Planning Potpourri

■ Copy Cat Danger: Photocopy machine lease expiring? How can you be sure that electronic images of the confidential papers recently copied are erased from the copier drives? Have the copier lease company confirm their policies for handling the drives in writing and have your IT consultant confirm that is adequate. Better approach – buy the drives from the company. The cost is likely nominal. Then have your IT consultant destroy or erase them so you have control over the process.

■ What’s Up Doc? Lawsuits, the possibility of a million dollar estate tax exemption, your son-in-law, all have you up worrying at night? Do you count defense attorneys leaping over a fence instead of sheep when trying to fall asleep at night? Say you have an interest in the real estate management company worth only $5 million in this market, but you’re confident in 10 years it will be at $25 million. If you get hit by a bus Uncle Sam will walk with nearly $12.5 million to pay towards the cash for clunkers debt. Say your mom sets up a trust for your benefit and that is a grantor trust to you (you pay tax on trust income, not mom, even though she set it up). In tax jargon the trust is a beneficiary (you) defective (i.e., grantor) irrevocable trust, or a “BDIT.” If you get hit by a bus or sued, the entire value is at risk. If you sell the business to the BDIT for a note, no gain will be recognized for income tax purposes. In 10 years the $20 million of appreciation will be outside the gift, estate and GST tax systems and protected from claimants. Since you did not set up the trust, you can be a beneficiary of the trust as well. For physicians worried about malpractice claims, a BDIT can be the ideal approach to protecting interests in say the real estate housing the practice, an equipment leasing partnership and other assets ripe for sale to the trust.  Thanks to Robert G. Alexander, JD, LLM, Milwaukee, Wisconsin.

■ Revocable Trusts and Personal Property. So you’ve set up a revocable living trust to manage your assets and provide a structure to protect you as your Parkinson’s disease or other health issues progresses, or to avoid probate. You should also transfer ownership of personal property (antiques, art, jewelry, etc.) to the trust so that these valuable assets will also be protected. This transfer is often accomplished using a “bill of sale” to transfer personal property to the trustee of the revocable trust. Compare the property in the proposed bill of sale to the listed or scheduled property on your homeowner’s insurance to verify that the ownership of all property is transferred, and to assure that any valuable property transferred is also scheduled. Be sure to notify your agent and insurance company of the re-titling to the trust.