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Thursday Report

Re: A Total Eclipse of The Thursday Report 

How Should a Married Couple Own Their Assets? by Alan Gassman

Excerpts from Alan Gassman’s Talk with Johns Hopkins Residents and Fellows by Joe Buhrts   

Checklist: Annual Review by Marty Shenkman

2 Estate Planning Strategies You May Have Missed by Alan Gassman 

If the Banks Start to Fail Again-Will Your Clients’ Accounts & CDs Be Safe? (Part 1 of 2) by Ken Crotty, Alan Gassman & Chris Denicolo with Review by Taylor Binder & Joseph DiNuzzo

Richard Connolly’s World 

Thoughtful Corner

Humor! (Or Lack Thereof!)  

We welcome contributions for future Thursday Report topics. If you are interested in making a contribution as a guest writer, please email Alan at

This report and other Thursday Reports can be found on our website at


 Quote of the Week

 “And everything under the sun is in tune

But the sun is eclipsed by the moon”

-Roger Waters (H2O)

A solar eclipse (as seen from the planet Earth) is a type of eclipse that occurs when the Moon passes between the Sun and Earth, and when the Moon fully or partially blocks (“occults”) the Sun. This can happen only at new moon when the Sun and the Moon are in conjunction as seen from Earth in an alignment referred to as syzygy. In a total eclipse, the disk of the Sun is fully obscured by the Moon. In partial and annular eclipses, only part of the Sun is obscured.

If the Moon were in a perfectly circular orbit, a little closer to the Earth, and in the same orbital plane, there would be total solar eclipses every month. However, since the Moon’s orbit is tilted at more than 5 degrees to the Earth’s orbit around the Sun, its shadow usually misses Earth. The Moon’s orbit must cross Earth’s ecliptic plane in order for an eclipse (both solar as well as lunar) to occur. In addition, the Moon’s actual orbit is elliptical, often taking it far enough away from Earth that it’s apparent size is not large enough to block the Sun entirely. The orbital planes cross each other at a line of nodes resulting in at least two, and up to five, solar eclipses occurring each year; no more than two of which can be total eclipses.

In honor of this rare event, we found 2 classic songs celebrating eclipses..guess which is our favorite…  Bonnie Tyler  Pink Floyd


How Should a Married Couple Own Their Assets?

by Alan Gassman

A common issue facing married couples is: how they should own their assets.

Although assets can be held as (1) tenants in common, (2) joint tenancy either with or without the right of survivorship, or (3) tenancy by the entirety, joint tenancy with right of survivorship can qualify as tenancy by the entireties if the couple resides in Florida, Delaware, or any one of the other states that recognizes tenancy by the entireties.

An advantage of tenancy by the entirety is that if one spouse is sued, that spouse’s creditor cannot reach assets held jointly in tenancy by the entireties.  Additionally, if one spouse dies the surviving spouse becomes the sole owner of the asset(s), without going through probate to receive title.  However, a disadvantage is that only one-half (1/2) of the assets receive a stepped up income tax basis for capital gains tax purposes.

In community property states – such as California, Texas, and New Mexico – one spouse’s death brings a full step up in income tax basis.  If one spouse is sued, all community property can be lost to the creditor.  This then becomes a judgment call as to whether transmute community property into separate property (to protect half of it in the event of a lawsuit), versus keeping the assets as community property to receive a full step up if one spouse dies.

Alaska recognizes community property and permits the establishment of a community property trust.  This protects the married couple’s assets (in the event that one of them is sued), and also provides for a full step up in income tax basis if one spouse dies.  The Alaska community property trust should be considered when either (1) one spouse in a married couple has a short life expectancy, or (2) creditor protection would be preferred.

Based upon Private Letter Rulings (Rulings) and an IRS Technical Advisory Memorandum (TAM), issued in the late 1990s and 20001, the JEST trust was designed for non-community property states to facilitate a step up in basis upon the death of one spouse.  This was done by giving the first dying spouse the power to appoint the trust assets under a JEST trust to the creditors of their estate

The Rulings and TAM did not allow for a step up in income tax basis.  They concluded that a step up in income tax basis would not be permitted where the surviving spouse benefits from making an imputed gift to the first dying spouse immediately before death, while then inheriting the assets back, since it would violate Internal Revenue Code §1014(e). Internal Revenue Code §1014(e) provides that the recipient of a gifted asset, inherited from a decedent, will not receive a step up in basis if the gift is made within one year of death.

The JEST trust’s foundation is that the inherited assets pass to an irrevocable trust, which will not benefit the surviving spouse, unless certain events occur that are beyond both the control and possible expectation of the surviving spouse.  For example, the surviving spouse may not benefit unless (s)he runs out of other assets, and then a Trust Protector appoints the surviving spouse as a beneficiary.

