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The Family Savings LLC

The Family Savings LLC
The Family Savings LLC can be used as an alternative to the Family Limited Partnership in many circumstances. In particular, individuals who are not primarily concerned with estate tax savings; will find that the Family Savings LLC has all of the asset protection features of the FLP but may be more convenient and flexible to create and maintain.

The Family Savings LLC is a specially designed type of Limited Liability Company (LLC). The LLC is a legal entity created by statute and permitted in all fifty states. The purpose of the LLC is to allow individuals to conduct their financial and business affairs in an efficient and convenient manner. It combines the best features of corporations and partnerships while eliminating many of the problems and complexities associated with each.

The LLC provides the protection from liability of a corporation without the formalities of corporate minutes, bylaws, directors and shareholders. At the same time, the LLC is treated like a partnership for tax purposes. That means that the LLC pays no income tax. All of the income and deductions flow through directly to the members personal tax returns. Further, like a partnership, the owners are permitted to adopt very flexible rules regarding the administration and operation of the business of the LLC.

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It should be clear from this discussion that the LLC will generally be the strategy of choice for most business arrangements. For personal planning and asset protection the Family Savings LLC can be designed to accomplish many of your objectives.

In the usual case, Husband and Wife form the Family Savings LLC. Each are members owning a 50% interest. Financial assets such as brokerage accounts, mutual funds, savings accounts and insurance policies are transferred to the LLC. As discussed later, the family home should not be placed in the LLC. Also, if investment real estate is owned, these properties should be placed in separate LLC’s. A Dangerous Asset such as real estate, which creates significant potential liability should not be placed in the same LLC with your financial assets.

In the event of a future lawsuit against the Husband or Wife the assets of the Family Savings LLC may not be seized by the creditor. As is the case with the FLP, the creditor is limited to the charging order remedy which does not affect the property in the LLC.

The advantage of the Family Savings LLC over the FLP is that Husband and Wife, as members of the LLC, are not responsible for any debts or obligations of the LLC. This is particularly important if family assets consist of Dangerous Assets such as real estate or other businesses.

The Family Savings LLC is a flexible and convenient strategy for protecting family wealth from the threat of lawsuits and claims. It provides excellent protection for valuable assets such as stocks, bonds, mutual funds, insurance and annuity investments and other savings vehicles. Separate LLC’s should be used to hold rental real-estate to shield you and your other assets from any liabilities associated with the property.

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