How Does Tax Planning Work with Asset Protection?

We take Tax Planning into consideration when creating each client’s individualized, customized, and tailored Asset Protection plan. Each structure, whether Domestic or International varies when it comes to tax planning. It is essential to know how your assets will be taxed before setting up your plan.

With Intentional Asset Protection, there are potential tax advantages. If you create an international trust, you must report the amount of money in it to the IRS. However, you will not need to pay taxes on it until you take money from the trust and transfer it to the U.S. In addition to this tax benefit, offshore trusts protect your assets from lawsuits and creditors.

Limited partnerships have several tax advantages. The first is that partners can distribute partnership income, gain, loss or credit among the partners however they see fit. This will depend on your operating agreement, but the distributions do not necessarily need to be proportional. Therefore, a partner can receive a disproportionately large share of partnership gain or loss and receive the tax benefits that come with it. A partnership can distribute appreciated or depreciated property to a partner without recognizing gain or loss. This means that it is not required to reevaluate the property or pay capital gains tax on an appreciated property. Another key advantage is that distributions to limited partnerships are not subject to burdensome self-employment taxes.

Corporations can be taxed as a C corporation or S corporation. Most people find it ideal to be taxed as the S corporation. In this case, only the owners are taxed through corporate tax status. In comparison, C corporations pay a tax on profits and their shareholders are taxed when receiving a distribution. It is important to note that the criteria for a corporation to be taxed as the S corporation can significantly narrow the options for Asset Protection.

Limited Liability Companies (LLCs) can be taxed as a C corporation, S corporation, or a partnership. Taxation as a partnership may be the most desirable choice because it avoids the taxations faced with C corporations and avoids the business restrictions on S corporations.

Lastly, LLCs can be structured as disregarded entities to be ignored for taxes. A disregarded entity LLC that holds a non-income producing property does not need to report its income for federal and most state tax purposes. This can be a helpful strategy to maintain privacy. An international LLC that is structured as a disregarded entity will reap the benefits of international protection while facing less reporting requirements than an international trust.

For more information on Tax Planning and Asset Protection, contact The Presser Law Firm, P.A. for a complimentary preliminary consultation.

The Presser Law Firm, P.A.

6199 N. Federal Highway, Boca Raton FL 33487

(561) 953-1050 or e-mail