Although the JEST trust does not offer the same creditor protection as either tenancy by the entireties or an Alaska community property trust, it may be easier to administer.

Some married couples prefer to have binding agreements, that upon the death of one spouse, the surviving spouse (1) be required to fund a creditor protection trust with a co-trustee and (2) to place marital assets into the trust, to be preserved only for the descendants of the marriage and not accessible to subsequent spouses, friends, or other third parties who might otherwise invade family assets to reduce what the descendants of the marriage may receive.

While meeting with a married couple to discuss how their assets should be held, the above options should be considered, and possibly discussed with everyone concerned.  Each couple can choose a different and unique path, based upon their perception of priorities, risks, rewards, and ultimately what is in the best interest of themselves and descendants.



Éclair, Eclipse and Important Food Tips

Excerpts from Alan Gassman’s Talk with Johns Hopkins Residents and Fellows

by Joe Buhrts 

Alan Gassman spoke to fellow and residency physicians at Johns Hopkins/All Children’s Pediatric Hospital about what doctors need to know, and what to do during their professional career when facing certain obstacles.

A brief summary of a small portion of this 3½ hour lecture is summarized as follows:

Below is what Mr. Gassman believes to be “Four Key Things Every Doctor Should Know.”

  1. Lawsuits 101

First, doctors need to know the order of action to take when a lawsuit is coming their way. To help with any possible lawsuit, a doctor should always preserve the patient’s records perfectly. As soon as a request for records comes in, the doctor needs to know about it, and needs to review the record. When reviewing the record, which should be done by the doctor, every single page needs to be looked at, and numbered if the record is being sent as a paper file.

As the doctor is reviewing the record they should either dictate, or type out everything they remember about the situation, and everything that worries them about the situation.  On top of the document containing the notes you can type “Attorney-Client Work Papers”, in order to help assure that they will not become discoverable.  The reason for going through the record and writing down what you can remember is, because what you remember nine months after the encounter is more than what you will remember two years after the encounter while you’re in a deposition.

It is possible there may be a mistake in the record that needs to be changed. If there is something to be changed, contact your lawyer and ask exactly how to make an amendment note. Never backdate that note, and never change a chart. If a doctor alters medical records, the jury will show no remorse in awarding an astronomical judgement.

In the event of a lawsuit, malpractice carriers will assign a claim administrator, and eventually if needed, a lawyer will be assigned.  Remember, this lawyer gets paid by the carrier, not the doctor, and an independent personal lawyer may be worth the expense to help assure that there is appropriate independent representation.  As in any profession, there are both great and mediocre lawyers. Unfortunately, you may not know which lawyer is which. This is why any doctor in a complex or challenging lawsuit should consider consulting with an independent lawyer of their choice, and why it may be important to ask for a list of the lawyers that a carrier is willing to hire, and to select which of those lawyers will be hired by the carrier.

The carrier has an obligation to defend your case, find the best witnesses, and to settle when they can. If you demand the carrier settle the case within policy limits, and they had the chance to do so, but did not, then under the Bad Faith Rules, any verdict exceeding policy limits may be the carrier’s problem. Settling does not necessarily mean you committed malpractice or were wrong in any way. Settling can protect you from a runaway jury system that could potentially award millions.

  1. Disability and Malpractice Insurance

Most doctors need disability insurance, which is admittedly expensive and needs to be budgeted for.  Accidents happen, and the chances are higher for someone to become disabled rather than die by the age of 65, which explains the reason for higher premiums in these policies. If you have a policy now, great! But, you may want to double check your policy, because there are policies that can “leave you in the dust” come collection time. A disability insurance policy should increase around 3% annually because the cost of living doubles roughly every fifteen (15) years.

If you are employed by a large practice group or hospital, you might ask, “why is there a  need for a separate policy?” It is true that larger practice groups and hospitals may provide disability insurance policies, but, they are not portable, meaning that as soon as you leave the hospital or the group practice, you lose your disability insurance. At that point, there may be health issues which prevents you from having your own independent policy.  Group practice insurance tends to be less expensive because actuaries know from experience that they will only need to cover about one in every six doctors, because people eventually leave the practice.

Many doctors are over insured because they have both the “temporary” (depending upon your occupational situation) and personal disability insurance policies. In personal policies, one would benefit more from an OWN occupational policy. An OWN occupational policy will pay full benefits if the doctor can no longer perform services within their specialty. In a  non-OWN occupational policy, benefits will be reduced or eliminated if the doctor can do work outside of his or her specialty, which might include being a greeter at Wal-Mart or a high school science teacher.

