Planning What Issues Should Be Considered When

¶ … Planning

What issues should be considered when a freezing order is issued against your client?

A freezing order, of course, is when the assets in question are frozen. This does not change the ownership of the asset but it does deprive the person from moving or harnessing the asset for as long as it's frozen. A frozen bank account is a specific example of this but it can apply to life insurance or any other retirement asset. The courts can issue a freeze order as can certain high-level politicians like the President if there are foreign business or people involved. A freezing order does not mean that the assets have been or will be confiscated but it could end up being that way depending on what is going on.

As for how to react to a freezing order, the first order of business is to figure out why the assets in question were frozen. The reasons can vary quite a bit such as divorce proceedings, contestation of wills and/or probate, suspicions of criminal behavior by federal, state or local authorities and alleged involvement with countries and/or businesses that are deemed to be averse to the United States or the country at hand.

If it is a criminal matter, then the client should cooperate fully so as to get the assets unfrozen. If it's a will/probate/divorce matter, then the person who owns the assets will have to assert and testify that they should get the asset. If it's an international kerfuffle, then the person who owns the assets along with counsel can work with the courts and authorities to get the assets unfrozen (Adkisson, 2013).

Discuss the tax return requirements for trusts and estates with nonresident alien beneficiaries.

The major consideration when dealing with non-resident alien beneficiaries is whom taxes will be owed to. Non-residents for tax purposes typically pay little to nothing to the United States or the applicable country but it all comes down to whether that residency status changes, when it's effective, when the assets are received, how much is received by the non-resident, the resident's legal status for immigration purposes and so forth.

At a minimum, a non-resident who receives a trust or estate payment will owe taxes in the country that they do have residency. Tax money may or may not be owed to the country in which the money is disbursed since the person in question is receiving money from that country. However, whether the person is a legal resident of that country and/or whether that person files jointly with someone who IS a resident can have a lot of effects on whether taxes are due and how much. Withholding tables are also usually advanced for non-citizens even if there is a strong to very strong chance that no money will be owed at the end of the year.

Regardless, a non-resident who receives any sort of income will need to take care and make sure that they pay any applicable taxes and file any applicable forms and returns up to and including a 1040, W-2, 1099 (of all types) and so on. Not doing so can run a person afoul of the local government and may endanger their status in the country or at least put them on record as owing tax moneys to the relevant government as the IRS (and other applicable national tax agencies) can be quite frenetic about getting their tax money (IRS, 2013).

When should a client consider a variable life insurance?

A variable life insurance, also often known as a variable universal life insurance policy (or VUL for short) can be attractive for two major reasons. First, variable universal life insurance policies build a cash value. This is something that is not true of all insurance policies. The money garnered from this aggregation of value can then be invested into things like mutual funds and such to make the cash value even greater over time.

The other main attractive feature of a variable universal life insurance policy is that it is locked in for life and will definitely pay benefits upon the death of the insured so long as no provisions of the insurance (e.g. suspicious death, commission of a felony at time of death, etc.) are violated.

This stands in contrast to term life insurance policies which only insure people for a finite amount of time and then the coverage simply terminates if the person is still alive. The downside to term life insurance, in this regard, is that it gets more expensive to buy the insurance as one gets older (or sicker) as the certitude of near death is greater and greater. The cost to age issue is somewhat of an issue with variable universal life insurance policies but this can obviously be mitigated once a policy is in force (since another one will not need to be bought) and buying one at an earlier age can safe a bit of money since the insured won't be buying a policy in their 60's or 70's unless something odd happens.

One major downside to a variable universal life insurance policy is that if the investments of the policy perform poorly, some money may be required out of pocket to keep the policy in force and if the money is not rendered, this can invalidate the policy (Kiplinger, 2010).

Discuss the considerations in using limited partnerships and LLCs in life insurance estate planning

This question would seem to point to IRS Publication 535, which refers to insurance costs in a business environment. If an actual business or family-oriented partnership is constructed to include the owner of the business (the self-employed individual), that person's spouse and/or family members, there can be some tax benefits that can be rendered for the life and other insurance premiums for that family.