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Re: incorporate to protect assets?
Old 02-03-2005, 10:43 AM   #41
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Re: incorporate to protect assets?

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I'd be curious to know the facts upon which you based your conclusion.
It was a few years ago, and I'm afraid that I did not keep notes. Just went with a friend to a sales pitch meeting by someone selling FLP setup packages (and the same person was also giving a Carleton Sheets type real-estate presentation). Also, no pretense to a valid search is done, I was more browsing with a bias looking for exceptions and negative info, based on prejudice from the second presentation.

I looked up info both online, and at the CU library. There were cases where the FLP was dissolved, and with contempt sentences in the library, and some statements online about the vulnerabilities of them for creditor protection. The ability to pass assets over time to heirs (in excess of normal gift rates) did seem to be valid, and that is also true for simple LLC's (which I think can have voting/non-voting shares).

Yes, it does make things harder, but it did not seem to make them impossible. So, maybe not a professional conclusion, but that's where I ended up. As Martha said above, there are approaches to break the protection.

Thanks for jumping in Martha - and you really jumped in! It's interesting to read how uncertain some of this really is.

BTW: maybe info on how to do those sales presentations should be in the "Make money fast with no work and no brains" section. I was amazed to see some people with checkbooks and credit cards out at the end of the spiels! Spending thousands of dollars each! Maybe they had done their research ahead of time

Wayne
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Re: incorporate to protect assets?
Old 02-03-2005, 10:47 AM   #42
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Re: incorporate to protect assets?

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...If I understand what I've read the advice I am given is to get an umbrella policy to give those creditors something to get instead of my house and other assets.
TC
I think the umbrella policy protects against liability, i.e. lawsuits, and not creditors in general (such as those for medical expenses).

Wayne
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Re: incorporate to protect assets?
Old 02-03-2005, 10:57 AM   #43
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Re: incorporate to protect assets?

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Keep in mind the need to talk to your own lawyer about these issues as your lawyer will ask all the necessary questions and help determine a plan for you based on your situation.

One thought for those going to retain a lawyer for any reason that is at all complicated: DO YOUR HOMEWORK. Often the legal advice can take a very short amount of time (and $$), but the education and Q&A part can eat up several times that. So for wills and trusts, go read a good book on them first and be sure you understand the basic terminology. For divorce, plan out the details and have them review it. In other words, plan ahead of time and make the best use of the lawyers time.

On the other hand, if you are short on time, and have plenty of money (or if you are Martha's client ), feel free to ignore the above suggestion.

Wayne
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Re: incorporate to protect assets?
Old 02-03-2005, 02:17 PM   #44
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Re: incorporate to protect assets?

Martha_M,

Thankyou so much for your response. We have talked to several lawyers and what frightens me is that they give different advice. The lawyer who did our wills told us that the 403(B) of the healthy spouse could not be counted for Medicaid eligibility of the spouse in the nursing home. I know from the reading that I have done that that is not true. A tax advisor told us that he had never heard of Medicaid taking the 403(B) of a healthy spouse. So I am reluctant to pay $500 for another set of wrong advice.

As far as LTC insurance, from a thread on this board, I found the Consumer Reports article that said it has many flaws. So I don't know if that is right for us either. We are 59 and 55 and have about 850K in 403(b)s and IRAs and I am so worried about losing it all, except for $92,000 allowed in Maryland this year. It seems that we will have to keep working until we have 2 million, which is the amount that I've read that you need to self insure. At least we have good health and good jobs!
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Divorce to protect assets?
Old 02-03-2005, 02:53 PM   #45
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Divorce to protect assets?

I have heard of people getting divorced to protect assets, but don't know of any. I think you give up something taxwise also...but am not sure. Anyone have more info on this?
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Re: incorporate to protect assets?
Old 02-04-2005, 04:01 AM   #46
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Re: incorporate to protect assets?

Just a quick visit this morning because I have a hearing to prepare for.

Smooch, to expand on the medicaid issue, I didn't really expand on it much because there are many complications, as I emphasized in a prior post. Different states have different amounts required to be spent down from the spouse not in the nursing home. So you have state variability. Also, I think, but I am not sure because I haven't looked at the issue for a while, that if you are still working and your spouse is in the nursing home, you might not have to liquidate your 401(k) or 403(b) because the asset isn't considered available to you. However, if you retire it may be considered an available asset and will be considered in the spend down formulas. I also think, but am not sure because I haven't looked at it for a while, that if you are retired and over 70 and a half, your retirement plan is treated like income and you might have to use part of the monthly distributions to pay for care, but won't have to liquidate the plan. There may be state variabilty on these issues as well. EDIT: Yup, there is state variability on how retirement resouces (of the person not getting medicaid) are treated.

So you can see the issue can get muddy.

Wayne, as far as getting a divorce, there as always are issues, such as competency, possible obligations to provide support and fair division of assets. I once represented a trustee in bankruptcy. The debtor had a lot of debt from a failed business. Before he filed bankruptcy he got a divorce. His wife got most of the assets. She didn't owe the debt. I sued her on the grounds of fraudulent transfer and settled for a a significant sum. I probably wouldn't have sued her if she had received only half their assets.