Doctors, like everyone else, are still human and may make mistakes. In the event of a mistake, or an intentional wrongful act having to do with a patients care, malpractice insurance may pay. Malpractice insurance has limits of liability that may vary from state to state and is normally a claims-made policy, meaning while the premiums are being paid, if someone files a claim the carrier will cover the claim. First-year premiums on malpractice insurance are usually very low, and often referred to as a step-rate premium. The fifth-year rate is usually the mature rate, and a doctor practicing for five (5) years may pay around the same of that of a doctor practicing for ten (10) years.

If a doctor were to leave a group practice with a claims-made policy, they have to buy a tail. A tail policy will not cover the doctor if they are no longer with the carrier, unless the incident was reported before the doctor left the group practice, or the doctor purchased the tail coverage. Tail coverage is not cheap, and the usual price for tail coverage is three-times as much as the doctor has been paying annually. A tail coverage expense should be taken very seriously, and the most common arrangement is for the employee to pay the tail coverage expense when they leave the group practice. Although, it is possible to have the employer pay the tail expense, and this is usually agreed upon in the employment agreement. Another possible way to avoid a tail coverage expense is to be with an insurance carrier for so many years (the carrier will specify how many) and retire.

Most carriers also provide retroactive coverage. Retroactive coverage is the event of a new carrier taking control of the old policy from the former carrier, meaning the new carrier will be responsible for any notices received for malpractice during the former carriers control of the policy. Retroactive coverage allows the doctor to start at a mature rate with the new carrier. The doctor, of course will pay extra premiums for the retroactive coverage, granted they’ve practiced long enough to reach the mature rate with their former carrier.

  1. Creditor Protection

Florida, with all of it’s beaches, beautiful sunsets, and amazing weather has yet another great perk – it is the best creditor protection jurisdiction on earth, aside from not having asset protection trusts.

Creditors cannot touch what are called, exempt assets. These assets are, but not limited to, the homestead, IRA, 403(b) accounts, 401(k) accounts, a pension plan, and 529 college savings plan for children. Also, anything two spouses own as tenants by the entireties (a special form of ownership between a husband and a wife) is protected from creditors unless they have a judgement against both spouses.

Furthermore, doctors should know when it is time to handle their asset protection. With Florida’s favorable (not to the creditor) credit protection laws, it is easier to prepare a “cushion” for your spouse and descendants. One way to prepare a “cushion”  is to have a life insurance policy pay directly to a trust. One should strongly consider having a personal life insurance policy pay directly to a trust, because in the unfortunate event of a passing, the trust is not subject to the creditor claims of the surviving spouse, and cannot be touched by their next spouse. The surviving spouse, being the Trustee, has a legal obligation to invest it prudently. The surviving spouse is also allowed to receive from the trust whatever is needed to maintain a reasonable standard of living, and can direct how the trust is dispersed among the descendants when they die.

At all times throughout your professional career, whenever your assets exceed the amount owed in student loans, you need to make sure your asset protection is handled. Student loans may deem you as “creditor proof”, in the event that the student loans exceed the amount owned in assets. If there ever is a lawsuit involving a creditor, one should direct a payment towards their student loans at least one (1) year prior to the judgement, in which most lawsuits run about two-and-a-half to three-and-a-half years.  With these favorable creditor protection laws in Florida the goal is to be creditor proof, and to always make sure your asset protection is handled.

#4 Employment Agreements

Lastly, doctors need to know the importance of an employment agreement, and the effect it can have on their future. If you are planning to live in a city, and your first employment agreement involves a non-compete agreement, the employment agreement is the most important financial situation you will ever have in your life, and should be taken to a lawyer to be looked over. Employment agreements differ as to what side of the employee/employer relationship you are on, and  must be read with absolute care, as every sentence matters. Employment agreements are always negotiable, and because of this almost no one signs the first draft. Within the Employment Agreement there are many other agreements, but, two important agreements are the non-compete and non-solicitation agreements.

A non-compete agreement is the most important clause within the employment agreement. A non-compete agreement is a clause that restricts a certain activity within a specified area for a specific amount of time upon leaving employment. It is not enforceable if the employer has “unclean hands,” or simply does bad things. Although, one must always assume that a non-compete agreement is enforceable. Non-competes can become extremely burdensome if enforced; such as not being able to practice within fifty (50) miles of the place of your employment for five (5) years. A non-compete can restrict your future employment, which is why these agreements should be read to the degree of complete understanding.

