Page 43 - MetalForming January 2011

• Never have your kids own life-insurance policies on your life (or second-to-die).
• If your kids or other family members own stock in your closely held business, make sure you have a unit buy/sell agreement to be certain the business stays in the family.
•Givethekidslimited(nonvoting)unitsintheFLIP,which is a perfect asset-protection device, locking out an ex-spouse. • If you live in a community-property state (like Texas, Cal- ifornia or Louisiana), remember that gifts and inherited property are not in the community (spouse has no owner- ship). In all other states, gifts and inherited property (and property owned prior to marriage) are nonmarital property and the spouse has no claim. Never comingle noncommunity
property with community property.
3) Sometimes kids must be protected from themselves. If
a minor or even an adult is a spendthrift, on drugs, has spe- cial needs, or other problems, set up an appropriate trust.
Protect Your Business
1) Don’t operate your business as a sole proprietorship or as a general partnership—incorporate your business.
2) Keep your corporation thin—only have the corporation own those assets that are necessary to operate, such as cash, inventory and accounts receivable. Here’s the drumbeat:
a) The following should be owned by separate LLCs and leased to the corporation:
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• Land that the business uses to operate. It’s okay to leave the building in the company as a leasehold improvement.
• Expensive equipment, furnishings and signage.
• Vehicles (most lawsuits against businesses are the result of vehicle accidents).
• The company should not use its cash to make invest- ments, own artwork or own any other nonbusiness asset.
Note: A thin corporation is not a good target for a lawyer going after big bucks.
b) If you are a C corporation, become an S corporation so you can make distributions without being double taxed.
3) Your corporation should never own life insurance on any of the stockholders—proceeds open to creditor claims.
4) Opening a new location or diversifying with a new product or service? Start a new corporation.
The above list does not cover all of the situations that require asset protection. Nor does the list include every do, don’t or strategy that a competent advisor might use.
Your death plan should be designed to protect your wealth from the IRS. Your estate plan is not done unless it includes a lifetime plan. Asset protection is an essential part of your lifetime plan, designed to protect your wealth from any third party or court that tries to take away any part of it.
When you work with an experienced advisor, asset pro- tection (as a part of your estate plan) is easy, quick and best
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