What Your CPA & Attorney Don’t Know Can Leave You Hanging! Speaker: Sponsored by: Dan McNeff
United States: Lawsuits 5% World Population 94% of all Lawsuits Worldwide
A Lawsuit is Born Cause Motivation You You Can Cannot and Control Must Control
Asset Definitions High Risk Asset: Can Create a Lawsuit Safe Asset: Cannot Create a Lawsuit Inside Asset: Everything owned in One Entity Outside Asset: Owned by Individual or by Separate Entities
What About an L.L.C. C-CORP SUB – S L.L.C L.L.C. SOLE PROP PARTNERSHIP Will Protect Assets Inside of The Entity From an Outside Lawsuit
The Beginning of Lawsuit Protection *** Properly Drafted *** F amily L imited P artnership
Liability ? 1% GP: Total General Partner Limited Partners LP: None 99%
Family Types of Assets Limited Partnership Business Purpose? General Partner(s) 1) “Any Legal Purpose” “Any Legal Asset” Home C ONTROL s -Corp - Real Estate 1% $ $ Limited Partners 2) O wn / Not Control Personal Property H - 49 1/2% W - 49 1/2% Income 100% children, grandchildren, $100,000 elderly parents
Trial Attorney’s Answer:
Passed in each individual state Would not allow ownership transfer The Charging Order from defendant to plaintiff Gave a judge the right to force a distribution and order the defendants share of the income to the plaintiff
The Charging Order Asset protection attorneys changed the wording so that only the general partner could order a distribution Also gave the general partner the option to take income for management or to loan money from the FLP
The Charging Order IRS Ruling 77-137 States: A plaintiff using the charging order will have to pay income taxes on any monetary judgment even if there is no distribution from the defendant.
The Charging Order WARNING WARNING!!! !!! Nearly all limited liability companies created in America today use the wording that allows a judge to order a distribution
The Limited Liability Company or LLC Modeled after the Family Limited Partnership but is less complicated and intended for business purposes.
The Remedy for Getting ASSETS Out of an L.L.C. is: The Charging Order
The Charging Order WARNING WARNING!!! !!! Nearly all limited liability companies created in America today use the wording that allows a judge to order a distribution
Typical Structures S, C (or P) Joint / Individual Corporation / LLC Ownership / Sole Proprietor: Owns: Home $$$ Building Equipment Personal Rental Vacation Property Property Home Practice/Business (goodwill) Closely Held Corporation Officer of the Corporation What does this structure protect?
Asset Protection Structure Living Trust FLP LLC LLC LLC LLC LLC Business Holds all Owns: Owns: Owns: Owns: Owns: “safe” Practice/ Business Rental Vacation Home Building Equipment assets Home Property $$$ Owns: Goodwill Rock Solid Asset Protection
1. Place all assets of significant value in asset protection entities and all high risk assets in separate entities. 2. Make sure that all entities are written on a Non Pro-Rata basis and that they give the sole distribution authority to the general or managing partner.
Prior to 1960 Highest Individual Tax Rate was 90% From 1960 to 1982 Highest Tax Rate was 70% Since 1982 Highest Tax Rates dropped to 40% or less Why did revenue increase after 1982? Tax Shelters and Credits were almost all eliminated with some exceptions such as home loan interest deductions.
Administrative Entities 1. C/P – Corporation – Tax Advantage with Corporate Resolution 2. S – Corporation – Helps Reduce FICA 3. Sole Proprietor – Easiest to use 4. Partnership
IRS Section 280a Rent Home To Business The IRS allows you to charge rent that is equal to a Hotel in your area decorated similarly to your home, times the square footage of your home. 280a provides for rental of $1,500 per day x 14 days per year = $21,000 200,000 - $21,000 = $179,000 Where did the $21,000 go? You personally 280a says it is not taxable income
$200,000 $179,000 X 35% X 35% $70,000 $62,650 $7,350 Actual Cash Saved
Family Types of Assets Limited Partnership Business Purpose? General Partner(s) 1) “Any Legal Purpose” “Any Legal Asset” Home C ONTROL s -Corp - Real Estate 1% $ $ Limited Partners 2) O wn / Not Control Personal Property H - 49 1/2% W - 49 1/2% Income 100% children, grandchildren, $100,000 elderly parents
Does NOT Protect Your Assets Living Trust Does Protect Against Probate
Probate Problems Time Consuming Expensive No Privacy
Two Ways to Avoid Probate 1. Don’t Die 2. Living Trust
How to implement these Tools and Strategies?