A non-solicitation agreement is a close second in importance to non-compete agreements. A non-solicitation agreement generally says,“if you leave the practice you won’t solicit.” But, these agreements can go even further to limit who a doctor can treat by saying something similar to, “by signing this agreement you agree to not treat any patient who was our patient during the time you were employed here.” It is even possible to limit referrals within these agreements, and because of that doctors may find difficulty in finding patients and generating business. For the reasons above,  both the non-solicitation and non-compete agreements need to be understood completely, and because these provisions are within the employment agreement, they are negotiable.

Furthermore, beware of any provision that treats employees differently from an economic standpoint when fired for cause versus without cause. For example, if an employee was fired without cause, they will receive severance pay for ten (10) weeks, whereas, an employee fired with cause receives no severance pay. This could possibly create a motive in the employer to try and find a cause to fire someone, and can ultimately hurt a doctor’s reputation.

Remember to always carefully read an employment agreement and all of its provisions with absolute care. Your understanding, even your lawyer’s understanding of the agreement, has an impact on your future.  Stay tuned for part 2 in the next edition of The Thursday Report.



Checklist: Annual Review

by Marty Shenkman

 Summary: Annual checkups are vital to all plans. You cannot keep your ship on course if you don’t regularly check its location, direction and final destination. Too often this doesn’t happen. Folks uniformly say “nothing has changed.” Those meeting regularly with their wealth managers often feel that the wealth manager knows all. They don’t. There is no substitute for getting all your advisers involved in planning on a regular basis. While what should be looked at each review will vary by person and by meeting, here are a few suggestions:

 √Budget: When was the last time you realistically looked at your budget? Most wealthy people seem to think that wealth means you are beyond budgeting. Nope. Even wealthy people can overspend but their budget is more. It may demonstrate you can give more to children now, more to charity. Like exercise, everyone needs a budget.

√Financial Plan: What you do with that budget is key. Have your wealth adviser forecast out to some reasonable age (think 95+) and see what your finances look like. If your forecasts were limited to age 80 or 85, unless you have a known health issue, that’s pretty risky given longevity increases. Stress test the results (more health care costs, etc.) to find what seems to be a realistic balance. While many wealth managers think this exercise is solely within their purview, that’s a dangerous mistake (note the collaboration theme song). If the wealth managers uses very conservative assumptions she could be hurting the client. Example: Dr. Jones is worried about malpractice liability, and she and her husband are evaluating funding nonreciprocal spousal lifetime access trusts (“SLATs”) for asset protection purposes. If the wealth manager completes conservative forecasts, that might suggest lower funding of the SLATs then what is actually done for asset protection. Those forecasts around might prove damaging to Dr. Jones if a future malpractice claimant argues that the funding of the SLATs was excessive and a fraudulent conveyance. Teamwork folks.

√Asset Allocation and Location: Asset allocation is what portion of your investments are held in a particular asset class, e.g., small cap equities. Asset location is which “buckets” specific assets are held, e.g., bonds in your IRA and family business interests in a dynasty trust. Be sure asset location decisions are reviewed with input from your entire team. Also, buckets can be changed. An irrevocable grantor trust (trust income taxed to you) might be changed to a non-grantor trust (income taxed to the trust), part of your regular IRA might be converted to a Roth. The “which bucket” decision can be made in a broader context with adviser input and perhaps net you better income tax or asset protection results.

√Life Insurance: Coverage should be reviewed periodically. Who owns the policy? Are there options in the policy to evaluate (e.g., convert a term to permanent policy because of a negative health diagnosis), should more be paid in to the policy to assure appropriate funding? Are there new insurance needs, fewer needs, or just different needs?

√Property, Casualty and Liability Insurance: This coverage is vital to everyone’s financial security but is too often treated casually if at all. Periodically identify risks that may exist and then determine if the cover-age meets those risks. Risks change over time. The wealth being protected changes. Too often policies bought under different circumstances are just continued without thought. Example: Mom has home health care workers. Was appropriate worker’s compensation purchased? Employment practices? Have the number or role of those workers changed?

√Estate Planning Scan: Step back and take a big picture look at the plan and whether it makes sense. Overviews of each document and component of the plan are often worthwhile to get everyone on the planning team, especially the folks whose plan it is, up to speed. But avoid complacency.

√Communication with Fiduciaries: When is the last time the trustee and trust protector of each trust have been at an annual review meeting? Don’t answer the question. You get the point. Without periodically having all key players involved in an update discussion they won’t be prepared when a problem arises. Formalities can’t be adhered to if the fiduciaries charged with carrying out trust duties have no active role.

√Communications with Advisers: Are all the advisers in the loop? Not every adviser has to be at every meeting, but every adviser should be kept up to date with the plan and general overview. If you’ve met with a wealth manager quarterly for years but don’t remember your attorney’s name that’s a problem!

