Michael Lindekugel wrote:

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As Tad notes, there are legitimate uses of various
structures for tax and asset protection purposes, but they
don't reduce down well to a "seminar" format. And, if not
handled correctly, such structures can cause more damage
than they solve.

I'm more qualified to speak to the tax issues--there are
reasons to use various structures to achieve certain tax
goals, but there's no "magic bullet" or "one size fits all"
structure out there. The courts are more than willing to
disregard a structure that appears to exist solely for tax
avoidance purposes and has no other "redeeming" value.

Asset protection is the province of attorneys generally, but
my layman's understanding of the topic is that, in most
cases, the issue becomes discouraging a potential creditor
from doing what he/she would need to do to "break through"
the entity, with perhaps just the limited goal of being able
to negotiate a more favorable settlement. But if you start
doing things when it becomes clear there's a major debt
that's going to come due, don't be surprised if the courts
find a way to "bust" your structure and/or convince you it
is in your best interests to assist in undoing the structure
if it is technically outside the court's jurisdiction.

--
Ed Zollars, CPA
Phoenix, Arizona

Michael Lindekugel wrote:

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And Al Gore is the father of the Internet!

(Did Mitton invent "insurance"? Or the "corporation"?)

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I think a good starting point that might leave some money on the table,
but lets you sleep better, is: you're heading into the grey area when
you use an entity/structure for something other than its intended
purpose. You might do OK there, but still, you're in the grey area, and
that's a type of vulnerability/risk. Just as "frivolous lawsuits" are a
risk to assets, IRS rulings and, well, non-frivolous lawsuits are
potential risks when trying to stop the IRS or a creditor from getting
at your stuff.

A C-corp is a way of structuring a business; so is an FLP. Do you have a
business? Maybe it should be structured as a C-corp, or an FLP. But
throwing your assets into a C-corp or FLP to evade taxes or
creditors...well, seek legal counsel on that one.

A CRT is a way of gifting assets to a charity, but drawing some income
during your lifetime. Are you certain that you want to gift substantial
assets to charity? Then a CRT might be something to consider.

Without speaking specifically to Mitton's suggestions...there is a bit
of a pattern...you hear schemes advertised, and then five years later
you see the Tax Court decisions. Some hold up, some don't; some of the
ones that do hold up get plowed under by changes to tax law. Not just
the tax side either..."disregarding an entity" is a very old concept in
law so asset-protection schemes need to be mindful of the limitations.
People with piles of money, and especially people with their own
businesses, need to think about these issues, but this is lawyer stuff,
not easily reduced to seminars and form books.

-Tad

hello,

someone explained "asset protection" to me the other day in a seminar.
actually it was a soft sell to buy their materials produced by Jay Mitton,
JD of THE NATIONAL FOUNDATION FOR
ASSET PROTECTION & ESTATE PRESERVATION, Mitton & Burningham in Newport
Beach. he is allegedly the father of asset protection.

the concept uses a C corp for tax deductions, limited partnership for asset
protection, charitable remainder trusts to lower taxes, etc. I find quite a
bit of info about it on the Internet. is this idea grey area law/tax or is
it on the up and up as a deterrent to frivolous lawsuits in today's
litigious society?

cheers,
Michael