Myth Busting: Why LLCs and Land TrustsDo Not Protect Your Assets
Limited Liability Companies (LLCs) and Land Trusts or other Revocable Trusts are often regarded as essential components in organizing one's financial affairs and safeguarding assets. However, it's crucial to dispel the common misconception that these tools alone provide asset protection. LLCs do not provide an impenetrable fortress against creditors and lawsuits. Here we explain some of the limitations of LLCs and revocable trusts, and we shed light on why relying on just these strategies may leave individuals vulnerable to unforeseen financial risks.
Living Trusts: Avoids Court Intervention For Assets When You Pass
Estate planning with living trusts, such as land trusts, serves as a vital tool for orchestrating the smooth transfer of assets to heirs after an individual's passing. However, its primary focus is on the distribution of assets and the execution of one's wishes, not on shielding assets from potential threats during the individual's lifetime. Assuming land trusts or other living trusts inherently provide protection against creditors and lawsuits is a common misconception that warrants clarification.
Creating a revocable living trust (such as a land trust), is the main tool for avoiding the Probate Court, and the judicial oversight that comes with that, upon one’s passing. However, titling assets into a revocable living trust does not provide creditor protection. Land trusts do not provide asset protection. Anyone who is sued and has their assets titled into their revocable living trust does not have any more protection than if the assets were titled into their personal name.
The Illusion of LLCs: Unveiling Vulnerabilities
On the other hand, LLCs are utilized to limit liability from lawsuits and creditors. However, the liability protection from LLCs is limited and can even be negated by courts of law. If an LLC is not maintained properly or is perceived as an extension of the individual for fraudulent purposes, creditors may successfully pierce the LLC veil and gain access to personal assets.
The assumption that an LLC creates an impregnable shield is misguided. The assets within an LLC remain susceptible to lawsuits and creditors, and the belief in absolute protection may expose individuals to unwarranted risks.
True Asset Protection: Domestic and Offshore Trusts
To address the limitations of revocable trusts and LLCs, we must turn to the only true asset protection vehicles, trusts with robust asset protection features. Irrevocable trusts, in particular, can provide an additional layer of security by placing assets beyond the immediate reach of potential creditors.
Tresp, Day & Associates, Inc. has over 32 years of experience protecting individuals from lawsuits utilizing structures that include irrevocable trusts. Our structures have been proven in court. Do not leave your family’s fortune up for grabs by creditors in lawsuits. Safeguard your assets fully by contacting our office for a free consultation. See how Tresp, Day & Associates, Inc. can fortify your assets to mitigate potential vulnerabilities from creditors and lawsuits.
