Asset Protection Iron Triangle by Charles Lamm

Asset protection is not just for the wealthy any longer. When a middle class home can easily run a half million dollars in Florida or another state, and over a million in California or other state, anyone can become a target of lawsuits, divorce courts, and the IRS.  You have to dig a well before you are thirsty, or in this case, build a legal fortress before invading barbarians reach your gate.

Your tools to protect your assets are:

  • “no asset” C corporation
  • Limited liability company (LLC)
  • Beneficiary controlled trust

C Corporation

  • A “no asset” C corporation will be the management company for your LLC. The two work together to protect your property from those who would take it from you.
  • You are employed by the C Corp, not the LLC. You can also be the sole shareholder and hold all of the officer positions. Your corporation owns nothing but a checkbook.

Your corporation can pay for:

  • medical insurance for the officers
  • life insurance ($50 thousand limit)
  • retirement plan

As an officer, you can be reimbursed for out-of-pocket medical expenses through a medical expense reinbursement plan (MERP).

Entertainment expenses directly related to the business can include:

  • training expenses
  • travel
  • meals
  • computer expenses
  • phone expenses
  • business gifts up to $25 per recipient
  • Never let your corporation pay for personal items. Commingling of funds could pierce the corporate veil and make you personally liable for corporate debts in the event of a judgment against the corporation.
  • Consult your CPA or tax advisor for the latest changes in allowable deductions.

LLC

  • Your limited liability company is where you earn your income. Your LLC should also own any vehicles, equipment, computers, copiers, printers, and real property.
  • You want your Operating Agreement to make your corporation the Manager of your LLC.
  • Your LLC should also pay the bulk of your operating expenses for your office, supplies, travel, fuel, utilities, phone, computers, and more.
  • Your interest in the LLC will be as a 99% member will be owned by the trust.

Beneficiary Controlled Trust

  • A beneficiary controlled trust is the crown jewel of asset protection.
  • While I will not go into detail here, a BCT works like this:
  • Someone other than yourself establishes an irrevocable trust with you as the beneficiary and as the Investment Trustee. A second entity or person is required as the Distribution Trustee.

Seek Advise

Charles Lamm’s company, _________Services, Inc., can act as your Distribution Trustee if you want to keep your affairs private from your friends and relatives.  __________ to take advantage of Florida’s excellent trust laws, as well as no state income tax.

  • The Grantor can put up to $12,000 per year into the trust without gift tax considerations, and you have an immediate right to withdraw the money as it is a Crummey defective grantor trust.
  • It’s complicated, but the idea is to leave the assets in the trust and use the trust to own the LLC and to take care of your needs.
  • The trust can purchase property, pay for your education and medical expenses, and take care of your physical well-being. You have full control over the trust assets without actually owning anything.
  • As the Investment Trustee, you control how the assets are used, and you can replace the Distribution Trustee at any time.

Summary:

  •  You are now isolated from lawsuits, creditors, judgments, ex-spouses, and the IRS.
  • Location within Broward and the state of Florida
  • Location within Broward and the state of Florida (Photo credit: Wikipedia)
  • Charles Lamm is a retired attorney who owns Trustee and RA Services, Inc., in Coral Springs, Florida. His asset protection blog can be found at http://trusteeandraservices.ml

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