FLP For Asset Protection

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FLP For Asset Protection?
Gen. Partner
Family Ltd. Partnership
Assets
Typically Is FLP Creator, Contributes The Assets,
May Be A Married Couple
Ltd. Liability Shield
Ltd. Partners
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FLP For Asset Protection?
Gen. Partner
Family Ltd. Partnership
Assets
Ltd. Liability Shield
Personal Legal Attack, Resulting In Judgment
Ltd. Partners
Creditor (1 Eye Monster)
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FLP For Asset Protection?
Gen. Partner
Family Ltd. Partnership
Assets
Ltd. Liability Shield
Personal Legal Attack, Charging Order
Ltd. Partners
Lien or Garnishment On Distributions Of
Affected Partner
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FLP For Asset Protection?
Gen. Partner
Family Ltd. Partnership
Assets
K-1
Ltd. Liability Shield
0.00, Tax Liability Hot Potato
Ltd. Partners
Creditor (1 Eye Monster)
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FLP For Asset Protection?
Theory of the K-1 Hot Potato Effect is Enhanced
With These Results

• A Creditor w/Charging Order Cannot
• Reach Partnership Assets
• Manage The Partnership or Vote
• Control Cash Flow Or Force Distributions
• Cause Partnership Liquidation

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FLP For Asset Protection?
Creditor, In Reality, Is Not Shut Out!

• Because The General Partner Cannot
• Make Distributions to Some Partners While
  Withholding Distributions to The Partner Who Has
  The Charging Order
• Withhold Distributions Period, Without Legitimate
  Business or Investment Purpose
• Therefore, In Many Or Most Cases the Creditor
  Will Be Able to Force Distributions To Accompany
  The K-1. Or, All Partners Are Tied Up
  Stalemate!
• See The Cutting Edge Handout

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FLP For Asset Protection?
Creditor, In Reality, Is Not Shut Out!
Even If The General Partner Could Withhold The
Creditors Distributions, While Paying Other
Partners,

• The Charging Order Partner Definitely Cannot
  Receive Distributions of Income or Capital
• If The FLP Forming Partners (Clients) Receive a
  Charging Order, They Have No Asset Protection!
• The Promoters Claims Are Not Valid

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FLP For Asset Protection?
And, The Creditor May Very Well Pay The Taxes!

• Taxes To Pay May Be Small In Comparison to
  Judgment Amount
• May Be No Taxes At All, If FLP Assets Are
  Primarily Capital Growth
• Paying The Taxes Probably Is A Good Investment,
  Ultimately Creditor Will Receive Corresponding
  Capital and Growth On It
• The Promoters Claims Are Not Valid

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FLP For Asset Protection?

• Other Limitations And Issues
• General Partners Must Give Away (98?) Interests
  To Protect Assets Which They Contribute To FLP
• No Protection For Non-FLP Assets, For Any Partner
• California Effectively Eliminated Charging Orders
  for LLCs On 1/1/2004, Allowing Membership
  Interest Liquidation For Creditor (FLPs and Other
  States Not Far Behind?)
• And, You Have To Question Competence Of Anyone
  Not At Least Recommending A Limited FLP or LLC

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FLP For Asset Protection?
What About Legal Attacks On The Partnership?
Gen. Partner
Family Ltd. Partnership
Assets
Ltd. Liability Shield
Ltd. Partners
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FLP For Asset Protection?
What About Legal Attacks On The Partnership?
Gen. Partner
Family Ltd. Partnership
Assets
For This Case, Charging Order Is Useless For
Partnership Assets and General Partners Non FLP
Assets. Only Ltd. Partners Are Protected.
Ltd. Liability Shield
Ltd. Partners
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FLP For Asset Protection?

• General Problems and Issues
• To Improve Protection, Should Use Outside
  Partners
• Must Avoid Personal Usage, Alter Ego Problems
• FLP Must Be Run As A Business
• Court Can Sell Interest, Even Dissolve FLP
• Limit on Asset Type, All Must Have Biz Purpose
• Statutory Action Is All In the Trust Arena
• If The FLP Worked For Asset Protection, NAFEP
  Would Support That. We Do Create FLPs For Proper
  Usage.

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If Not For Asset Protection,Then What Is FLP
Purpose?
Family Ltd. Partnership
Gen. Partner
Assets

• FLPs Make An Excellent Income and Estate Tax
  Planning Vehicle
• Very Useful For Managing Familys Income
  Producing Assets

Ltd. Liability Shield
Ltd. Partners
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FLP For Asset Protection?

• Source\Reference Material For FLPs
• ?The Cutting Edge, Published By Leimberg
  Associates, Inc. www.leimbergservices.com, 60.00
  
• Asset Protection, By Peter Spero, Published By
  Warren Gorham Lamont (WGL-RIA), Division of
  Thomson Tax Accounting Company
• Tools and Techniques of Estate Planning, By (Many
  Authors), Published By National Underwriter Co.,
  64.95, www.nationalunderwriter.com

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Getting Rid of Myths

• This Is Not Asset Protection

Business Directed Legal Attacks
Limited Liability Co.
Personal Property Directed Legal Attacks
Ltd. Liability Shield
LLC Owner
LLC Units
Assets
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Getting Rid of Myths

• This Is Not Asset Protection

Asset Directed Legal Attacks
Revocable Living Trust
Assets
Personal Legal Attacks
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• Your Assets
• Without a Life Estate Trust

• Your Assets
• With a Life Estate Trust

• EARNED INCOME
• HOUSE
• (Some Protection in Some States)
• VACATION HOUSE
• AUTOMOBILES
• OFFICE BUILDING
• RENTAL PROPERTY
• CASH/SAVINGS

• EARNED INCOME
• HOUSE
• (Some State Protection Full Protection in
  Trust)
• VACATION HOUSE
• AUTOMOBILES
• OFFICE BUILDING
• RENTAL PROPERTY
• CASH/SAVINGS

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• Your Assets
• Without a Life Estate Trust

• Your Assets
• With a Life Estate Trust

ANNUITIES INVESTMENTS INVESTMENT INCOME LIFE
INSURANCE CASH VALUE PENSIONS-PROFIT SHARING /
401K IRA / 403 B (Protection in Some States)
ANNUITIES INVESTMENTS INVESTMENT
INCOME (Protected After April 15th of Each Year
if Left in Trust) LIFE INSURANCE CASH
VALUE PENSIONS-PROFIT SHARING / 401K IRA /
403B (Protection in Some States)
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Asset Protection Support Materials

• The Preceding PowerPoint Presentation w/Script
• Automated Presentation (Answers To Lifes
  Financial Risks)
• Answers Booklet, Paralleling Above
  Presentations, Excellent Study Guide at Seminars,
  Client Handout
• Color, Bi-Fold Brochure, Client Handout
• Asset Protection Legal Package, For Clients
  Counsel