Hale Stewart is an attorney in Houston, Texas and a financial adviser with Thompson Creek Wealth Advisers. You can read his weekly market commentary at the XE.com Currency Blog.
Most people don’t think about placing their liquid financial assets into a trust or family limited partnership. Instead, once they open a trading account, they simply leave assets in their personal name and move on. This is unfortunate, because there are numerous benefits to owning your assets in some type of entity. These include:
Asset protection: Unfortunately, practitioners have horribly oversold asset protection as the magical cure-all to every potential personal calamity. Some practitioners tell prospective clients that, once they establish a family limited partnership, they can simply not distribute assets to creditors, leaving claimants helpless to do anything. This is not the case; creditors have a remarkably broad set of legal remedies to enforce judgments.
Asset protection does, however, place the person erecting the structure into a better negotiating position should they have to settle a debt. Entities place more impediments in the creditor’s path, making them more agreeable to compromise on favorable terms.
The benefits of non-probate transfers: probate courts serve many important functions, one of which is to ensure smooth asset transfer between generations. This is especially important for physical property, where government agencies (such as county property clerks) must be involved. But liquid assets don’t have this requirement; therefore, placing them into a trust or partnership with a well-documented ownership succession plan will transfer the assets between generations without involving the courts.
Beginning to think about an estate plan: most people don’t think about an estate plan until their early 60s. The fundamental reason is understandable: no one wants to contemplate their own mortality before they absolutely have to. But creating a structure later in life could prevent a planner from using a particular strategy that would have been viable had the client started 10 years earlier.
These are just some of the benefits. I’ll be developing this idea over the coming months in a series of articles. If you'd like to discuss this idea in more detail, please contact us at 832.330.4101.
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