Are you confident that your clients will never be sued? And if they are sued, are you certain that they will be treated fairly by the U.S. legal system? People are now being forced to protect themselves and their assets from liabilities that were never a concern in the past. Even though asset protection planning, such as the use of trusts, has been around for hundreds of years, there are newer defense methods specially suited for the complex modern times in which we live.
For those unfamiliar with the term, asset protection planning is the adoption of advance planning techniques that place one’s assets beyond the reach of future potential creditors. It can be done without hiding assets, secret agreements or fraudulent transfers. It is based upon proven sophisticated combinations of business and estate planning techniques, utilizing offshore trusts.
Many people mistakenly believe that it’s safer to protect their assets domestically with a limited liabiity company. Although some degree of protection may be available through the use of a domestic LLC, we can never predict whether a local court or jury will properly apply the law. Sometimes a “result oriented” judge or jury will ignore the limitation on reaching the interest of a member (owner). In addition, some states provide no protection of assets held by a single-member LLC.
A second common misconception is that there are negative tax consequences with an offshore trust and LLC combination. The entire structure is actually tax neutral, meaning that your income, estate, and gift tax “picture” does not change as a result of establishing this structure. The LLC will elect under IRS rules to be “disregarded” as an entity for U.S. tax purposes. This means it will not file a U.S. tax return and that all of its income and transactions will be reported on the trust’s information tax return. Income tax is only paid on your personal tax return – on the same items you would have paid tax on without the LLC/trust structure.