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Using the LLC in a Modular Structure For Asset Protection Services
It is well documented that an LLC is probably the best form of business entity for purposes of protecting debts against the member owner rather than debts against the LLC directly. A creditor of an LLC member is generally limited to a Charging Order as a remedy to obtain the assets of the debtor member’s LLC interest. However, the Charging Order may not suffice for all protection purposes. One way to build an additional firewall and provide more protection is to have the LLC member interest owned by a domestic or foreign Asset Protection Trust. This modular structure provides much better protection against creditors than the use of the LLC by itself.
The Trust is formed and then the Trust becomes the owner of the LLC. The argument is that since the Trust is the owner of the LLC that the creditor has to go against the Trust before it can obtain the Charging Order because the member interest is not owned by the debtor but by the Asset Protection Trust.
There are various laws in about 18 or 19 states that have been created giving effect to Asset Protection features for Trusts. Nevada, Alaska and South Dakota are the primary examples of states that have an act of favorable jurisdiction in this regard. Offshore Trusts can also be set up to hold title to the LLC interest. The Offshore structure is much better because it takes any challenge against the Trust outside of the jurisdiction of the US court system.
The Modular Structure utilizing LLCs is available to discuss and the strategy can be implemented. Please contact Jeff Matsen at Bohm Wildish & Matsen, LLP for a review of your situation to determine if the Modular Structure utilizing LLCs is appropriate for your Planning.