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INTRODUCTION TO ASSET PROTECTION STRATEGIES
Maurice Kassimir & Associates, P.C.
INTRODUCTION TO ASSET PROTECTION STRATEGIES
PLANNING TO PROTECT A LIFETIME OF HARD WORK

We live in a litigious society. Anyone slipping on the ice on the sidewalk in front of your home or business, someone you injure in a car accident or a customer injured by a product your company has made, can sue you for many millions of dollars, depending on the circumstances. Your insurance coverage may not be sufficient to fully protect your assets. What can you do to protect your family and the assets you’ve worked so hard to accumulate through the years? We can recommend several techniques which are effective individually and powerful when combined. The goal of a well designed asset protection plan is to build a wall between your assets and potential creditors. The better the plan, the higher the wall.

First, you may consider the creation of one or more Delaware limited liability companies to hold your homes, any businesses and commercial real estate you may own (if they are not already held in limited liability entities), and centralize the investment management of your liquid asset portfolio. Delaware is a debtor-friendly state with a long history of statutes and case law favorable to persons who form Delaware entities to protect their assets prior to experiencing creditor issues. The most a creditor could hope to obtain from your Delaware LLC would be a charging order requiring you to turn over any distributions made to you until your debt is paid. However, if such a charging order were in effect, you would cease any distributions frustrating the creditors who might be encouraged to settle the claim for cents on the dollar. An additional advantage is that Delaware law does not allow creditors to participate in the management of a Delaware LLC, so no distributions can be forced if your LLC's operating agreement is properly drafted; nor can your creditors demand that the LLC be dissolved.

We would advise that your Delaware LLCs be multi-member and not be single member LLCs. In other words, give your spouse, your child or a non-grantor trust, a small membership interest in each LLC (any gift tax issues would have to be addressed). Without a second member, the LLC would be considered a disregarded entity for income tax purposes and may be considered a disregarded entity for creditor protection purposes, as well. Because the asset protection laws of Delaware are designed to protect members of an LLC against charging orders obtained by creditors of one of the members, you will need a multi-member LLC to take advantage of that protection. In short, a single member LLC might cause you to lose the asset protection benefits as you and your entity would be too closely identified with one another. You may also consider allowing your spouse or child to act as the Manager of any non-operating business LLCs to put more legal distance between yourself and your assets which would be advantageous in any litigation. Contributing your assets to a multi-member Delaware LLC in this manner will provide you with a very healthy level of asset protection. Your creditors would need to obtain a charging order in a Delaware court to prevail against your LLC-protected assets. This structure is a very effective deterrent to litigation.

After the formation of the LLC(s), deeds would be prepared to transfer your homes and any additional real estate to the LLCs. You would contribute your liquid assets to the LLC by re-titling your bank and stock accounts. The more LLCs that are created will likely improve the asset protection results. If you decide to go no further, you will already have done quite a bit to protect yourself from future creditor claims.

Should you wish to engage in additional planning to protect your assets, a Delaware LLC may be created in conjunction with an Alaska trust. The trust would have to have an Alaska trustee (typically a trust company). The trust company would only act in an administrative capacity and family members, friends or advisors acting as the trustees would be responsible to handle investments and distributions. Alaska, like Delaware, has laws which strongly favor the protection of persons who contribute their assets to Alaska trusts prior to having any creditor issues. Your Delaware LLC membership interests can be transferred to an Alaska trust in a manner which does not result in a current gift for gift tax purposes. It would be extremely difficult for a creditor to obtain a charging order against a Delaware LLC making a distribution to an Alaska trust. A potential creditor would be required to bring suit in both Delaware and Alaska and contest the formidable asset protection laws of both jurisdictions to reach the assets held in the trust.

During your lifetime, you, your spouse and your descendants can be beneficiaries of your Alaska trust, as long as you have no power to distribute assets to yourself. After the death of you and your spouse, lifetime asset protection trusts could be created for the benefit of your descendants for as long as you have descendants, as Alaska is a jurisdiction which allows for the creation of perpetual trusts. To the extent your assets are held through an Alaska trust, its provisions will effectively act as a Will in directing the distribution of those assets at your death.

Call us to talk about these exciting opportunities to protect what your hard work has built for you and your family.

Maurice R. Kassimir, Esq.
Maurice Kassimir & Associates, P.C.
mkassimir@mkpclaw.com
(212) 790-5719
I will be out of the office starting April 10th returning April 22nd
As required by new U.S. Treasury rules, we inform you that, unless expressly stated otherwise, any U.S. federal tax advice contained in this email, including attachments, is not intended or written to be used, and cannot be used, by any person for the purpose of avoiding any penalties that may be imposed by the Internal Revenue Service.

Questions?

If you have any questions regarding this matter or any other estate planning techniques, please contact a Maurice Kassimir & Associates, P.C. Trusts & Estates attorney or e-mail us: mkassimir@mkpclaw.com.

(212) 944-1377

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