√Communication with Heirs: Have the heirs ever been spoken to about the planning? Age and position appropriate discussions are important to have. Acclimating heirs slowly over time is best.


2 Estate Planning Strategies You May Have Missed

by Alan Gassman


Our friend, Marty Shenkman, suggested that we re-explain the MAPS system (Marital Asset Preservation System) Agreement, where a married couple agrees that on the death of one spouse, the survivor will assure that a certain portion of the marital assets will be held in trust to help assure protection of the surviving spouse and an eventual inheritance for mutual descendants.

While most of our clients have trusts in place which will capture life insurance and a certain portion of family assets on the first death, there will typically be significant assets owned outright by the surviving spouse or under his or her Living Trust which become exposed to creditors, subsequent spouses, and potential loss for other reasons.

Sometimes, clients agree that the surviving spouse will set up an Asset Protection Trust to protect the assets from the creditors of the surviving spouse. Having this provision in an agreement may prevent loss of assets if there is a creditor situation existing when the first spouse dies, because the reason for setting up the Asset Protection Trust would be the contractual obligation, and not “to flee from a creditor.”

Alan’s longer article on MAPS systems can be viewed by CLICKING HERE.



The estate tax may be here to stay, but during the past months and over the next few months, many clients will miss estate tax avoidance opportunities because they prefer not to lose absolute access to assets that would go into now existing trusts that may solely benefit a spouse and/or descendants or others.

Some clients who wish to assure that they are taking the proper steps from an estate tax planning standpoint choose to use the “Reversible Exempt Asset Protection (REAP)” Trust for this reason.

A REAP Trust can consist of a simple Nevada Trust which can be designed to be outside of the grantor’s estate, but reversible so that the assets can be transferred back to the grantor if the estate tax is eliminated.

If the estate tax is not eliminated, then the assets in the REAP Trust can be transferred back to the grantor, or into a different type of trust that may be better suited given possible changes in the future.

Since the details of inheritance and mechanisms of existing trusts can be copied into or simply referred to under the REAP Trust, the REAP Trust can be significantly less expensive to establish, and it can own an LLC managed by the client so that practical control can be kept, and Trustee expenses can be minimized.

Our full article on the REAP Trust can be viewed by CLICKING HERE.



The word is out that medical marijuana cannot be prescribed for pain unless one of a number of specific medical conditions exists.  While that is true, the list includes “chronic non-malignant pain” as a condition in and of itself.

Health care lawyer and author, Lester Perling, has confirmed that when any medical condition other than cancer causes pain which has extended beyond the normal course of pain that typically applies for a given physical condition, then marijuana can be prescribed for such “chronic non-malignant pain.”

Non-malignant means not associated with cancer or growths that are similar to cancer.

Our updated comprehensive outline on the Florida Medical Marijuana Laws for Physicians and Others can be viewed by CLICKING HERE.

Special Notre Dame Announcement

Please click here to see the amazing Notre Dame Tax and Estate Planning Institute agenda and  schedule for the dates in 2017 in South Bend, Indiana. This starts with a late Wednesday 2-hour presentation on what you need to know about bankruptcy law by Alan Gassman, and wraps up late Friday, followed by the Fighting Irish of Notre Dame vs. NC State on Saturday the 28th.

Alan thanks bankruptcy lawyers Al Gomez and Michael Markham of the Johnson Pope Law Firm for helping to critique and stand upon the outline for this presentation.  Stay tuned for the below webinars and please sign up.

The DoubleTree hotel adjoins the convention center, and the Thursday evening cocktail reception that is held there should not be missed. We’ll buy drinks after the Wednesday presentation for anyone who mentions the Thursday Report at the DoubleTree bar.



If the Banks Start to Fail Again-Will Your Clients’ Accounts & CDs Be Safe? (Part 1 of 2)

by Ken Crotty, Alan Gassman & Chris Denicolo

with Review by Taylor Binder & Joseph DiNuzzo

The Thursday Report asked FDIC Insurance Specialists Tayler Binder and Joseph A. DiNuzzo to review our 2008 article of the title below.

Taylor and Joseph work for Promontory Interfinancial Network, LLC , which provides CDARS and ICS services to thousands of banks and other financial institutions as the leader in the FDIC Insured Deposit Allocation Services area.

Many clients and advisors are not aware that banks who belong to the CDARS program (CDARS stands for Certificate of Deposit Account Registry Service) can open accounts well above $250,000 that will be FDIC insured through the cooperative arrangement between hundreds of banks that can participate pro-rata to enable such coverage.

