Investors and wealth-builders too often concentrate on building their estates without considering that it's even more important to protect their assets. This blog will address some of the strategies that asset protectors have developed over the years. This will be a brief overview, while the details will follow in my book entitled "Legacy Planning: A Paralegal's Handbook for Estate and Probate Law."
In today's society, we have fortune-builders and fortune-takers. The former acquires assets through hard work, smart choices, and sometimes a bit of luck. The latter attempts to take those assets through devious schemes that usually involve lawsuits. In this blog, we'll discuss an asset-protecting mechanism called a Family Limited Partnership ("FLP").
The following types of assets are best suited for placement in a Family Limited Partnership (FLP):
Liability-producing assets: Assets that may generate potential legal liabilities are well-suited for FLPs. Examples include:
Businesses
Apartment houses or rental properties
high-risk professions, e.g., doctors, lawyers, architects
Real estate: Properties that could be targets for lawsuits, such as apartment buildings or commercial real estate, are good candidates for FLPs
Investment portfolios: Stock portfolios and other securities can be placed in an FLP to separate them from liability-producing assets
Closely held business interests: Stock in privately held businesses can be transferred to an FLP
Personal assets: Various personal assets can be transferred to an FLP, including:
Cash
Investment securities
Homes (though this may require the services of a local expert)
It's important to note that while FLPs can be useful for asset protection, they are best used in conjunction with other strategies, such as asset protection trusts. The FLP is primarily a tool for separating ownership from control and making assets less attractive to creditors. Also, it's crucial to understand that liability-generating assets should generally not be placed directly into trusts. Instead, these assets are better suited for FLPs, while non-liability producing assets like bank accounts and securities are more appropriate for trusts.
More will follow in upcoming posts. #AssetProtection #FortuneBuilders #FortuneTakers #FamilyLimitedPartnerships #Trusts #LiabilityProducing #NonliabilityProducing
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