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Re: incorporate to protect assets?
Old 02-04-2005, 07:13 AM   #47
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Re: incorporate to protect assets?

Martha - I was thinking of the long term care/medical bills issue. Half is probably better than some of the scenerios described here for asset spend down for spousal nursing home care. There is also an emotional aspect to it, but if I were to need long term care for Alzheimer's, I would rather be divorced than to force my wife into the poor house.

Long term care insurance is the defensive mechanism needed here, but for those that wait too long, it really sounds like they are screwed.

Wayne
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Re: incorporate to protect assets?
Old 02-04-2005, 10:48 AM   #48
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Re: incorporate to protect assets?

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Long term care insurance is the defensive mechanism needed here, but for those that wait too long, it really sounds like they are screwed.
I agree with Wayne.

Smooch, you seem to be saying that you will keep working until you have $2M so you can self insure for LTC. Before doing that, why not buy LTC insurance? I'm not sure if it's doable anymore, but 2-3 years ago my wife and I bought policies and paid them off in one lump sum. Total for both was $35,000. Like you, we felt LTC was a piece of the puzzle we needed to address. LTC isn't for everyone, but for some it's very good to have, IMHO.
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Re: incorporate to protect assets?
Old 02-04-2005, 02:36 PM   #49
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Re: incorporate to protect assets?

From Martha:

if you are still working and your spouse is in the nursing home, you
might not have to liquidate your 401(k) or 403(b) because the asset
isn't considered available to you.

Thankyou again, Martha. You brought up some interesting possibilities,
like the one above. We are both still working - just thinking ahead. I'm
going to look into the rules about your above statement in our state.

Bob Smith,

I want to buy LTC insurance, but my husband is not convinced, given that we've read many articles saying that the insurance companies won't be able to pay when the time comes. I am continuing to research the issue. Just looking at all of our optiions.-
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Re: incorporate to protect assets?
Old 03-08-2005, 03:38 PM   #50
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Re: incorporate to protect assets?

Hi all and thanks for everyones onput on this subject. It's especially great to have Marthas' expert advice along with everone elses personal experiences in this area. Thanks again.

I am seeing how complicated this all is, and how area specific it all can be.

But, I need a plan and help with it:

I'm leaving from my home here in Las Vegas to go to Michigan on April 5th. I'll be there for 3 weeks. It is my intention to purchase, with cash, a piece of property to build my future retirement home on. The home will be paid for also as it is built.

I need to know if I should create an LLC now, in Nevada and have the LLC purchase the property. The property will be my primary residence and I don't know the homestead type laws there as far as how exempt this asset would be from creditors under existing Michigan laws.

Also, If the LLC owns the property, I would be living in, or "renting" an asset owned by a corporation in Nevada.

I wish I lived with a lawyer and a CPA and a financial planner and...

TC
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Re: incorporate to protect assets?
Old 05-19-2005, 01:10 PM   #51
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Re: incorporate to protect assets?

One more thing on the LP idea. It may not be perfect but it is better than nothing. I am not worried about bankruptcy protection - mainly just some crazy lawsuit. While I have a general liability policy as well, I always wonder if that really matters. After all, these days, juries routinely award gigantic settlements which could easily exceed any general liability policy I might own.

If you are going to do it, do it sooner than later! Also, you don't really need a 'family' to do this. You can use an S corp as a partner. In my case, both myself and my wife are limited partners but an S corp is the General partner. I could however, have another S corp as a limited partner if I wanted. It is a hassle around tax time however...

Greg
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Re: incorporate to protect assets?
Old 05-19-2005, 01:58 PM   #52
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Re: incorporate to protect assets?

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Originally Posted by gstander1
While I have a general liability policy as well, I always wonder if that really matters. After all, these days, juries routinely award gigantic settlements which could easily exceed any general liability policy I might own.

Greg
Greg, as TH said in another thread, an umbrella policy, given its relatively low cost, is just about a necessity for anyone with more than a nominal amount of assets to protect.

As far as so called out of control jurys, don't believe everything you read on the size of jury verdicts and remember most suits settle.
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Re: incorporate to protect assets?
Old 05-23-2005, 09:56 PM   #53
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Re: incorporate to protect assets?

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Originally Posted by gstander1
One more thing on the LP idea.* It may not be perfect but it is better than nothing.* I am not worried about bankruptcy protection - mainly just some crazy lawsuit.* While I have a general liability policy as well, I always wonder if that really matters.* After all, these days, juries routinely award gigantic settlements which could easily exceed any general liability policy I might own.
Greg, FWIW, I did some looking into very small business liability (I was thinking of making a few custom racing motorcycle frames for sale).* The liability exposure was too scary for my taste.* But one of the racer/attorney's I talked to informally told me that the first thing he does (and suspects that most attorneys do) when someone comes to him is look around and see if anyone potentially involved in the situation has some money.* If there isn't enough money to both pay him for his time AND recover enough to make it worth while for the client, he'll pass on the case.

A number of people remarked to me that it looked like you might be better off to have limited assets than to have liability insurance that gave the plaintiff something to go after.

That's probably worth less than most free advice, but I thought I'd pass that along as something you might consider and/or ask about if talking to a knowledgable person on the issue.

cheers,
Michael
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