Asset Protection Strategy / C-Corp / FLP

[Vishnu]

Asset Protection Program

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I have read and learned from this discussion. I have a different take on protecting ones assets:

I set up a C-Corp and it is scantily funded (has few inexpensive asssets) I set this up in Nevada for the obvious reasons.

Then I set up a Family Limited Partnership which is much like a LLP but consists of Family Members thus foregoing many of the "official" functions of a LLC. Also, there aren't the funds dispersal issues in the context of "asset protection".

The General Partner is the only person of the FLP who bears liability and the Limited Partners hold interest in per centage and not shares, as in the C-Corp.

The "poor" corporation is the General Partner of the FLP so if the General Partner is the liable party, then there is nothing to get except a calculator and a couple of hundred bucks in a bank account. In other words, there is no good reason to sue or attack the Corporation/General Partner.

Everything I own is "In The FLP". I have titled everything that has a formal title to the FLP and eveything that one owns but has no formal title, such as coin collections, antiques, firearms etc...is listed in the schedule "A" of the FLP thus the FLP has "TAKEN" ownership. The list is extensive and complete so I technically own NOTHING.

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. The theory being that as a Limited Partner, they will eventually receive income to match the award from the courts. However, I have included language in the Partnership Agreement, that the General Partner can, at any time, for any reason, and for any lenght of time, withhold dispersal of income to the Limited Partners. This is done by sending a certified letter to the last known address of all the Limitd Partners. The very minute you are aware that someone is suing the FLP, you send the letter. Don't worry because the wheels of Just-Ice turn slowly and before you are required to answer the Complaint, the Limited Partners are mailed and reeceived.

The Plaintiff is now sitting happily by, thinking he/she is going to be paid. BUT NO!!! What they are going to get is a K-1 statement stating they have an interest in the FLP. Lets say they got a 1 million dollar Charging Order, then they will have a 1 million dollar K-1 statement.

Here is the kicker. The IRS Code 11-137 states that a charging order is the same thing as earned income and the TAX on that income is immediately due. They now owe the IRS as much as $300,000.00 and there is nothing they can do about it.

It never really gets this far because as soon as they send you the complaint to answer, you send the Attorney of Record a letter explaining exactly what you will do if they prevail in court and that you own nothing and the FLP will not be dispersing any income as long as the lawsuit is active. Since most of these cases are accepted on "Contingency" the attorney now knows he will not get paid and that he will likely be sued by his client for causing him such dramatic financial damage. The lawsuit will be pulled, the attorney will quit, and your problem is solved.

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. When you croak, the corp and FLP collapse and the funds and assets go directly into the Trust by-passing probate and inheritance taxation. Your family, as directed by the list of succession of Trustees, will get thier money and assets and no one can dispute your wishes, or sue, and per the language in your Trust, upon your death the "Revokable Living Trust" becomes "Irrevokable". Your babysitting instructions must be followed as YOU wanted. You dispersal of assets must be complete and clear so the family will not errupt into a huge fight. In my case, I have only one daughter and she is in line to become Trustee upon my death so I don't worry about all that extra paperwork and she becomes wealthy and I can rest in peace knowing the Black Robed Priests of the Admiralty Court and thier sucophantic Esquires can kiss my asstrisk!

One may even go farther with Charitable Remainder Trusts and Family Foundations to perpetuate the wealth for generations.

I did all the legal work myself too so if I can do it, you can too. My favorite attorney checked it out and stated that he has never seen such a tight set of docs and that the "special/extra" clauses allowing me absolute control were very well formed and the language would hold up in any court.

Thanks for your time to listen. I wish everyone the best in protecting your assets. Your thought are welcome.

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.

This method of asset protection was developed by Jay Mitton, known as the father of asset protection.

Vishnu

[macerico]

Originally Posted by Vishnu

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.

I can't comment on most of what you've described. For many, it sounds like real overkill. If you have nothing IN YOUR NAME, then someone trying to sue you won't get squat unless they can link the company as a party to the action they are suing you for.

Veil piercing normally will not happen just because a company is a sham used to shelter assets. Lots of wealthy people and corporations do that, and the courts have a vested interest in letting that status quo stand.

C-Corp = corporation with pretty much no assets worth mentioning.

FLP = Limited partnership with C-Corp as general partner and all others as LIMITED partners

Everything is either titled or listed on the Schedule A of the FLP.

You have the same problem as any corporation shelter arrangement. If YOU are the cause of someone's injury, they can seek YOUR assets. However, if that injury involves something that is property of the FLP, then its assets can become subject to the claim as well because the FLP can be brought in as a party.