Please enjoy this updated explanation of planning issues and alternatives for clients who want to be assured that their bank accounts qualify for FDIC coverage.


Opportunity and Complexity Presented by

Federal Deposit Insurance Corporation Regulations

2017 Edition


By Kenneth J. Crotty, Esquire; Alan S. Gassman, Esquire; and Christopher J. Denicolo, Esquire, Gassman, Crotty & Denicolo, P.A.; Taylor Binder and Joseph A. DiNuzzo, Esquire,  of Promontory Interfinancial Network, LLC



This article seeks to provide planners with information about the Federal Deposit Insurance Corporation (“FDIC”) coverage limits that apply separately for individuals, revocable trusts, irrevocable trusts, and business and investment entities.  FDIC coverage extends only to the insurance limit.   In July 2010 Congress permanently raised the maximum deposit insurance amount to $250,000 in the Dodd-Frank Wall Street Reform and Consumer Protection Act.

Planners should be aware that the various ownership categories operate in independent spheres.  For example, one individual may have $250,000 coverage on a personal account, $250,000 of coverage on a joint account with another owner, up to $250,000 of additional coverage for each beneficiary (such as a spouse, child or friend) named in a revocable trust account, $250,000 under a family limited partnership or family LLC account, and $250,000 under an IRA. Therefore, one person with the above-mentioned accounts (including a revocable trust account naming three beneficiaries) could have $1,750,000 of coverage at one bank, and that would not include potential coverage for accounts held in connection with one or more business entities and irrevocable trusts!  Based on these various categories, individuals may find that they qualify for insurance coverage far exceeding $250,000, even though all of the accounts are on deposit at a single institution.

Types of Accounts

Individual Accounts

The FDIC provides coverage up to $250,000 for accounts owned and titled in the name of a single individual, including any sole proprietorship accounts owned by that individual.  The $250,000 insurance coverage limitation applies cumulatively to all of these accounts at one bank.  Individual accounts at the same bank include savings, CDs, NOW, checking, and money market deposit accounts.

Joint Accounts

In addition to coverage for individual accounts, the FDIC provides coverage of up to $250,000 worth of an individual’s ownership interest in joint accounts, if the following three conditions are met:

  1. All of the co-owners of the account are people;
  2. All of the co-owners have an equal right to withdraw funds from the account; and
  3. All the co-owners have signed the deposit account signature card (unless the account is a CD or has been established by a third party acting as an agent, nominee, guardian, custodian, executor, or conservator).

For example, if a Husband and Wife have a joint account with a balance of $500,000 and have no other joint accounts at the same bank, the Husband and Wife each would be deemed to own $250,000 in joint accounts.  As such, the entire amount would be protected by the FDIC.  But, if the account has a balance of $600,000, $100,000 would be uninsured because the coverage limitation for joint accounts is limited to $250,000 per joint owner, per FDIC-insured bank.

For purposes of determining FDIC insurance protection, joint accounts which name beneficiaries and accounts held in connection with a trust settled by two grantors are not treated as joint accounts.  Instead, these accounts are classified as either revocable or irrevocable trust accounts.  The rules pertaining to those accounts are explained below.  However, funds held as community property are treated as any other joint account in that the total account is insured up to $500,000, with each spouse afforded $250,000 of coverage.

Revocable Trust Accounts

The FDIC classifies revocable trust accounts into two categories, formal and informal trust accounts.  Informal revocable trust accounts include Payable on Death (”POD”) accounts, Totten Trust accounts, and In Trust For (“ITF”) accounts.  Formal revocable trust accounts are trust accounts created for estate-planning purposes, (i.e., living or family trusts).

Informal Revocable Trust Accounts

Generally, the FDIC insures revocable trust accounts up to $250,000 per beneficiary named in one or more accounts owned by the same account owner.  For example, if a depositor opens an account naming his or her spouse, sister, and friend as beneficiaries, the account would be insured under the revocable trust account category for up to $750,000.  This assumes the owner has no other accounts at the same bank naming the same beneficiaries.  For these purposes, the FDIC defines “beneficiary” to include all natural persons, as well as charitable and nonprofit entities recognized as such under the Internal Revenue Code.

In order for an informal revocable trust account to be eligible for per-beneficiary coverage:

  1. The account title must include a commonly accepted trust designation term — for example, POD, ITF, ATF (As Trustee For); and
  2. The bank records must have identified the individual beneficiaries who would take ownership upon the death of the owner(s).

