An important part of estate planning is trying to keep your estate intact to the greatest possible degree. This does not mean the utilization of secretive and unethical means; there are a number of legal and charitable ways to protect your property for retirement or your estate. Asset protection is complex and requires knowledge of a number of legal concentrations. You should consult an experienced attorney before initiating an asset protection plan.
An important tool for this purpose is a family limited partnership, or FLP. An FLP is arranged like a traditional limited partnership, but generally includes family members. The usual arrangement of an FLP makes the parents “general partners” while the children are designated as “limited partners”, who receive a share of profits but no control over the partnership’s decisions. Contact a Iowa probate representing clients in Adel, Iowa today to schedule your initial consultation.
The General Partners (or parents) are responsible to control the operations of and make financial decisions for the FLP. They can also receive a management fee out of the FLP’s income. Upon formation, the parents own all general partner and limited partner interests, but give shares to their children using the annual gift tax exclusion. Under federal law, the general partners can maintain control over the FLP even if they control only one percent of the FLP’s assets. An FLP can allow you to avoid the estate tax credit, by providing annual share gifts. Additionally, because there is no market for shares in the FLP, a gift of FLP assets may be appraised for tax purposes at far below the dollar price, or “discounted”. It should be noted that steep discounts can result in an IRS challenge. As a result, some attorneys have begun crafting LLCs to accomplish the same goals as an FLP.
An FLP can also help protect assets from creditors upon death, within limits. Most states have adopted part or all of the Revised Uniform Limited Partnership Act (RULPA). Under RULPA, a creditor can petition a court for a “charging order”. This allows a creditor to receive any income from a partnership due to the individual who owes the creditor, but forbids a creditor from assuming control of a partnership. The same rules apply to creditors pursuing debtors’ interests in LLCs. In many instances, it is possible to transfer the ownership of an asset to a spouse. This makes it unavailable in most instances to creditors.
Many people have actually transferred the vast majority of their assets to a trust, foundation, or other entity. They own little in their own name, and assets controlled by the new entity are not subject to any claims against the individual. Asset protection, done legally, is very different from actions taken in order to commit fraud against creditors or the government. It is vital to have the advice and assistance of an attorney who has experience in estate planning.
Adel estate planning lawyer, attorney Adel, IA, will / trust / power of attorney law firm - If you would like to schedule a initial consultation regarding your case, please contact the Luthens Law Offices at (800) 685-7948 or complete our inquiry form.