So, you might want a house titled under a new corporation separate from the FLP/C-Corp but subject to control by those entities. This way, if someone got hurt on your property, they can come after you, the LLC/Corp that owns your home, but not the FLP/C-Corp. Have another LLC/Corp for each vehicle, etc.

Save the FLP asset pool for things that are highly unlikely to cause damage to anyone like liquid assets, investments, valuable collectibles, etc.

The trust is just a nice way to ensure there are no hang ups when you die for ALL of the sheltered assets going to where you want them to go.

For the interest of protecting both assets and privacy, you often need layer after layer of corporate identities to layer veils between a potential creditor and the assets to be protected.

Just my 2 cents....I'm educated, but no expert.

[farmer_giles_of_ham]

Mortgage and property tax issues

http://www.suijuris.net/forum/112331-post8.html

http://www.suijuris.net/forum/112459-post9.html

http://www.suijuris.net/forum/office...tml#post116573


"who" owns the property has nothing to do with foreclosure- it's about secured PRIORITY- so on the face of it a mortgage has priority over all other, later claims, or owners.

[Vishnu]

That is pretty much what I thought. Thanks for the links.

[Vishnu]

Originally Posted by macerico

I can't comment on most of what you've described. For many, it sounds like real overkill.

***When it comes to protecting your assets from the thieves that rule the roost, how can there be such a thing as overkill?***

If you have nothing IN YOUR NAME, then someone trying to sue you won't get squat unless they can link the company as a party to the action they are suing you for.

***The KEY: It is all owned by the FLP and the corp runs the FLP and holds th liability but hasn't enough assets to make it ( a lawsuit) worth persuing.***


Veil piercing normally will not happen just because a company is a sham used to shelter assets.

***A) The corp is not a sham. It has legitimate business and meets all 10 requirements to prevent being pierced. B) This train of thought is old school. Increasingly, the courts are piercing the corporate shield on such trivialities as Not having a business location, Not having a business phone listing, Not having any third party transactions, Not having a business bank accout...etc...***

Lots of wealthy people and corporations do that, and the courts have a vested interest in letting that status quo stand.

C-Corp = corporation with pretty much no assets worth mentioning.

FLP = Limited partnership with C-Corp as general partner and all others as LIMITED partners

Everything is either titled or listed on the Schedule A of the FLP.

You have the same problem as any corporation shelter arrangement. If YOU are the cause of someone's injury, they can seek YOUR assets.

***Read closely, the corporation hasn't enough hard assets to go after***

However, if that injury involves something that is property of the FLP, then its assets can become subject to the claim as well because the FLP can be brought in as a party.

***This may be true but they cannot take any assets, only "INCOME", the exception being an "INSIDE LAWSUIT". Since the other "LIMITED PARTNERS"are family, this isn't going to happen. The income can only be attached with a "Charging Order" no judgement or leins apply. ***

So, you might want a house titled under a new corporation separate from the FLP/C-Corp but subject to control by those entities.

***This is a grey area. A house, if you live in it, is a medium risk asset and the call is a toss-up. If it is a rental property, then you most certainly want a second FLP to hold the title because lawsuits are always in the mail. The Corp is the General Partner of the FLP. One shouldn't confuse the Corp with the FLP. They are two different animals. ***

This way, if someone got hurt on your property, they can come after you, the LLC/Corp that owns your home, but not the FLP/C-Corp. Have another LLC/Corp for each vehicle, etc.

***Agreed. The vehicle issue is somewhat covered because we are extorted for insurance by the state so it is self healing. If someone gets hurt on the property, they will be guilty of tresspass as I have the property posted with bulletproof signage stating the cannon of law governing Trespass. If you do not hold license to enter the property and have said license on your person for inspection at any time, then you are there at your own risk...including the possibility that I may inflict bodily harm or death. This way if I come home to find someone in the house or attempting to break in then I can shoot them and get away with it. The law routinely jails the person defending thier property as I'm sure you have heard of the cases where some 80 year old man get 20 years for shooting a burgler or the thief wins a lawsuit because you shot him and he claims damages. ***

Save the FLP asset pool for things that are highly unlikely to cause damage to anyone like liquid assets, investments, valuable collectibles, etc.

***Done***

The trust is just a nice way to ensure there are no hang ups when you die for ALL of the sheltered assets going to where you want them to go.

***As I stated. It is part of "The Program" to reduce taxes and protect assets.***

For the interest of protecting both assets and privacy, you often need layer after layer of corporate identities to layer veils between a potential creditor and the assets to be protected.

