The Presser Law Firm, P.A. Definitions
The following is a guide, ordered from A through Z, of common definitions you should know regarding Asset Protection, Estate Planning, and Business and Legal Counsel.
This information is an educational resource -- if you have any questions regarding any of these terms or need any other definitions not listed here clarified, please contact our offices today.
An asset is any item of property that has monetary value. Assets include current assets, fixed assets and intangible assets. (Scroll down for the definitions of current, fixed and intangible assets).
Assets that are exempt are protected by statutory law from creditor claims. Each state has different exemptions laws. As an example, the following assets could be exempt in your state: your primary home, furniture, burial plots, retirement accounts, annuities, etc. However, it is important to check your state exemptions to be certain which assets are exempt and to what extent.
Asset Protection is the legal process of titling both your personal and business assets to put them beyond the reach of future potential threats, creditors, and liabilities while simultaneously enjoying the benefits of those assets.
Captive insurance is established with the specific objective of insuring risks of businesses emanating from their parent group or groups, and customers where applicable.
A civil judgment is the final rendering of a judge or jury's decision in a civil case. This includes a finding that one party owes money to the other. It also includes a declaration of rights and responsibilities. After a judgment is proclaimed against a party – the winning party becomes a "creditor" in the sense that the court gives them the right to collect that judgment against the debtor.
A corporation is an organization formed with state governmental approval to act as an artificial person to carry on business (or other activities), which can sue or be sued, and (unless it is non-profit) can issue shares of stock to raise funds with which to start a business or increase its capital. A corporation can elect to be taxed as either a C corporation or an S corporation.
A C corporation is any corporation, under United States federal income tax law, which is taxed separately (resulting in double taxation) from its owners.
A creditor is a party (e.g. person, organization, company, etc.) that has a claim to the assets of a second party. Essentially, a creditor is someone who is coming after another person for some monetary amount based on a credit arrangement or other right established by law.
Current assets are assets that can be converted to cash or used to pay liabilities and include but are not limited to: equipment, property and funds owned by a business (such as accounts receivable), cash, etc.
A debtor is a party (e.g. person, organization, company, etc.) to a credit arrangement or other right established by law who owes a debt or the performance of an obligation to another, who is called the creditor.
Domestic Asset Protection
Domestic Asset Protection is the set of legal techniques and body of statutory and common laws dealing with protecting assets of individuals and business entities from creditors using entities, trusts and strategies within the United States.
Double taxation is the taxing of the same property for the same purpose twice in one year.
Equity stripping is achieved by removing the equity in assets. Equity stripping is accomplished by encumbering the asset by liens or mortgages. The theory behind equity stripping by reducing your interest in any given property (thereby reducing any equity) creditors will not go to great lengths to include that asset in any claims. Equity stripping is typically seen in homes and real estate but can be used for a multitude of other assets.
Estate planning is the process of anticipating and arranging for the disposal of an estate. Having an estate plan eliminates the uncertainties over administration of a probate and often reduces taxes and other expenses of disposal of an estate (including length of time).
Family Limited Partnership
The family limited partnership (FLP) is a type of limited partnership restricted to family members. One or more general partners are responsible for managing the family limited partnership and its assets. The general partners take full liability for the partnership's debts, liabilities, obligations, etc. Limited partners have no ability to control, direct, or otherwise influence the operation of the family limited partnership. They can neither buy additional assets, nor sell existing assets, and they cannot act on the partnership's behalf. They also substantially lack the ability to sell their interest, with one typical exception: transfers to immediate family members (spouses, siblings, and direct lineal descendants and ascendants) depending on the partnership agreement.
Fixed assets are assets that cannot easily be converted into cash and include but are not limited to: basic equipment and structures.
Foreign Limited Liability Company
The foreign limited liability company is a limited liability company that is registered outside of the state where it was initially incorporated, but within the United States.
A homestead exemption protects the value of your primary home from creditors and circumstances surrounding the death of a spouse. Each state has different homestead exemption laws (rules and limitations).
Intangible assets include assets such as intellectual property rights (trademarks, patents, and copyrights).
