• March 19, 2015

It is quite common for clients to tell us that they thought their standard family revocable grantor trust would serve to protect assets from creditors. This is a very common misconception. Your standard revocable family trust does not in fact provide any asset protection. There are certain types of trusts that can provide asset protection, such as Nevada irrevocable asset protection trusts. However, it is not always necessary to utilize these very advanced estate planning techniques for the average person to protect assets from creditors.

When seeking to protect assets we seek to achieve two goals. The first is to separate your business assets from your personal assets. The second is to separate your business assets from other business assets. For example, if you own a primary residence and two office buildings, your first consideration might be putting the office buildings into an entity (LLC, Series LLC, Corporation or the like) and removing them from being titled under your individual name. The second consideration would be to separate the assets from each other by putting each office building into separate entities.

BeFunky_Entity Buckets_no text.jpg

Why do we recommend this type of structure? Because if everything is in your individual name and one of the tenants sues for a slip and fall, and obtains a judgment against you, it will be a personal judgment and your personal assets may be subject to that judgment, including your home. If all of your assets are in your name, you have created one big bucket of aggregated value for a judgment creditor to dip into.  However, if the business assets are held in an entity structure, you are starting to create multiple buckets which hold fewer assets and less value. The tenant, in this case will be limited to seeking a judgment against the business at which s/he fell and recover only against its assets, which will no longer include your home. Further, if we have taken the extra step of separating the business assets from each other, then we are again creating more buckets and minimizing the value that is available for satisfaction of the judgment in each bucket.

Every client’s needs, level of risk and level of risk tolerance are different. Additionally there may be tax and other considerations when looking at entity structures. Corporate formalities and relevant laws must be adhered to in any entity structure to maintain the protections they can afford. All of these issues should be discussed with your legal counsel and CPA before forming new entities and moving assets.

Cassell von Baeyer is a partner at the Incline Law Group, LLP. Incline Law Group, LLP - Providing Legal Clarity for Over 40 Years Incline Law Group, LLP, is committed to providing legal clarity. Our transparent approach to delivering legal services is designed to get beneath the surface of the matter in order to minimize surprises and maximize our clients’ outcomes. Founded in 1973 by John C. Rogers, Incline Law Group has earned a reputation for professionalism, discretion, honesty, diligence and positive results. Most of our attorneys are licensed in Nevada and California and have been providing legal clarity in the areas of Real Estate, Litigation, Family Law, Contracts, Business Formation and Estate Planning for over 40 years to our Northern Nevada and California communities. Cassell has been practicing law for 16 years and is licensed to practice in all courts of California and Nevada. Cassell's areas of practice include: -Real Estate transactions (commercial and residential) -Purchase and sale of real property -Commerce development -Common interest community developments and homeowner's association matters -Commercial development -Leases -Easements -Construction contracts -Mechanics liens -Land use -Distressed real estate, including judicial foreclosure -Business Entities and Transactions - formation and administration of business entities -Contracts -Real property -Business -Licensing agreements -Construction Cassell is a member of The State Bar of Nevada, The State Bar of California and the Washoe County Bar Association.