Formal Revocable Trust Accounts

The FDIC requirements for per-beneficiary coverage for accounts held in connection with formal revocable trusts are, for the most part, the same as the rules for informal trust accounts.  Thus, an account held in connection with a living trust would be insured up to $250,000 per beneficiary named in the trust.  As to formal revocable trusts, however, the FDIC does not require that the names of the beneficiaries be provided in the bank’s records.  The FDIC would obtain that information from the trustee if the bank should fail.

Notably, the FDIC imposes special rules when a formal trust names more than five beneficiaries.  If the trust account has a balance of more than $1.25 million and the trust names more than five beneficiaries, maximum coverage is the greater of $1.25 million or the aggregate of all beneficiaries proportional interests, limited to $250,000 per beneficiary.  For example, if a revocable trust has eight beneficiaries, each with a proportionate interest equal to $200,000, then the amount of coverage is $1.6 million.  Conversely, if the same trust has seven beneficiaries, six of which each have a proportionate interest equal to $100,000 and one of which has a proportionate interest equal to $650,000, then the amount of coverage is equal to $1.25 million under the rule stated above.

The FDIC regulations do not address an uncertainty that exists in the context of revocable trusts which split into a credit shelter trust and a marital deduction trust upon the death of the grantor.  This issue is discussed below under the “Additional Complexities” section.

Irrevocable Trust Accounts

Basically, an irrevocable trust account qualifies for up to $250,000 in coverage for the combined interests of contingent beneficiaries.  Plus, additional coverage up to $250,000 per beneficiary may apply based upon the actuarial value of trust benefits for each individual beneficiary — provided that the beneficiary’s interest is not contingent or subject to the possibility that the trustee may divert assets away from that beneficiary.  Specifically, if the trustee has the power to invade principal for the benefit of other beneficiaries, then a beneficiary’s interest is deemed to be contingent for purposes of FDIC insurance coverage.

For example, assume that Husband creates an irrevocable trust with $500,000 worth of assets that are held for the lifetime benefit of Wife.  On Wife’s death, the trust assets will split equally among the four children of Husband and Wife.  Further assume that the trustee has the authority to invade the principal of the trust for Wife’s benefit, and that the value of Wife’s interest in the trust as calculated pursuant to the life expectancy tables in the Internal Revenue Code is equal to $30,000.  Wife’s $30,000 interest in the trust will be insured.  The remainder interest of each of the children will not qualify for insurance coverage because the trustee has the authority to invade the principal for the benefit of Wife.  The irrevocable trust as an entity will qualify for $250,000 worth of insurance coverage.  Therefore, the total amount of assets held under the irrevocable trust that qualify for insurance coverage under the new law is $280,000.  ($30,000 (Wife’s interest) + $250,000 (irrevocable trust) = $280,000 (total coverage)).

Situations where more than one irrevocable trust is created by the same grantor for one beneficiary may present problems in determining how coverage is divided amongst the multiple accounts.  Further, the presence of powers of appointment may cause difficulty in calculating coverage of an account held by an irrevocable trust.  These issues are discussed below in the “Additional Complexities” section.

Because of the complexities involved in determining coverage for accounts held in connection with irrevocable trusts, FDIC staff typically suggests that trustees of such accounts assume that the accounts are insured to a limit of $250,000.

Retirement Accounts

Retirement accounts are deposit accounts owned by one person and titled in the name of that person’s retirement plan.  FDIC insurance only extends to the following types of retirement accounts: IRAs (including Roth IRAs, traditional IRAs, Simplified Employee Pension (SEP) IRAs, and Savings Incentive Match Plans for Employees (SIMPLE) IRAs); Section 457 Deferred Compensation Plan Accounts (regardless of whether self-directed or not); Self-Directed Defined Contribution Plan Accounts (including 401(k) and SIMPLE 401(k) plans); and Self-Directed Keogh Plan (or H.R. 10 plan) Accounts.  FDIC coverage extends to all retirement accounts owned by the same individual at the same banking institution.  The insurance coverage is a combined $250,000 for all of the above-listed accounts at a single institution.

Planners should note that naming beneficiaries on a retirement account does not increase coverage.  However, if an individual owns his or her own IRA, as well as an inherited IRA, each IRA is separately insured.  Additionally, retirement accounts are separately insured from any other deposits that may exist at the same institution.  IRA investments, such as mutual funds, stocks, bonds, and annuities, are not covered by FDIC insurance, regardless of whether they are purchased from a FDIC institution.


Richard Connolly’s World

Insurance advisor Richard Connolly of Ward & Connolly in Columbus, Ohio often shares pertinent articles found in well-known publications such as The Wall Street Journal, Barron’s, and The New York Times. Each issue, we feature some of Richard’s recommendations with links to the articles.

