what you keep. Some real estate lawyers and accounting firms also offer “lease audits” these verify all the mysterious monthly expense add-ons you may face if you rent rather than own the building, the calculations are often wrong, and not in your favor.


Protect yourself from your, clients or patients (or renters, their guests, and business invitees); you are liable for their health, welfare, and safety related to the property and conditions on it. Have specific leases, written policies on conduct and the use of the properties and penalties for violating them. Insure yourself to hilt against liability incurred on the property. You will almost always be more collectible and a better lawsuit target than your renters. That said, don’t ever forget that insurance alone is just one layer of defense and is not adequate protection.

Don’t put too many eggs in one basket. Divide properties based on use, equity, and danger or liability. If you have multiple pieces of property in a single LLC, for instance, remember that ALL of them are potentially at stake for an exposure at one property.

Implement personal asset protection planning and consult with legal counsel on how you are protected and which of your other personal assets are at risk and should be made legally distinct. If he or she says, “just by more insurance” fire them and get better help.


Adequately insure yourself against loss and property damage, as distinct from liability. Use only top rated national carriers that you can sue for bad faith if they don’t pay under the policy as they should. Yes, this is common, “bad-faith” lawyers exist for a reason. Remember that vacant property is often not covered by general loss and liability insurance after as few as 30 days if you don’t let the insurance company know and pay them extra.

Get ALL the right insurance. If you are a owner/manager you need general liability, E&O (like professional malpractice), and potentially D&O insurance (directors and officers) if you are a director or officer of a company that may be personally named for professional acts or omissions, i.e. “I made the call that reinforcing the balcony railing was too expensive and not required at the property…”

As always, act today, anything you do after an exposure is more expensive and less likely to work. Be proactive and tactical in defending what you have earned.

Attorney Ike Devji has a decade of practice devoted exclusively to Asset Protection and Wealth Preservation planning. He works with a national client base including 1000’s of physicians and business owners often through their local attorney, CPA or financial advisor. Together, he and his associates protect billions of dollars in personal assets for these clients. Ike also regularly writes, teaches and speaks on these issues to executives, physicians and other professionals nationally. See his work in WORTH, Advisor Today, Physician’s Practice and at www.ProAssetProtection.Com

As always, the information presented here is general and educational and can never replace the advice of experienced counsel specific to your assets or situation. 

Please feel free to contact me with your financial planning and investing questions. 

Please check out our Resources page for links to some additional tools and services that might be beneficial to you.

Photo Credit:  Wikipedia


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Should You Accept That Estate Planning Seminar Invitation?


I recently received such an invitation in the mail. Clearly this was a mass mailing of some sort. I’ve received several similar invitations in recent years. While tempted to check one of these sessions out from a professional curiosity perspective, in the end I always opt not to attend because I don’t want to stick the presenter for dinner when I’m clearly not interested.

Should you attend one of these sessions?

In deciding you should think about what you would hope to get out of such a session and perhaps do a little critical reading of the invitation.

A few points about the invitation that I received:

  • One of the topics to be covered was “…new developments in estate planning.” What struck me here was that one of the major discussion topics in the area of estate planning is the expiration of many of the provisions of the estate tax rules and the utter chaos this might lead to with some estates. The lack of any new rules is clearly the problem.
  • I Googled the attorney who would be presenting. All I could find about this individual was that he seems to give a very large number of talks on estate planning during the course of a year. A question that you should ask yourself is whether or not this individual would be the one to either draft your estate planning documents or at least oversee the drafting by another attorney in his firm.
  • Further down the body of the invitation, there was a mention of a special presenter to talk about issues in the stock market. Not sure exactly how this relates to estate planning.
  • What I found interesting is that the guest speaker was not named.
  • Moving to the end of the invitation, I noticed that current clients of a well-know brokerage firm were not eligible to attend. I therefore surmised that several brokers from this firm were likely sponsoring the event and one of them was likely our mystery guest speaker.
  • The invitation did promise that no products would be sold at the session.
  • The invitation went on to say that if attendees brought their current estate planning documents that a representative would review them on the spot after the presentation.

Reasons to attend

  • If you are interested in learning more about estate planning, the speaker might provide the some good information.
  • You either like the restaurant or would like to check it out.

Don’t attend if you are susceptible to sales pressure. While the invitation specifically says there will be no financial products sold at the session, you can bet that you will be solicited to do business with both the estate planning attorney and the brokerage firm sponsoring the event. I’ve got to believe that the on-site review of your current documents generally results in a gap in your planning being uncovered. Further, ask yourself if you want your estate planning documents reviewed in this type of setting.

Whether or not you attend this type of session, you should be skeptical as to the connection between the estate planning attorney giving the presentation and the brokerage firm. Both a properly constructed estate plan and proper insurance coverage are key elements of one’s overall financial plan. I am very leery, however, when the providers of these services seem to have some sort of connection. You should ask whether there is any sort of financial arrangement here.

The fact that this estate planning attorney’s main claim to fame seems to be giving estate planning seminars should also raise a red flag. A question to ask is whether or not this attorney is the person with whom you would be working.

Often brokerage firms try to sell insurance and annuity products to the “leads” they generate from seminar attendees. Again there is nothing wrong with insurance or annuity products per say, as long as these vehicles fit your particular situation. Also, I suspect that annuities sold by this type of firm are generally not low cost products. Buyers of annuities should shop for the product with the lowest expenses and least onerous surrender charges that will meet their needs.

In my opinion, a better method to find an estate planning attorney and/or an insurance agent who deserves your business and your trust is via a referral from a trusted advisor like your accountant or your financial planner. Personally, I work with several trusted professionals in both areas and refer my clients to these people when there is a need. I also remain part of the process to review the proposed insurance products or the estate planning documents and to ultimately advise my clients through the process.

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