When Going "Offshore" Should be Avoided
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One of the key concerns for most individuals is how to protect their
Personal
Property from creditors. Stocks, bonds, second houses, and other
investments
are all vulnerable to seizure.
This is why we developed the Personal Preservation Package®.
The
Personal Preservation Package® is made up of two entities:
the
Personal Preservation Trust® and the Personal Preservation
LLC®.
First, you establish a simple irrevocable trust, the Personal
Preservation
Trust®, which usually is structured naming your children as
beneficiaries.
You will be named as a member of the Trust Committee. The Trust
Committee's
only job is to fire and replace the Trustee should the Trustee do
anything
that the Trust Committee thinks is wrong. This provides you with
effective
control over the Trust.
Then you establish a special type of company called a Limited Liability
Company
or LLC. An LLC is an entity that combines the limited liability
advantages
of a corporation with the ease of management and the tax advantages of
a
partnership. This company, the Personal Preservation LLC®,
will
be established for the purpose of owning most of your personal and
business
property which you wish to protect. You will then give a 1%
interest
in the Personal Preservation LLC® to the Personal Preservation
Trust®.
Why are you doing this? The LLC has many special features similar
to
a partnership:
* A full LLC interest cannot be seized by creditors. The
creditor
can only receive an "assignment" of the interest. The creditor
can
take away your membership interest, but will not be able to vote.
* An LLC can require members to make additional contributions of
capital.
So if a creditor seizes your membership interest, the LLC may require
the
creditor to make additional contributions to the LLC. If the
creditor
refuses, he may lose his interest in the LLC.
* If the LLC shows a profit, it is not necessary for the profit
to
be distributed to the Members but can be retained by the LLC.
However,
the Members will be taxed on this profit even though they did not
receive
it. So if a creditor takes your membership interest, the LLC can
operate
at a profit, and may be able to force the creditor to pay taxes on
profits
which the creditor never received.
As you can see this would be a very unpleasant situation to be in if
you
were a creditor, but a very good situation to be in if you are trying
to
protect your assets. A creditor who attempts to take your shares
in
the Personal Preservation LLC® will only get an assignment of
non-voting
shares. The remaining shares will be held by the Personal
Preservation
Trust® which will be the only entity that will be able to vote on
who
becomes Manager of the LLC. The Trustee will most likely be
interested
in appointing you or another friendly person to be the Manager of the
LLC,
or face termination and replacement as Trustee. As Manager of the
LLC
you will be able to decide whether or not you and other employees get a
salary,
whether or not assets are sold, whether or not profits are distributed,
whether
or not there is a need for additional contributions from the Members,
etc.
Few creditors will want your membership interest in the LLC when they
realize
what a hornets nest they are getting themselves into.
There are additional strategies that can be used to further enhance the
asset
protection abilities of the Personal Preservation Package®.
* For married couples a "defective" post-nuptial agreement can
add
an extra level of protection by insuring that the liabilities of one
spouse
do not put at risk the assets held by the other spouse.
However,
the agreement is only effective against third parties, not against the
other
spouse (unless the couple specifically desires this).
* If you have a business, the business should not be operated by
the
Personal Preservation Package®, but should have a separate business
organization
that insures that any liabilities of the business operation are
separate
and apart from the Personal Preservation Package®.
* Depending on the homestead laws of your state, it may be
advantageous
to give a "future interest" in your real property to the Personal
Preservation
Trust® and put the remaining "life estate" into the Personal
Preservation
LLC®.
* Finally, the Personal Preservation Package® is not a
substitute
for a good will or living trust. You need a will or a living
trust,
a power of attorney, a power of attorney for health care, and a
directive
to physicians.
HOMESTEADS IN KANSAS, FLORIDA, IOWA, SOUTH
DAKOTA
AND TEXAS
Should you put your homestead into the Personal Preservation Package®? For most residents of the above states this would be a mistake. Homestead laws in these states give a very attractive unlimited homestead protection that is frankly superior to that provided by the Personal Preservation Package®. In Texas, for example, no one can take away your homestead or even put a lien on the homestead except for the first lien holder, home equity loans, and of course tax liens. Unless you foresee Federal Income Tax problems, the Personal Preservation Package® is not as effective for the homestead as just leaving it in your name (if you do foresee Federal Income Tax problems the situation changes; for more information contact us). That does not mean that the Personal Preservation Package® cannot protect all the rest of your assets; securities, non-homestead land, business ventures, etc. The power of the system relies on putting your assets into the LLC which is very unattractive to creditors, and insuring that even if someone takes your interest in the LLC they will not get control of the assets in the LLC.
PRICES
Personal Preservation Package®
$ 3000.00
Includes the Personal Preservation Trust®, the Personal
Preservation
LLC®, all necessary transfers, the First Year Annual Trustee fees
of
$500.00, and the First Year Annual Registered Agent and Office fees of
$150.00. *
* These are basic
fees and
do not include additional services that may be required. For
further information request the Fee Schedule. This will not include
cost of preparing tax returns for entities. Fees may change.
NOTE: This system may not immediately work if there are prior creditors
and liabilities. It would be best if the system was in place
before
such liabilities are incurred rather than after. Otherwise, there
may
be a time period before the transfers are safe from creditors,
depending
upon state laws and regulations. If you intend to sell certain
real
property, this system may be inappropriate. By transferring the
property
into an LLC, the property will be treated as an investment property,
thereby
losing certain federal tax benefits of a homestead upon sale. It
could
be awkward to sell the property with divided ownership. State
property
taxes may also favor homestead treatment.