***Thus the Nevada corp. They have NO reciprocal agreement with the IRS and do not divulge to ANYONE else, worth, income, board members, addresses, shares, etc... It once was that Deleware was best which is why the FED is registered there but Nevada has competed effectively for the business. They now, because of the protections, are the no. 1 filing location for Corporations. ***

Just my 2 cents....I'm educated, but no expert.

You have a very good knowledge base and some excellent opinions and questions. The savings and features of doing it this way are so numerous that it would take hours to explain. For instance, I have a corporate welfare program written into the C-Corp. This way everything that medical insurance doesn't cover becomes a tax deduction for the corp. The corp reimburses the board members for all out of pocket medical expenses. I take care of my 85 yr. old father with alzheimers and since he is an advisory board member, this feature saves a fortune.

The FLP owns my log home business. It hires the corp to run the day to day operations and marketing. The FLP pays the corp. I can move money back and forth this way. The FLP owns the office and all the equipment which it leases to the Corp for thier oprations. Another tax deduction to leverage the tax liability of the corp. This can move money back to the FLP. The rent is so "high" that the corp makes a very thin margin on every home I sell. Plus as a board member, I have a housing provision for my father who lives in the other half of the office/guest house. This way ALL maintenance of the house and office are tax deductible. All utilities as well. My home is also my model-home so it too has all utilities, maintenance, etc...as tax deductions since the home is a showcase for the product plus the housing clause covers me as the President and my wife as Chairman of the board.

It goes on and on so when you stop to consider all these features, when used correctly, and the proper language included, it is a wise structure and a safe structure. You are correct that many wealthy people use this structure but one need not think this way. You'll never get rich unless you stop the biggest hemmoraging wound in your financial life which is WHAT? TAXES...TAXES...TAXES...!!!

If you set up a Charitable Remainder Trust, CRT, then you avoid Capital Gains Taxation because profits from sales of lets say..."Investment Properties" can be used to buy investments that are not "Like Investments." That is the rule as I'm sure you know. If you sell an investment home and buy more investmment homes with the profit then you owe no CGT. But if the CRT owns the investment home (move it in right before sale) then you can reinvest in whatever you wish and avoid CGT. Buy Llamas if you want and no one can say a thing about it. The rule is that you pay ONE NICKLE on the dollar in taxes. Nice HUH? This will make the CRT rich very fast and very versitile so you can spin on a dime and make diversified investments then you set up a family foundation and down the road, designate it as your "Charity of Choice" hire your family to run it and put them on the payroll and keep all the money in the family.... forever!

If this weren't the preferred way, the the Fords, Pews, Carneggies, Rockefellers, et al wouldn't be doing it this way. It's not the way the rich do it...It's the way they do it to get rich. It's never to early or too late to get on the wagon.

Great Discussion! Thanks.

Vishnu

[farmer_giles_of_ham]

do you really EVER have a gross profit or gain?

You make log cabins, and you sell the titles. What is the basis cost for your sale of capital? Everything you put into these, including the efforts you lent to the endeavour, was basis cost- all inputs one way or the other. You may volunteer your time, or exchange it for a share of interest in the value, without redemption; or you can just invest your participation. It’s all characterization- who has the first-hand knowledge to claim otherwise?

When you sell your interest, the value is exactly what you paid for it. If you had somehow lost your entire investment, any law is going to recognize this loss as a deduction. Until you recoup your loss, including whatever you have invested, you are at negative. When you cover the loss by selling the title and interest in the product you bring your loss back up to zero. It’s always an even exchange.

Or maybe you just borrow against your collateral, left in the hands of your creditors. Loan proceeds are immune from levy.

Or maybe you just collected what YOU had lent, a pre-paid credit, also immune.

Or you have been damaged by the loss of your property, and received an exempt compensation from insurance.

Even if you have a prior agreement with the government to count forward from gross, and allow only certain deductions, the above examples are contemplated by law as immune from levy, or exempt. You could be franchised to do all the business in the world and still borrow money, lend titles/interests, receive pre-paid credits, be covered for damage to your property (as in- “what’s the damage”) and so on.

[Vishnu]

I sell pre-packaged log home kits. There are 26 models and we also put together pkgs. for custom homes. I buy them from my manufacturer and sell them to the public. The margins are fixed and I have no other complications. I do not build them (excpt my own) and I do not speculate in prebuilt homes and land. It is very simple. There are few entanglements of any sort.

The profit is easily leveraged with the expenses so I show minimal gross profit. I hope I cleared up some of the confusion. <;-)

//V//