Many folks mistakenly believe that asset protection is a tool only for the wealthy. The simple truth is most people have more asset value than they think. A few simple steps can protect those assets in the unfortunate happening of lawsuits, nursing home care, divorce or any other unfortunate situation.
There are a few commonly overlooked assets that individuals may want to protect.
Determining whether or not you have equity in your home is as simple as determining what is owed on the balance of your mortgage and subtracting this amount from your homes fair market value. The County Auditor and other real estate valuing websites are good starting points for this analysis. If this amount is a positive number congratulations you have positive equity in your home. However, creditors may see your home as an available source of repayment by attachment, lien, or foreclosure.
LIMITED LIABILITY COMPANY MEMBERSHIP UNITS
Most folks believe that forming a limited liability company offers them complete insulation from lawsuits, judgments, and other forms of garnishment so long as they hold all of the assets of the company in the name of the LLC. In the event that the LLC is a company with positive value, the membership units maintained by the individual may also have value. That value is another asset of the individual that creditors may seek to attach, lien or attach to recover.
PROTECTING YOUR ASSETS
In the past individuals have been reluctant to consider an irrevocable trust as a viable option to asset protection. The nature of irrevocable trusts is such that assets in, lose their flexibility leaving you the inability to acquire and dispose as you see fit. However, recent changes to the law and the manner of implementation have created a scenario where your assets are safe yet flexible.
HOW DOES IT WORK?
When you combine an irrevocable trust with a limited liability company and a management agreement you acquire the benefit of asset protection with the feature of asset control.
STEP 1: An irrevocable trust is formed. Ohio residents have the luxury of recent changes to the law that allow for the creation of certain trusts that insulate trust assets from the reach of creditors. These trusts also change the nature of the property in that they are now owned by the trust. This has far reaching implications in situations such as divorce and elderly care, to name a few.
STEP 2: Form a limited liability company. The membership units of the LLC will be owned by the Trust. Your assets you seek to protect will also be owned by the LLC. This prevents creditors from attempting to utilize the membership units as an asset during collection.
STEP 3: The trust and you enter into a management agreement wherein you are vested with the authority to manage the LLC. This allows you the flexibility of controlling the assets owned by the LLC but the membership units owned by the trust, with the benefit of those assets being safe.
If you or someone you knows wishes to develop the peace of mind in knowing the assets they worked hard to acquire are safe from the reach of creditors then this is something that needs serious consideration. Contact my office to schedule a cost free analysis to determine if this approach is beneficial for you.