The Modular Structure
One of the best asset protection planing strategies is to combine the utilization of the Domestic Asset Protection Trust with an LLC in a modular structure. Basically, the member interest of the owner of the LLC is transferred to the Domestic Asset Protection Trust which holds the interest more or less a custodian. Example: A husband or wife can be the Trustor or Settlor of the DAPT, an LLC can then be set up to hold real property or other investments and the member interest of the LLC can be transferred to the DAPT. A simple diagram of the modular structure is set forth below.
The benefit of the modular structure is that the member interest is protected by the Trust, but the business owner or professional continues to manager the investments contained within the LLC as its manager.
The modular structure provides two significant barriers to the prospective creditor. It must first attack the Trust which can be very expensive and time consuming and may result in an unfavorable decision to the creditor. And then, even assuming a favorable judgment, the creditor will have difficulty to enforce the judgment because of the Charging Order limitation of the LLC. For additional information regarding the modular structure or Domestics Asset Protection Trusts, call us at 714-384-6500 to schedule a consultation and protect your assets today.