The government has come up with a “permanent” estate tax solution. Does that mean you can get rid of your family limited partnerships and LLCs? What about your irrevocable trusts? There are a lot of good reasons for them!
Today we will hit on a few reasons why you should keep your family limited partnerships (or LLCs) you already have and consider adding them to your estate plan:
1) Asset protection: Entities like corporations, LLCs and limited partnerships add asset protection when proper business formalities are followed.
2) Management and control: A family entity can keep control of the family empire with mom and dad for as long as mom/dad want!
3) Income tax benefits: With the limited personal deductions available maybe you can receive income tax benefits from writing off expen
Our office did a lot of advanced estate planning late in the year. We helped clients give away tens of MILLIONS of dollars, without tax, through mediums such as family limited liability companies (FLPs), irrevocable trusts, and tenancy in common agreements. Most experts thought the January 1, 2013 date would come with a lower gift and estate tax exemption. Maybe not the $1mil as the law was written but maybe something like $3mil or $3.5mil. However, yesterday Congress came up with a new law leaving the exemption at $5.12m, leaving portability in place and continuing the recent years of indexing the exemption. This is all good news for high net worth people. If you didn’t take action to do your estate plan, and you are high net worth, then NOW IS THE TIME! Take action now! The law can
I was just reading about a new California case that cut into the asset protection world a little bit. It’s the case of Kilker v. Stillman, 2012 WL 5902348 (Cal.App. 4 Dist., Unpublished, Nov. 26, 2012).
Asset protection, in most cases, is simply estate or asset planning that happens to include some protection elements to it. For example, creating an irrevocable trust has some creditor protection elements to it but the purpose is NOT asset protection. Rather the purpose is tax planning generally.
If one sets up a trust for the purpose of avoiding creditors the Courts do not like that. In fact, it can be construed to be a fraudulent conveyance and the whole transaction undone.
The Kilker case involved a person that created a Nevada trust for asset protection and told everybo
I met with a client recently with family assets that would be perfect for a family LLC or FLP. The client owned three properties with their siblings. There was a valuable home and two commercial properties. Currently each sibling owned 1/3 and thus they are a de facto “general partnership.” This is probably not the ideal set up for many reasons but mainly liability protection and control issues if one should die or become incapacitated.
General partners or revocable “family trusts” provide no liability or asset protection for the creators of the entity. Thus all the assets are subject to creditors claims and lawsuits!
With a family LLC the family retains control at the sibling level (not kids or spouses) and they have liability protection. These are the crucial benefits of