Avoiding Fraudulent Conveyance: Derivative Financial Instrument®

Avoiding Fraudulent Conveyance: Derivative Financial Instrument®

Asset Protection: Part 4 of 4, by Rocco Beatrice, Sr.

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Our Derivative Financial Instrument® is the most decisive critical part of your estate planning:

When timely and properly implemented, our Derivative Financial Instrument® will set the legal defense for potential civil conspiracy issues that may be advanced by the [P]ast; [P]resent; and [F]uture (not yet born) creditor.

In finance, a “derivative” is a contract that derives its value from the performance of an underlying entity. The underlying entity can be a class of assets, i.e. cash or near cash, a futures contract, an option, collateralized debt obligation, insurance contract, a credit default swap, a stock, a time deposit, a general debt obligation , bonds, mortgages, or any underlying asset used as “the medium of [E]xchange.”

Intermediation is the process of matching positives with negatives to develop a desired outcome in a new contractual obligation method of [E]xchange between third parties.

The underlying entity(ies) considered in our Derivative Financial Instrument®:

• Estate Planning
• Gift Taxes
• Intentionally Defective Grantor Trust (IDGT)
• Grantor Retained Annuity Trust (GRAT)
• Grantor Retained Unitrust (GRUT)
• Commercial Annuity
• Private Annuity
• Installment Sale
• Self Canceling Installment Note (SCIN)
• Treasury General Counsel’s Memorandum (GCM) 3953, May 7, 1986
• Estate of Moss v. Commissioner, T.C. 1239 (1980) acq. in result, 1981-2 C.B.1
• Estate of Costanza v. Commissioner, T.C. Memo 2001-128; reversed and remanded
• 6th Circuit, No. 01-2207, February 18, 2003
• Estate of Frane v. Commissioner, 998 F. 2nd ( 8th Circuit 1993)
• Lazarus v. Commissioner, 58 TC 854, August 17. 1972
• Estate of Musgrove, 33 Fed Cl. 657 (1995)
• Estate of Kite, T.C. Memo. 2013-43
• Estate of William M. Davidson, U.S. Tax Court Docket No. 013748-13
• United States v. Davis, 370 U.S. 65 (1962)
• International Freighting Corp. v. Commissioner, 135 F.2d310 (2nd Cir. 1943),
• United States v. General Shoe Corp., 282 F.2d 9 (6th Cir. 1960);
• Wood v. Commissioner, 39 T.C. 1 (1962)
• CCA 201330033; Treas. Reg. § 25.2512-8
• Revenue Ruling 80-80, 1980 1 C.B. 194
• Revenue Ruling 55-119, 1955 – 1 C. B. 352
• Revenue Ruling 86-72, 1 C.B. 253
• Revenue Ruling 68-392, 1968 -2 C. B. 284; and 69-74, 1969-1 C. B. 43
• Treasury Regulation 1.1275 4(c); (j); and § 25.7520-3
• Treasury Regulations § 1.72-6(e); and 1.1001-1(j), October 2006
• Life expectancy (determined under Reg. 1.72-9, Table V)
• Federal Medicaid Act 42 USC 1396 et. Seq.
• Internal Revenue Code (IRC) 72; and (IRC) 7520

Fair market value is defined as “the price at which the property would change hands (the [E]xchange) between a willing buyer and a willing seller, neither being under any compulsion to buy or sell and both having reasonable knowledge of relevant facts to the transaction.” The fair market value of our Derivative Financial Instrument® is generally determined under the annuity tables prescribed by the IRS. See 26 U.S.C. 7520(a); Treas. Reg. 20.7520-1. These tables provide a factor composed of an interest rate component and a mortality component that is used to determine the present value of an annuity. Treas. Reg. 20.7520-1.

A fraudulent conveyance, or fraudulent transfer, is an attempt to avoid debt by transferring money to another person or company. In civil litigation the creditor attempts to void the transfer and make the asset available to him in satisfaction of his claim.

A transfer will be fraudulent if made with actual intent to hinder, delay or defraud any creditor. Thus, if a transfer is made with the specific intent to avoid satisfying a specific liability, then actual intent is present. However, when a debtor prefers to pay one creditor instead of another that is not a fraudulent transfer.

Under the Uniform Fraudulent Transfer Act you would be committing a crime, see Section 19.40.041

…. (a) a transfer made or obligation incurred by a debtor is fraudulent as to a creditor whether the creditor’s claim arose before or after the transfer was made or the obligation was incurred, if the debtor made the transfer or incurred the obligation: (1) with actual intent to hinder, delay, or defraud any creditor of the debtor.”…

Fraudulent conveyance has to do with transferring assets at “less than the fair cash value” thereby defrauding a potential creditor or the “intentional divesting of assets” which would have been available for satisfaction of his creditor claim. This intentional disregard, can become a sticky-wicky, for a judge who does not like to be undermined in “his” court-room.

The “civil conspiracy theory” has been defined by the courts as: (1) an agreement (2) by two or more persons (3) to perform overt act(s) (4) in furtherance of the agreement or conspiracy (5) to accomplish an unlawful purpose /or/ a lawful purpose by unlawful means (6) causing injury to another.

To be convincing, the creditor must allege not only the conspirators committed the act but also the act was tortious in nature. The conspiracy alone is not enough to trigger a claim for civil conspiracy without the underlying tort.

Gifting, by definition, is a Fraudulent Conveyance or Fraudulent Transfer because there is NO Exchange at the fair market value. Our Derivative Financial Instrument® solves this problem because the [E]xchange is at the fair market value.

REMARKABLE: Our Derivative Financial Instrument® is contract for which, NOT EVEN BANKRUPTCY COURT CAN UNWIND because it’s at Fair Cash Value and not to the detriment of the Creditor. The Derivative Financial Instrument® protects the assets even after the owner loses a lawsuit. This is because the courts cannot set aside the purchase . . . it’s not voidable by a creditor as a fraudulent transfer, nor by a bankruptcy court as an “executory contract.”

The “Trigger” for Estate Taxes is the value of ALL assets owned by the individual at the DATE OF DEATH, “the Gross Estate.” Our Ultra Trust©</> eliminates the “Trigger” because on the date of death, ALL assets are owned by your Ultra Trust© with an independent Trustee, and Independent Trust Protector. You cannot file an estate tax return. You cannot Trigger the estate tax return, you own nothing on the date of your death. Your Gross Estate is below the taxable threshold.

We look forward to our visit with you and your professional representatives to assist you with the advancement of your estate planning.

The Ultra Trust® “Precise Wealth Repositioning System”