BUSINESS SUCCESSION and ASSET PROTECTION / PRESERVATION STRATEGIES 7
by
(LLC) to own
and manage such properties (as well as for any future acquired land).
The LLC has the
advantage of limited liability, as does the ownership of stock in a
corporation. But an LLC also provides
certain income tax advantages otherwise obtainable only through the use of a
general partnership. However, a general
partnership is still subject to the claims of each individual partner's
creditors, while the LLC provides insulation from your individual creditors
and those of your co-owners.
It may not be
absolutely necessary, based on your current asset values, that you proceed at
this time with the establishment of a LLC, since you may be able to adequately
protect your family from estate taxes, under current law, with the Wills and
Insurance Trusts mentioned above.
However, the IRS literally hates the estate tax savings currently
available through use of LLCs. Because
we certainly anticipate the Good Lord continuing to bless you and your family
materially, your need for an LLC is not going away. The availability to use a LLC, on the other
hand, might soon vanish.
This type of an
arrangement provides maximum creditor protection without giving up control
of your property (as contrasted with the use of an irrevocable trust) and
also makes significant income tax advantages possible. The costs associated with implementing this
phase of your overall Asset Protection Plan alone could be a relatively
significant sum. In many cases, there might also be a need for appraisals
should be performed on all properties being transferred into the LLC. However, in view of the substantial tax
savings currently available with the LLC, not to mention the critically
important opportunity to insulate property from potential lawsuits, this
strategy should be viewed as a real bargain.
Of course, from
an economic perspective, you should also weigh these minimum costs against the
anticipated amounts and risk of claims associated with unfavorable
individual ownership of your property.
Bottom line, if there is a substantial risk that a claim against you
might exceed your liability coverage in an amount greater than $3,500 (perhaps
the amount of any deductible for which you would be responsible under your
current liability insurance policy), then an LLC should be well worth the
investment.
E. Periodic
Reassessment:
Looking toward
the future, you should periodically review your overall Asset Protection Plan
as you and your family continue to be blessed materially.
F. Closing Comments
Although the
legal fees associated with an updated estate/asset protection plan might sound
somewhat high at first glance, we trust you will take into account the
substantial federal estate tax (and potential future Alabama inheritance tax)
liability your family will otherwise be facing, which your Asset Protection
Plan is designed to substantially reduce or eliminate. And, please keep in mind, your comprehensive
Asset Protection Plan will provide significant creditor (lawsuit) protection,
as well as tax savings and financial security benefits for you and your
family for years to come. It is
difficult to put a price on the peace of mind with which you and your family
will be provided through the proper implementation of your comprehensive Asset
Protection Plan.
If you do not
have a current legal advisor or your attorney has indicated that he or she does
not handle tax matters, we would welcome the opportunity to meet with you and
your spouse to discuss the benefits to be derived from implementation of an
overall asset protection plan for you and your family. Of course, we will be more than happy to work
with your current, local attorney and financial advisor to discuss these benefits
as well. This outline should give you both an “advance look” at those issues
that should be addressed before that unfortunate legal “complication”
visits upon your doorstep. Your comments and any questions or requests for
further information are welcomed and you may contact us by phone at (205)-349-1910;
or please feel free to give us a call on our cell (205) 792-7304 which should
be a local call for you in the 205 area; or, if you prefer, our email address
is chip@cbrowderlaw.com
