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Asset Protection

Why should I protect my assets?

A real-world example

In 1953, Sam and Helen Walton put what little they had into a family limited partnership that included their four children. They called their partnership “Walton Enterprises.” From this partnership the well-known chain store, Walmart, evolved. Eventually, the partnership assets grew and included real estate, banks and a newspaper.

In 1985, the Walton family’s wealth was estimated to be $20 to $25 billion. But when Sam Walton died in 1992, he owned only a 10 percent interest in Walton Enterprises. He had used a family partnership to transfer assets that grew to over $18 billion to other family members without gift or estate tax.

To Sam Walton, the gift of a business opportunity to a loved one was much more valuable than a gift of cash. With a flat rate of 55 percent at the time of Sam Walton’s death, this advanced planning saved approximately $10 billion in estate taxes.

True wealth is not measured in money or status or power. It is measured in the legacy we leave behind for those we love and those we inspire.

Co-founder of National Farm Workers Association

The power of a Family LLC

Our clients frequently come to us searching for one solution, and a Family LLC often presents answers to questions they did not realize they had.

A Family LLC is a multifaceted legal entity that provides enhanced asset protection, increased savings on taxes, and robust estate planning. As a focal point of WMA’s financial and tax planning, many of the options we offer revolve around the precise use of an FLLC.

An FLLC is a powerful and valuable tool, providing benefits to our clients now and beyond their lifetime by managing, protecting, and ultimately transferring their hard-earned assets to their children and heirs.

The power of a Family LLC

How a Family LLC works

Frequently Asked Questions

Why do I need a Family LLC in conjunction with a Living Trust and Will?

A Living Trust and Will alone does not protect your assets from taxes and Medicaid Spend Down. Your estate will still be subject to state (if your state has an estate tax) and federal estate taxes.

Is my Estate large enough for an FLLC to be worth the cost?

Our solutions are not centered around the amount of wealth you have but if the financial tools will solve your problems and meet your needs.

What assets can I put in my Family LLC?

Your Non-Qualified assets will fund your Family LLC. This would include your assets that are not subject to income tax.
Example: Stock, annuities, cash, etc.

Can I put my IRA in the Family LLC?

No. Because IRAs are qualified assets (subject to income tax), you cannot place them in a Family LLC. We would use our IRA Rescue to assist with transferring the qualified funds into non-qualified funds in a tax-efficient manner.

Do I need a bank account for both my Family LLC and my Living Trust?

Yes. Think of your Family LLC bank account as a “savings account” that you would keep anything greater than $10,000 in. Your Living Trust account is used for your day-to-day expenses, and you typically would not want it to hold more than $10,000 regularly. Anything outside of either of these 2 bank accounts will be subject to probate.

How do I protect my retirement accounts from Medicaid Spend down?

Once you are 59 ½ years old, we begin the IRA Rescue process to convert tax qualified money to cash.

Should I have a checking and savings account outside of the Family LLC?

Yes, you should always keep their personal or joint checking & savings accounts. However, you should move your personal accounts into the Living Trust to help avoid probate. The Certification of Trust is included in the estate planning book that should be taken to the bank to change their existing personal checking and saving accounts into the name of their trust. You will also have a checking account for the Family LLC. The majority of your savings should be kept in the Family LLC for asset protection and funds can be transferred to the trust checking any time money is needed.

Should I have Credit Cards inside the Family LLC?

Credit cards inside the LLC should only be used for business purposes. Day-to-day credit cards should be in your personal name.

Should my homeowners or other insurance policies list the Family LLC?

Homeowners policies should be in the name in which the home is deeded, usually your personal name. Life insurance policies, if they are term, can be changed to the Family LLC. The owner and beneficiary should be the Family LLC. Once ownership is transferred, all premium payments can come from the Family LLC. If the life insurance policy is whole life or universal life, the cost basis should be reviewed before the policy is transferred into the Family LLC. This will be a taxable event. If premiums paid into policy are higher than the cash value, there should not be a taxable transfer. If the cash value is higher than premium payments made, then there could be a taxable event and you will owe taxes. If the tax liability is acceptable, then you can move the policy into the Family LLC. The owner and beneficiary should be the Family LLC. Once ownership is transferred, all premium payments can come from the Family LLC. Auto Insurance is paid from the Living Trust Checking.

What should be done with jewelry, guns, and other personal items? Should they be listed in the Family LLC?

If these personal items are not listed on any insurance policies, they should not be listed in the Family LLC. Only items that hold significant value (antiques, for example) should be put in the Family LLC. Most personal items are worth pennies on the dollar and therefore do not need to be protected. Firearms can also create a liability for the Family LLC if they’re not antiques. Since most personal items are undocumented it would be difficult to know whether or not the item still exists. If these types of items are to be passed to a beneficiary at the time of death, there is a document in the estate planning book called “Instructions for the Distribution of My Personal Property” to list assets that need to be given to a beneficiary. All non-listed assets are moved the trust with the Pour-over Will.

Can I put my primary residence in the Family LLC?

You can, but we do not recommend it. Placing your primary residence into the Family LLC would disqualify you from the homestead exemption, capital gains exclusion, and stepped-up basis.

What happens after we've created a Family LLC?

Once the Family LLC has been created, your Wealth Management Accounting team will help ensure you fund it correctly. The funding process is the most important step, and unfortunately it’s also the step that is most often forgotten. If the Family LLC and Living Trust do not get funded with your assets after being properly set up, then the entire process was for no reason. Your team will walk you through funding and help answer your questions every step of the way.