Quote:
|
Originally Posted by Vishnu
Lets suppose someone tries to pierce the FLP to gain assets or income, they will not be able to take any assets in any circumstance but if they find a stupid lawyer and a dumber Judge, then the Judge may actually give them a "Charging Order" thus forcing you to accept them as a Limited Partner.
|
No, a charging order doesn't make them a limited partner. It just entitles the creditor to any distribution the limited partner would otherwise receive.
Quote:
|
Now we get to the TRUST part. Both the FLP and the C-Corp are owned by the "Revokable Living Trust" and listed in the schedule-A.
|
And this is why this scheme doesn't work. Since the stock of the corporate general partner is owned by a revocable trust, it can be reached by the creditors of the settlor of the trust. Once the creditor has levied on the stock, he controls the general partner and all distributions from the partnership. A revocable trust provides no protection against creditors of the person creating the trust. In fact, in most states even an irrevocable trust won't provide creditor protection to the settlor, since most states prohibit the creation of self-settled spendthrift trusts.
Quote:
|
When you croak, the corp and FLP collapse and the funds and assets go directly into the Trust by-passing probate and inheritance taxation.
|
It may bypass probate, but since the trust was revocable, all of its assets are included in the grantor's estate for estate tax purposes. Using revocable trusts to save on estate and inheritance taxes never works.
Quote:
|
I am wondering one thing though. With this structure can the mortgage company take my home since it is owned by the FLP, in the event of an economic collapse? This issue wasn't even in my thoughts when I constructed this program.
|
If the mortgage was on the property when you transferred it to the FLP, you bet it can. Your transferring the property to the FLP has no effect on the mortgagee's lien or its right to foreclose if there's a default on the loan. In fact, if the transfer was made without the mortgagee's consent, you probably breached a provision in your mortgage and are already in default.