Shielding Wealth from Creditors
Asset Protection through a Family Limited Partnership
We live in a litigious society in which virtually anyone can file a lawsuit and anyone who makes money is a potential target. If you have significant assets that are vulnerable to judgments and creditors, The Livens Law Firm offers proven methods to protect your hard-earned wealth.
Based in Bedford, Texas, we offer asset protection services in the Dallas-Fort Worth area and statewide to professionals, business owners, landlords and other high net worth clients. Contact us today to discuss legitimate and effective strategies that do not require going offshore.
What Assets Are at Risk?
Under Texas law, much of your estate is safe from creditors, including your homestead, qualified retirement plans, life insurance and annuities. But many assets remain exposed: cash accounts, money market funds and CDs, stocks and bonds, business interests, equipment, land, rental property and second homes.
Transferring Assets Out of Reach
In most cases, sufficient asset protection is accomplished through creation of a family limited partnership (FLP) or limited liability company (LLC). Each has its place, though we find the FLP typically offers superior advantages.
In an asset protection scenario, you (or your irrevocable trust) and any other partners contribute vulnerable assets to an FLP created and registered in Texas. You receive a certificate of partnership in return. A third party manager is named general partner, with full control of the assets. As a limited partner, you have no further liability in a lawsuit against the entity. Only the general partner can be sued. Creditors have a valid claim only if you were to take a cash distribution and they cannot compel you to cash in. Even with a charging order from a judge, a claimant gets nowhere with the general partner (manager), who will not authorize distributions.
In addition to creditor protection, your FLP shares are discounted for estate tax purposes when you die. As a limited partner, you have no liquidation rights, no right of transfer and no right to income. The IRS acknowledges the difficulties of a limited partner lack of control and marketability and commonly discounts such assets 30 to 45 percent.
Asset protection must be proactive, not reactive. Transferring assets after a judgment is rendered or a lien is perfected, especially moving wealth offshore, can be considered criminal. Nor does asset protection void IRS obligations you must still pay state and federal income taxes on your share(s) of the partnership.
Stephen J. Livens holds an M.B.A, has practiced in estate planning law for over 20 years and has been a CPA in Texas for 25 years. His sophisticated knowledge of tax law, Texas law, business planning and wealth preservation strategies will put you on solid legal ground.
Call the Livens Law Firm at (800) 569-2663 or reach us online. In a free initial consultation, Mr. Livens will explain his successful asset protection strategy in clear terms that relate to your specific circumstances.