How to Protect Your Assets?

[KFC911]

Totally out of my area of expertise, but another quick search turn up this quote from Wiki:

"Most U.S. States now recognize the validity of Totten trusts. The Restatement 3d of Trusts Section 26 and the Restatement 3d of Property (Section 7.1 comment i) also recognize its validity. Such a device can be revoked at any time by the settlor, either by closing the account or by executing a will which disposes of the property in the account. The funds in the account can be reached by the creditors of the settlor during the settlor's life"

"IF" this quote is indeed accurate, it would seem "to me" that the assets would not be protected.

[the]

Totten trusts definitely do not protect against creditors.

I'm not sure an LLC does, either, but not sure. If, for example, an LLC owns a $1 million building, outright, and you are the only member of the LLC, I think that a creditor is going to find a way to get to that building. You, the individual, "own" or have the equity interest in the LLC. It's that equity interest in the LLC that the creditor would go after (again, I'm not sure exactly with an LLC, but if it were that easy to shield your personal assets, then everyone would be holding all of their assets in an LLC).

Very generally, if you still direct what can be done with the asset, then you own it as far as creditors are concerned.

[KFC911]

Interesting perspective the... I truly don't know for sure either.

[ChrisBennet]

If you are trying to protect yourself from what I imagine is the most common way of losing your assets - get a prenup.
-Chris

[RoninLB]

Forbes mag occasionally hits these subjects in an relevant article.

try search
http://www.forbes.com/

[KFC911]

Originally Posted by ChrisBennet

If you are trying to protect yourself from what I imagine is the most common way of losing your assets - get a prenup.
-Chris

Good one

[cab83_750]

Originally Posted by ChrisBennet

If you are trying to protect yourself from what I imagine is the most common way of losing your assets - get a prenup.
-Chris

Some may find it funny, but I do have one.


p.s.,

Even though the prenupt was discussed prior to my proposal, it still hurt her (I think) when I had her sign it.

[Moneyguy1]

If there is a second marriage involved, a prenup is an absolute necessity, particularly if there are kids from the first marriage. By giving the new bride a "Life Estate" in the home and the children as "Remaindermen", the children's interests are protected. With cash types of assets, they can be put into a form where the surviving spouse gets an annual/monthly payout and the trust reverts to the children or anyone else you may wish to leave it to.

[cab83_750]

Bob,

Assuming 1) you are currently married, 2) it is your 1st one, 3) you have been married for some years, don't you want to also recommend that even in the first marriage, a prenup is a 'must'?

Hopefully, my question will not turn the original intent of my post to a "prenup" arguement(s).

[Joeaksa]

Originally Posted by widgeon13

Given my present age and my wife's, we will be setting up trusts to protect for future generation and avoid some nasty tax issues.

You are not alone. Know many people in this position and very well may join them someday.

[Joeaksa]

Originally Posted by cab83_750

Bob,

Assuming 1) you are currently married, 2) it is your 1st one, 3) you have been married for some years, don't you want to also recommend that even in the first marriage, a prenup is a 'must'?

Hopefully, my question will not turn the original intent of my post to a "prenup" arguement(s).

Cab,

Bob lost his wife of many years recently. He is a financial adviser and from what we hear is very good at it.

Joe

[Porsche-O-Phile]

Without belaboring this more (I'd also like the thread to return to good tax/probate shelter advice), I would point out that fully 100% of failed marriages happened between people who thought "it would never happen to them".

I'd absolutely positively recommend a prenup to anyone (especially men) that care about protecting the fruits of their labor and effort.

Back on topic - the specific differences between LLCs and corporations are still a bit unclear to me - can someone elaborate on this?

[RoninLB]

generally, LLCs is used with professional partnerships.

[KFC911]

Originally Posted by Porsche-O-Phile

I'd absolutely positively recommend a prenup to anyone (especially men) that care about protecting the fruits of their labor and effort.

Back on topic - the specific differences between LLCs and corporations are still a bit unclear to me - can someone elaborate on this?

I'm single, and don't intend to change that, but if I were to decide to get married, at my age (47) you can bet a prenup would be "a given". Just the way it's got to be these days imo.

Now take all this with a big 'ole grain of salt, but in a nutshell, here's my layman's understanding of the second part. A corporation is a "legal entity" that is taxed as a corp. and is more complicated to setup and maintain. Income, etc. would be passed to the individual as salary, dividends (as you own stock in the corp.), etc. which would again be taxed as individual "personal income". An LLC is a more simple structure to setup and maintain, and although it's also a "legal entity", is NOT taxed as such. Income is passed through to it's member(s) where personal income tax takes effect. In my case, the primary reason for the LLC was to "own" my rental properties so if a liability etc. occured with one of my properties, the exposure would be limited to the LLC's assets (and you "can" minimize those if you get creative), but most importantly, MY personal assets would be untouchable. That part I am 100% sure of. The inverse of that (as "the" refers to above) is not crystal clear to me. (i.e. If I am personally sued for example, could someone "go after" my holdings in the LLC). As I posted to "the", I'm really not sure. That's the "high level" view, and maybe someone else will explain it better and there's plenty of info online if you search around. As usual, don't take my word for it, consult a professional as "you get what you pay for" .

[Moneyguy1]

In a first marriage, a pre nup may make the party with the most to lose feel a bit safer, but in a way, it seems to me that it is to some extent setting the union up for failure, giving a "way out".

I dunno...it's just the romantic in me to think that a marriage shoud be a "forever" thing and if there are doubts, then it probably shouldn't be........

Joe...thanx for the kind words.

[RWebb]

Originally Posted by Porsche-O-Phile

What about simply incorporating and transferring all your assets to the corporation? Effectively you (as an individual) own nothing and the corporation owns everything.

Ask you atty about "piercing the corporate veil..."

[greglepore]

In most places, the best way to protect your assets from outside creditors is to be married, and never enter into joint ventures or liability producing behavior with your spouse.

Of course, being married unsucessfully is another story...

I think most laymen waste way too much time worrying about "asset protection". Most significant creditors require personal guarantees of entity loans etc, unless the entitities have significant assets of their own, and liability for tort etc is best dealt with by having large insurance.

[KFC911]

Originally Posted by greglepore

...I think most laymen waste way too much time worrying about "asset protection". Most significant creditors require personal guarantees of entity loans etc, unless the entitities have significant assets of their own, and liability for tort etc is best dealt with by having large insurance.

I agree 100% that a large insurance policy is effective and probably the best option for most. I won't go into details, but I needed to protect our family holdings from a local attorney who imo would not stop at the "low hanging fruit" of an insurance policy if he could somehow acquire the land that's adjacent to his mini-Ponderosa. He's been salivating over it for thirty-some years, I needed "bulletproof protection", and an LLC provides that. Is it overkill? Possibly, but I don't take chances when my parents are in the equation and he has proven himself to be extremely devious in related matters with other adjacent property owners...after all, he is an attorney .

[lendaddy]

I've found that not having any assets is a pretty good game plan. Yep, that the ticket it's all by design.