You want to title your cash, CDs, mutual funds and other liquid investments to one or more limited partnerships (LPs). We most frequently use LPs to protect liquid investments because; 1) the LP lets you control these assets; 2) your LP interest cannot be claimed by your creditors; 3) the LP is tax-neutral; 4) the LP gives you maximum ownership and operating flexibility; and 5) the LP lets you better plan your estate and reduce your estate taxes. The LP is both versatile and protective. Most comprehensive asset protection plans include at least one limited partnership. But the limited partnership is only one option. Some planners recommend limited liability companies (LLCs) because they too are COPES (limiting creditors only to the charging order). But we prefer the limited partnership for these assets because the limited partnership is designed to own 'safe' assets and the LLC is preferable for business purposes and to own non-residential real estate. Moreover, the limited partnership provides for discounted estate tax valuations and finally, the limited partnership can simultaneously own the client's multiple LLCs or C corporations and thus serve as the foundation for their entire plan.
Retirement accounts or special accounts – such as 529 plans – should usually remain outside the LP. Moreover, an LP shouldn't own liability-producing assets such as real estate, equipment or vehicles since the LP's general partners are personally liable for lawsuits arising from its assets. That's why it's preferable to title your 'dangerous' assets to a limited liability company. While transfers of assets to a limited partnership generally have no tax consequence, it is always wisest to check with your accountant about the tax consequences before you title any asset to a limited partnership – or any other entity.
In summary for liquid assets we prefer to utilize the limited partnership method but ultimately what strategy we use depends upon your personal situation, the value of your assets, your estate plan, and your financial and tax objectives. For this reason, you should involve your financial planner, tax advisor and the rest of your financial team in your planning. Asset Protection is one goal, but you also want to structure your assets correctly considering your other goals. Remember, your financial professionals are important members of your wealth protection team and they are essential to a coordinated, integrated plan.
Contact us today for a complimentary preliminary consultation regarding your Asset Protection options.
The Presser Law Firm P.A.
6199 N. Federal Highway, Boca Raton FL 33487
(800) 999-9992 or e-mail firstname.lastname@example.org