Ownership by a Trust
The most popular alternative for asset protection and for owning FLP interests is to transfer the ownership into a trust, which is designed for this purpose. Recent developments in trust law and advances in strategy now allow unlimited variations in form to accomplish most reasonable asset protection goals. We will discuss the Family Savings Trust in more detail later. For now, keep in mind that the purpose of the Family Savings Trust is to accomplish these specific results:
- Depending on the terms, partnership interests can be immune from charging order or foreclosure.
- Family Savings Trusts can be designed to be domestic or foreign, or to convert upon the occurrence of specified events.
- The plan can be tax neutral, preserving existing tax status, or may create estate tax savings and income tax advantages when appropriate.
- The family residence and other property can be held by the Family Savings Trust without disturbing the current tax benefits.
- A high level of privacy can be incorporated into the plan together with these asset protection features.
Based upon what is intended to be accomplished and the type of assets involved, creating an asset protection plan sometimes involves forming one or more Family Limited Partnerships, Limited Liability Companies or other entities. The key question in these cases is how to hold the interest in these entities. We discussed the fact that owning the interests in your name allows a creditor to obtain a charging order or to foreclose and seize those interests. Generally, we have found that a trust designed to own these entities provides excellent flexibility and convenience and achieves all or most of the goals of a solid asset protection plan.