Tips for Funding Your Asset Protection Plan

We’ve had a lot of interesting call lately regarding unfunded asset protection plans. An asset protection plan–a Family Limited Partnership combined with an International Wealth Management Trust–is only useful for protection against creditors if there are actually assets titled in the name of the plan. That should go without saying, but we’ve encountered it enough recently to make it worth addressing in this article.

The first asset you need to consider is your primary residence. If you live in a state with fantastic homestead protection like Florida or Texas, then you don’t need to do anything. Your home is protected. Otherwise, you need to provide some protection for your home. The typical way to do that is to transfer or “deed” your primary residence into your asset protection trust. The same is true of any second homes that you own but don’t use to generate rental income.

Rental properties are slightly riskier than non-rental properties. As a result, there needs to be some additional insulation around them in order to protect your other assets. That additional insulation comes in the form of a limited liability company (a “LLC”). The funding works as follows:

The LLC is created, and it is owned in the exact same proportions as the rental property to be transferred.
The rental property is deeded into the LLC.
The LLC is transferred into your asset protection limited partnership.

It’s very important that you follow the exact sequence described above, because in some instances it can save you money by avoiding transfer taxes and/or a reassessment for tax purposes (check with your local taxing authority and clerk of court to make sure).

Cash, stocks, bonds, precious metals, and jewelry are all considered “safe assets.” That’s because they can’t generate liabilities for you. Think about it like this: Someone can get injured on your rental property. That’s just not true of your safe assets. Because of this unique feature, your safe assets can be owned directly by your limited partnership, without the need to insulate those assets with an LLC.

Vehicles are very risky assets. As a result, they should be left outside your plan completely. Own vehicles in your personal name, and trust that your other assets are safely protected.

Feel free to contact our office now, or at any time during this course to get an analysis with our in-house Asset Protection Attorney or Analyst, please contact Kitty Lucarini at 1 (800) 231-7112 to schedule the phone appointment.

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