International Financial Center
An international financial center is a financial center in a global city that is home to a large number of internationally significant banks, businesses and stock exchanges.
International Limited Liability Company
The international limited liability company is a limited liability company that is registered outside of the United States.
International "Offshore" Asset Protection
International or offshore Asset protection is the set of legal techniques and body of statutory and common laws dealing with protecting assets of individuals and business entities from creditors using entities, trusts and strategies outside of the United States.
An international trust is a trust governed by the laws of a jurisdiction other than the United States.
An irrevocable trust is a trust where provisions and benefits cannot be altered or canceled by the settlor/grantor. Once the settlor/grantor transfers his or her assets into the trust, he effectively removes all of his or her rights of ownership and control over the assets and the trust.
Legal and Business Counsel
Legal and business counsel encompasses the counsel and execution of the many realms of business law. Business law is the branch of law that examines topics that impact the operation of a business. This may include but not limit; contracts, the law of corporations and other business organizations, securities law, intellectual property, antitrust, secured transactions, commercial paper, pensions & benefits, trusts & estates, immigration law, labor law, employment law, etc.
Limited Liability Company
A limited liability company (LLC) is a flexible form of enterprise that blends elements of the partnership and corporate structures. It is a legal form of a company and provides limited liabilities to its owners in the majority of United States Jurisdictions. A LLC can either be member managed or manager managed.
Limited Liability Partnership
The limited liability partnership is another type of partnership in which some or all partners (depending on the jurisdiction) have limited liability. These entities are namely used for the professional practices of lawyers, medical professionals, accountants, architects and other professions.
The limited partnership (LP) is a type of partnership where there is at least one general partner and at least one limited partner. The "general partners" of a limited partnership are responsible for all debts and contracts of the partnership, participate in management decisions, and share in profits and losses according to the percentage of their total investment. The investing "limited partners" of a limited partnership cannot participate in management, but share in the profit according to the percentage of their investments. The limited partners have limited liability in regards to partnership debts and contracts.
Manager Managed Limited Liability Company:
The manager-managed LLC is an entity structure where one or more managers are appointed to run the business and make decisions on behalf of the business. The members in this case do not have the authority to act on behalf of the business unless they become managers.
Member Managed Limited Liability Company:
The more common, member-managed LLC is an entity structure where all of the business members jointly run the business. Every member has the authority to act on behalf of the business.
A Partnership is a business enterprise entered into for profit, which is owned by more than one person, each of whom is a "partner." A partnership may be created by a formal written agreement, be based on an oral agreement or just a handshake. Each partner invests a certain amount (money, assets and/or effort), which establishes an agreed-upon percentage of ownership. Each partner is responsible for all debts and contracts of the partnership (even if another partner creates the debt or enters into the contract) and participates in management decisions. Each partner also shares in profits and losses according to the percentage of their total investment.
A revocable trust is a trust where provisions and benefits can be altered or canceled by the settlor/grantor. This type of trust has great estate planning, but no Asset Protection benefits as creditors can also revoke the trust and reach the assets within the trust.
The S corporation resembles a partnership in terms of taxing structure. S corporations do not pay any federal income taxes. Instead, the corporation's income or losses are divided among and passed through to its shareholders. The shareholders must then report the income or loss on their own individual income tax returns.
A trust forms when property is transferred by a settlor/grantor to be held by a trustee for the benefit of a third party beneficiary. A trust may be revocable or irrevocable and established domestically (within the United States) or internationally (outside of the United States).
The settlor/grantor is the party who creates the trust on behalf of third party beneficiaries.
Trust "Third Party" Beneficiary
A trust "third party" beneficiary is the person or persons who are entitled to the benefit of a trust arrangement.
A trustee is the party in a trust arrangement that holds property, authority, or a position of trust for the benefit of the third party beneficiaries.
Yes, You Can Lose Everything!
You may think that your wealth is safe and that you don't need protection. But don't delude yourself and accept reality — for every 60 minutes you spend making money, spend 60 seconds thinking about how to protect it!