Thursday, June 23, 2011 Charging Order Protection for Members of Limited Liability Companies
Many state laws make a charging order the “sole” remedy for a creditor of a limited liability company (LLC) member. Some states have provided that the charging order is the “exclusive” remedy. The judgment creditor could collect the debtor’s share of any income distributed by the LLC.
A charging order entitles a creditor to distributions (not management fees, loans, or sale proceeds) made to the debtor Member. For this purpose the creditor is given a status that is the equivalent of an assignee of the debtor member’s interest. The IRS (Rev. Ruling 77-137) is read by many commentators to suggest that the assignee should receive a K-1 statement showing the assignee’s share of LLC income, even if no distributions of cash are made from the LLC. Since the LLC is a pass-through entity for income tax purposes, the debtor’s share of undistributed income may be taxed to the judgment creditor even though the debtor did not receive the LLC income. This type of income is sometimes referred to as “phantom income.”
The possibility of “phantom income” can provide a strong disincentive for someone who sues a person owning interests in an LLC or a strong incentive to settle early. If the creditor’s share of phantom income is a significant amount, it may throw the creditor into a higher tax bracket, and could even force the creditor to pay more in income tax in a year than he actually received in income.
For example, Nevada's legislature recently passed revisions to its charging order statutes.
The revisions which are effective October 1, 2011 enhance Nevada's creditor protection laws for its LLCs, LPs and corporations. The revisions expand Nevada's protections to not only make the charging order the exclusive remedy, but to also remove all potential equitable remedies that might apply.
The new legislation also specifies that creditors of a member of a single member LLC and creditors of a shareholder of a single shareholder corporation are limited to the charging order remedy, thereby distancing Nevada from the laws of other states.
BridgeBuilder - Plans for Life
Garrett Griffin Tuesday, May 31, 2011 Who can be blamed for someone's misfortune?
Don't just think that because you are extremely competent and careful that you don't have exposure. Over the last few decades, expanding theories of liability and the great proliferation of litigation has given increased emphasis to Asset Protection Planning. We live in a "sue society", and as such, it is no longer a question of negligence, but a question of who can be blamed for someone's misfortune Why is there such an increased liability exposure? Although there are numerous factors to consider, the evolution of the legal system has enabled a victim oriented society.
The contingency fee was adopted in the early ‘60s as means to ensure that “innocent victims” would not be denied access to the US legal system. Since then, Plaintiff’s lawyers have been encouraged to take on cases and in essence finance the claim in hopes of a “pay day” in the form of a jury verdict.
Finally, there is attorney advertising. You need only watch some late night TV or drive down the interstate to see this at work. “Call the ABC firm after ANY ACCIDENT. Aggressive Attorneys that work for YOU!” This form of communication simply provides a foundation for a strong societal tendency to blame misfortune and general ills on some specific person or entity in an attempt to obtain financial remuneration from the targeted defendants.
BridgeBuilder assists those concerned about the potential liability arising from the operation of their business or professional practice or ownership of their real estate against their personal assets.
BridgeBuilder - Plans for Life
Garrett Griffin Monday, May 23, 2011 Wealth is at Unprecedented Risk - Consider Asset Protection Planning!
BridgeBuilder – Plans for Life, is a Kansas City asset protection estate planning practice that represents business owners, physicians, other professionals, real estate owners, investors, and other individuals of high net worth throughout Kansas and Missouri. BridgeBuilder assists those concerned about the potential liability arising from the operation of their business or professional practice or ownership of their real estate against their personal assets.
If you are a member of one of the above groups, your wealth is at unprecedented risk! Did you know that more than 50,000 lawsuits are filed every day? How about that 94% of the attorneys reside in the United States or that 97% of all lawsuits are filed in the US? The fact is that 1 in 3 people will be sued in their lifetime.
Asset Protection Planning in its purest form is the planning process of arranging one’s assets to create legal obstacles for creditors and thereby lower your financial profile. Protecting what you’ve accumulated is a crucial responsibility for you and your family. It enables the opportunity to build a network of assets that can grow and eventually span generations. After all, what’s the point of working if everything you work for is constantly at risk? Isn’t it time that you started working on building that bridge?
Next time, I’ll look why there is such an increased liability exposure.