This week, the article of interest is Tax Court Nixes Roth IRA Tax Shelter by Ashlea Ebeling.  This article was featured on August 10, 2017 in Forbes

Richard’s description is as follows:


How much can you stuff into your Roth IRA before the Internal Revenue Service comes calling? In a recent case in U.S. Tax Court, Jan Jansson, a southern California business owner, made initial $2,000 deposits into Roth IRAs for himself, his wife and his two adult sons.

Then, over a six-year period, via a conduit limited liability company, Block Developers, another $800,000 poured into the Janssons’ Individual Retirement Accounts. During the 2006 tax year alone Block Developers distributed $65,000 in patent royalties to each Jansson Roth IRA—that year the contribution limit was just $4,000.

The Court found that Block Developers was “just a conduit to shunt money to the Janssons’ Roth IRAs and not engaged in any real business activity.” Therefore, the transfer to the Roth IRAs were excess contributions that triggered excise tax and penalties.

To View the Full Article Click Here




Gun law expert Sean Healy has been kind enough to update an extensive article on what lawyers and other advisors need to know about guns, ammunition, and wills and trusts.  This goes well beyond our book on Gun Trusts that can be purchased on Amazon by


For a free copy of this 52 page outline, please email, and we will shoot it right out to you.

Special thanks for Sean Healy for giving us co-author credit on this fantastic rewrite.

We will ride shotgun on any of his articles in the future.


Thoughtful Corner


By Alan Gassman


Peter Drucker is by far the most respected and visionary business thinker and professor who ever lived.

His fifteen (15) books on business management written from 1939 through 2002 are still the solid bedrock of business knowledge and methodology with respect to marketing, management, and enhancing the experience and performance of professionals.

An excellent and powerful short read is the article entitled “Managing Oneself”, which was published in the Harvard Business Review in 1999.

There are two key themes in the article, and an exciting synergism between them.

Theme Number 1:

We all learn differently, and should adapt our interactions to our best methods of learning.

The article points out that Dwight Eisenhower was an amazing visual learner, and was renown during WW II for giving amazing press conferences because he knew what the questions would be, and had read briefings on the answers before each conference began.

Later, as U.S. President, he was not able to be prepared for hundreds questions and answers, and rambled on very ineffectively as a result thereof.

Most modern presidents who are visual in nature, have compensated for this by having extensive briefing materials in anticipation of questions.

Those who learn best by reading might consider ordering transcripts of talks, or even having a secretary type out what has been said during meetings and otherwise, when it is important to make sure that all of the information is digested.

Many professionals who are visual will type what is being said verbatim during phone conferences, and even during meetings, in order to best digest and stay “mindful.” Copious note taking is a great way to assure that your mind and memory are working in tandem with whatever is being said. Drucker points out that a great many people learn best by writing, as opposed to by reading or listening. Writing a short article about a topic that you are studying can be extremely helpful.

Give thought to which learning mode works best for each important person in your life.

Your spouse or significant other.

Your important team members.

Your important clients.

Your important referral sources.

What can you do to make your communications with them more effective and efficient?

What can you ask them to do to make your learning and information accumulation the best that it can be?

Theme Number 2:

Organizational leaders spend entirely too much time and energy solving problems, and not nearly enough on pursuing opportunities.

Drucker asserts that great leaders are only capable of pursuing two important projects at a time, and might most appropriately delegate problem-solving to others that is not directly related to the two best opportunities that presently exist.

Do you have a number one and number two opportunity in mind for yourself and your organization?  Are you pursuing these enthusiastically, and without delay, so that you can get to the third and fourth opportunity upon subsequent completion thereof?

Alternatively, are you working simultaneously on all four opportunities, causing number one and number two to not be finished or fine-tuned as they should be?

Can you appoint someone else in your organization to take care of problems that rob you of time and energy to pursue opportunities?

How can you apply the above learning system knowledge to best pursue your best opportunities?

If you are not sure off hand what the primary opportunities are, you might first consider thinking through which area of your business or professional situation is holding back the others, or might advance the others:

  1. Clientele and volume thereof.
  2. Team and infrastructure needed to handle volume.
  3. Personal involvement ratios and organizational dependence upon any one or more individuals.
  4. Speeding up any one or more processes.

The opportunity to remove what is bogging your organization down the most, and to accelerate what can help the most can be key to a balanced approach to personal and organizational improvement.

Stay tuned for our review of a second Peter Drucker article entitled “What Makes an Effective Executive”, which was published in the Harvard Business Review in 2004.

These articles were published together in a small book entitled Managing Oneself: The Key to Success, which has a yellow cover and can be found in most large bookstores.


Humor! (Or lack thereof!)