Concerns for Consideration 1. Most Attorneys know very little about lawsuit prevention.
The BIG Problem #1 There are very few Asset Protection Attorneys The American Bar Association reports that LESS than .05% of Attorneys in the U.S. specialize in Asset Protection.
Concerns for Consideration 1. Most Attorneys know very little about lawsuit prevention. 2. The entities they use are not designed for asset protection
Concerns for Consideration 1. Most Attorneys know very little about lawsuit prevention. 2. The entities they use are not designed for asset protection 3. The Cost of entity structuring can be outrageous.
The Solution
Legally Mine has been around for over 40 years, and educated hundreds of thousands of professionals Legally Mine is affiliated with: Bank of America Harding Financial Services ABA Accounting Legally Mine has over 20,000 happy clients Legally Mine has an “A” rating from the BBB
PREMIUM+ Program Cost of $100/mo. (12 months) DOCUMENT REVIEW & ASSESMENT Most existing documents are NOT asset protective. We can/will amend these CREATING BLUEPRINT documents & file the amendment(s) with your state. Our team of paralegals will set appointments to get you started. After a DEVELOP A TAX-REDUCTION PLAN STEP ONE: questionnaire, your Blueprint will be created by one of our Asset Protection Most accountants do tax returns NOT Tax Reduction Plans. We make sure that Attorneys the entities you use have a tax reduction purpose. PREMIUM+ Within 10 days you will have a Blueprint Review with an attorney or senior We Will Develop a Tax Reduction Plan for you EACH YEAR . We make sure legal advisor. This plan will address Asset Protection, Tax Reduction and not to use questionable deductions. Estate Planning
Sample Blueprint Living Trust Holding “S” FLP Company Corp (LLC Taxed as FLP Holds a “ Practice/ “High “S” Corp. Business Risk” asset Holds all Owns: “safe” Goodwill assets $$$ LLC LLC LLC LLC LLC Owns: Owns: Owns: Owns: Owns: Vacation Equipment Building Rental Home Home Property
Lawsuit Prevention ASSET PROTECTION BLUEPRINT Estate Protection Tax Management Family Living Trust 2/11/2013 Spouse 1 Joint Spouse 2 Bank Accounts, LLC/FLP Interests, LLC/FLP Interests, Corp Stock, IRA, Vehicles Corp Stock, IRA, Life Insurance Life Insurance Trust Package Includes: Last Will & Testament Living Will Durable Powers of Attorney Possible Equipment, FLP (MA) (Holds and leases equipment) ABC, LLC (MA) Asset Management, Ownership: 100% owned by Family LLC DEF, PC GP: Mgmt LLC 1% Living Trust (AK & MA) (MA) LP: Spouse 48.5% (Owns SMLLC (S-corp) LP: Spouse 48.5% interests and 1% GP LP: Kids 2% in FLPs) Ownership: (Tax as Partnership) Spouse 1 - 100% Ownership: Spouse 1 - 50% Safe Asset, FLP Spouse 2 - 50% (UT) (Holds Bank Accounts, investment accounts, and other Existing Future “safe” assets) Entity Entity Ownership: GP: Mgmt LLC 1% LP: Spouse 48.5% LP: Spouse 48.5% Homestead Act: Massachusetts LP: Kids 2% TUV, LLC WXY, LLC $500,000 and $500,000 for each age (NV) (NH) 62+ or disabled person. -- Mass. Gen. L. QRS HIJ KLM NOP (amend owner (amend owner Ch. 188 §§ 1, 1A Land Trust and dist. Auth.) and dist. Auth.) Land Trust Land Trust Land Trust 100% owned 100% owned by Asset Mgmt, by Asset Mgmt, Amend to make Note : Private retirement plans are Mgmt LLC as Mgmt LLC as Mgmt LLC as LLC LLC Mgmt LLC the exempt except under special sole beneficiary sole beneficiary sole beneficiary Single Member Single Member sole beneficiary garnishment rules regarding child and Disregarded Disregarded spousal support. LLC LLC
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