BridgeBuilder – Plans for Life
Garrett Griffin Monday, May 16, 2011 BridgeBuilder Announces the Addition of Jeffrey R. Matsen
BridgeBuilder – Plans for Life, the Wealth & Legacy Planning Group of the Kansas City Law Firm, Kevan D. Acord, P.A.., is pleased to announce that Nationally Recognized Estate and Business Planning Attorney, Jeffrey R. Matsen and his Orange County California firm, Wealth Strategies Counsel (WSC) of Bohm, Matsen, Kegel, & Aguilera LLP are “Of Counsel” to BridgeBuilder. This relationship provides BridgeBuilder with additional resourcesand prestige associated with Attorney Matsen and his firm; ultimately increasing the services to their clients with Estate, Business and Asset Protection Planning as well as the ability to provide Offshore services.
Attorneys Garrett Griffin and Jason Salinardi are co-founders of BridgeBuilder – Plans for Life (BB) BridgeBuilder is the only Wealth & Legacy Planning firm providing comprehensive and continuing solutions to medical professionals in Kansas and Missouri. BB specializes in preserving, protecting, and transferring the wealth and legacy of clients in this risk laden, tax-burdened, and litigious society. BB serves doctors and dentists who have a new practice, are transitioning or exiting out of their current practice, are concerned that their personal assets are exposed to our litigious society, or simply have not developed a comprehensive Wealth & Legacy Plan.
Jason M. Salinardi graduated from the University of Missouri-Columbia in 2000 with his B.S.and Master’s in Accountancy, from the University of Missouri-Columbia Law School in 2003, and from the University of Missouri-Kansas City Law School with an LL.M. in Taxation in 2004. Jason is licensed to practice law in the States of Missouri, Kansas and Illinois.
Garrett L. Griffin is a third generation attorney. He received his B.S. in Business Administration from William Jewell College in 1998 and graduated from the University of Missouri – Kansas City School of Law in 2001. He went on to receive his LL.M. (Master of Law in Taxation) from the University of Missouri – Kansas City School of Law in 2005. Garrett is licensed to practice law in the States of Missouri and Kansas.
BridgeBuilder is the Wealth & Legacy Planning group of the Kansas City, Missouri Law Firm of Kevan D. Acord, P.A. KDA is the preeminent tax boutique firm in Kansas City. Employing tax attorneys and Certified Public Accountants, KDA provides comprehensive tax consulting and compliance services to some of the country’s largest companies, including Dairy Farmers of America, the country’s largest dairy cooperative. KDA, BB, and Matsen team up to provide the most comprehensive tax, estate, and asset protection solutions to clients in Missouri and Kansas.
Attorney Jeffrey R. Matsen’s knowledge, professionalism, responsiveness and integrity have vaulted him to the top of his field culminating in his designation by Worth magazine as one of "America’s Top 100 Attorneys", by Los Angeles Magazine as one of California’s "Super Lawyers". The Nationally Renowned Attorney Rating Service, ‘AVVO’ has rated Mr. Matsen a perfect "10/10 Superb" and he has continued to achieve the highest "AV rating" and has been designated a "Preeminent Lawyer" by the only other prestigious attorney rating directory, Martindale Hubble. He is internationally recognized in the areas of Asset Protection, International Trusts and Offshore Business Entity Formation and has a myriad of world-wide legal, financial and business connections.
Matsen is the founding partner of Wealth Strategies Counsel(WSC), the Estate Planning and Business Transactions Department of the Orange County California premier law firm of Bohm, Matsen, Kegel & Aguilera, LLP with offices in Orange County California, New York City, Washington D.C., Detroit, Chicago, Salt Lake City, Boise Idaho, Monterey/Carmel California, San Diego, Honolulu, and now, Kansas City. With over 35 years of experience, WSC handles complex and sophisticated asset protection, estate and business planning matters locally, nationally and internationally. WSC serves a variety of clients by providing solutions they can count on and advisors they can trust. WSC make certain that their client’s wishes are not only being fulfilled, but that they are sound and tax advantaged.
Both BB and WSCare members of Wealth Counsel (WC) a national association of Estate Planning attorneys and a leading provider of tools and intelligence to the Estate Planning community. It provides its member attorneys with back office technology solutions and continuing legal education that keeps them on the leading edge of professional knowledge and engages the attorney membership in a collaborative network where each attorney can exchange ideas and problem solve. There are over 1000 member attorneys nationally in Wealth Counsel, including many of the leading Estate Planning practitioners in the country. Attorney Matsen has presented continuing legal education through WC and continually collaborates with other WC attorneys, which is how the two firms became associated and began working on mutual cases together.
“I am excited to be affiliated with BridgeBuilder and value their opinions and ideas! The decision to join their firm on an “Of Counsel” basis was made after considerable due diligence and concluding it is a very professional and outstanding firm. Our combined expertise and resources provide a strategic advantage to our mutual clients,” stated Jeffrey R. Matsen, Founding Partner, Wealth Strategies Counsel.
