Assume a client owns several real estate properties or one or more businesses, is concerned about potential lawsuits and wants a business and investment structure that maximizes estate planning and gifting opportunities as well as provides for centralized management and continuity in the event of the client's death.
1. Place each real estate property or business in a separate LLC ("Operating LLC")
2. Form a Delaware LLC called ("Holding, LLC") to own Client's membership interest in each Operating LLC.
3. Form another Delaware LLC ("Management LLC") to manage the Holding Company and to act as manager of each Operating LLC.
4. The owners of Holding LLC will be Client as to 90% to 95% and a trust for Client's children as to the remaining 5% to 10% ("Children's Trust").
5. Management LLC is owned by the Children's Trust. The manager of Management LLC will be the Client.
Note: Holding LLC will be the owner of the real estate or businesses for ownership and financing purposes -- the Operating LLCs that hold legal title to the actual asset are disregarded for this purpose --
The balance of this article has been incorporated into the Tax Prophet's Action Guide entitled, "Wealth Preservation " described below:
This Action Guide discusses domestic asset protection and the use of legally permitted entities such as limited liability companies and trusts, to preserve assets in today's hostile litigation environment. The approaches suggested are conservative, safe, practical and legal -- a far cry from most asset-protection schemes touted on the web. This Action Guide is a must read for small business owners or investors concerned about potential litigation and their advisors.