“BridgeBuilder is thrilled to have someone of Jeff’s caliber on our Wealth & Legacy Planning team,” stated Garrett L. Griffin. Jason M. Salinardi added, “We look forward Jeff’s involvement as we enhance the asset protection planning solutions offered to our Kansas City clients.”
Garrett Griffin and Jason Salinardi
BridgeBuilder – Plans for Life
Architects at Preserving, Protecting & Transferring Family Wealth Sunday, May 15, 2011 What is Asset Protection?
Last week Garrett shared the definition of Asset Protection Estate Planning. I want to give an analogy that I use to help people understand what we are talking about.
Like most people (I hope) I always wear my seatbelt. My car has front and side airbags that are triggered to release upon impact to provide further protection. Like most people (again I hope), I do not drive around with the plan or hope to get into an accident to see if the seatbelt and airbags work. But I do know based upon research and evidence, that I will be protected in the case of an accident and be glad I have that seatbelt and airbag protecting me.
Asset Protection Estate Planning is the process of installing a seatbelt and airbags to protect your financial wellbeing. We utilize the necessary asset protection tools to install that seatbelt and airbags for you. Hopefully, you will never need them, but you and your family, your business, your partners, etc. will be very glad you do if attacked.
Jason Salinardi
BridgeBuilder
Thought for the Week
"A bank is a place that will lend you money
if you can prove that your don't need it."
~ Bob Hope Tuesday, May 10, 2011 The Case for Asset Protection Estate Planning
We spend a lot of time on building and learning how to build our fortunes; unfortunately, we spend very little time and very little is ever taught on the subject of protecting our fortunes from creditors. Unfortunately, we live in a very litigious society (more than 50,000 lawsuits filed daily), and as such it is no longer a question of negligence, but a question of who can be blamed for someone’s misfortune.
As you probably can see, if you have any degree of even modest wealth, your assets have considerable exposure to creditors. Therefore, we must engage in special estate planning methods to protect your assets.
We call these special estate planning methods "ASSET PROTECTION ESTATE PLANNING"! Asset Protection Estate Planning can be defined as: the process of organizing one's assets and affairs within an estate plan that protects assets not only from liabilities and litigation,but also from disability or guardianship probate, death probate and estate taxes.
Why should you engage in Asset Protection Estate Planning?
Besides the obvious reason - that you should be inclined to protect those non-exempt assets you have worked so hard to earn -you should engage in asset protection estate planning for the following reasons:
(1) Peace of Mind
(2) Avoiding Probate and Estate Taxes
(3) Liability and Malpractice Insurance Savings
(4) Reduced Settlements and Number of Suits
(5) Exemplary Damages
(6) Liability Insurance Carriers can go Bankrupt
(7) Strategic Bargaining Power with Settlement of Claims
In future posts, we’ll continue to explore the case for Asset Protection Estate Planning and some of the various techniques.
BridgeBuilder – Plans for Life
Garrett Griffin Monday, February 28, 2011 Kansas Legislature Looks to Increase Exempt Assets
The Kansas Legislature is looking to enhance the statutory asset protection afforded to the residents of Kansas. The Kansas Senate is to consider a bill (SB 36) that appears to add inherited IRAs to the list of exempt assets. It recently came out of the Committee on Judiciary to the full Senate.
Generally, Kansas statute currently exempts the following assets from seizure and sale:
1) a homestead to the extent of 160 acres of farming land, or of one acre within the limits of an incorporated town or city;
2) the furnishings, equipment and supplies, including food, fuel and clothing, for the person which is in the person's present possession and is reasonably necessary at the principal residence of the person for a period of one year;
3) jewelry, having a value not to exceed $1,000;
4) motor vehicle, having a value not to exceed $20,000;
5) a burial plot or crypt or any cemetery lot;
6) the books, documents, furniture, instruments, tools, implements and equipment, the breeding stock, seed grain or growing plants stock, or the other tangible means of production regularly and reasonably necessary in carrying on the person's profession, trade, business or occupation in an aggregate value not to exceed $7,500.
K.S.A. 60-2308 also provides some protection for pension and retirement money as well as family postsecondary education savings accounts. SB 36 appears to place the inherited IRA at the same level of protection as a personal IRA. Please visit the Kansas Legislature for more information on SB 36.
If you have additional questions or concerns about asset protection, please contact us for a no obligation consultation.
Garrett Griffin |