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#1041 - 05/15/07 08:07 PM LP vs LLP vs LLLP
FredOringer Offline
Member

Registered: 08/29/06
Posts: 68
Loc: Las Vegas, Nevada
Question: Which is the preferred entity for "Asset Protection"?

Question: What is the primary difference between an LP, LLP & an LLLP?

Question: Can an LLLP be combined with a "revokable living trust" for "asset protection" is the "irrevokable living trust" the preferred instrument for asset protection?

Question: Can a "living trust" be converted to an "irrevokable living trust"?

Best regards,
Fred H. Oringer
_________________________
Best regards,
Fred H. Oringer

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#1042 - 05/16/07 12:20 AM Re: LP vs LLP vs LLLP
pfshield Offline
Member

Registered: 05/07/05
Posts: 188
Loc: SLC, Utah
Answer 1: Depends on your situation. I've used LLCs (onshore and offshore), limited partnerships, various trusts (onshore and offshore), equity stripping, contract arrangements, insurance products, and state exemptions to protect assets, among other things. I even formed a corporation once (the company was planning on going public.)

Answer 2: LP stands for limited partnership. Limited partners don't manage the company but have limited liability. General partners manage the company and have no limited liability. LLP stands for limited liability partnership. It is like a general partnership, except each partner is not liable for another partners actions. This is mostly used by licensed professionals (CPA, attorney, etc.) LLLP stands for limited liability limited partnership. It is like an LP where one general partner is not liable for the other general partner's actions. Thus, it is a hybrid, of sorts, of the LLP and LP.

Answer 3: Yes, if you amend the revocable living trust to be irrevocable. Most living trusts become automatically irrevocable upon the grantor's death. Whether or not an irrevocable trust provides asset protection depends on whether the grantor continues to benefit from trust assets. If he does (and a trust where the grantor benefits from trust assets is called a 'self-settled trust'), then he gets no asset protection in 42 states, although in 8 states he does get asset protection IF the trust meets certain statutory requirements, the grantor and assets remain in a state that allows such protection, AND a certain amount of time has passed since the transfer into the trust (2 to 4 years, depending on the state).

Note that Oklahoma and I think maybe one other state (can't remember which) now allow asset protection for self-settled revocable trusts. Of course there are limits to this, and this has yet to be tested by the courts.

Furthermore, recent case law has shown that even a non-self-settled irrevocable trust's assets may NOT be safe from the IRS if a trust beneficiary is delinquent in meeting his tax obligations, even if the trust has anti-creditor provisions such as a spendthrift clause. I'll put some more information regarding this on the board in the next day or two.

Finally, assets placed in trust are more susceptible to fraudulent transfer rulings than other entities, because the transfer is usually without consideration, and the 2005 BAPCPA (new bankruptcy and consumer protection revisionary law) greatly reduced the asset protection that self-settled trusts provide in bankruptcy.

Regards,

Ryan Fowler
www.pfshield.com

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#1043 - 05/16/07 03:48 PM Re: LP vs LLP vs LLLP
FredOringer Offline
Member

Registered: 08/29/06
Posts: 68
Loc: Las Vegas, Nevada
Good Morning Ryan! smile
And thank you for your information!

I now understand the application of each entity and instrument.

I look forward to your future posts on the subject.

Best regards,
Fred H. Oringer
_________________________
Best regards,
Fred H. Oringer

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#1044 - 05/23/07 10:49 PM Re: LP vs LLP vs LLLP
FredOringer Offline
Member

Registered: 08/29/06
Posts: 68
Loc: Las Vegas, Nevada
Good Afternoon All! smile

Question:
How is the election from an LP to a LLLP viewed as part of a foreign filing to other states that do not have such provisions or elections? Will the General Partner still be affored limited liability from the debts and actions of the limited partners and from other General Partners?

My opinion is that the internal affairs of the LLLP would be referenced back to the state of formation. Am I on the right track?

Best regards,
Fred H. Oringer
_________________________
Best regards,
Fred H. Oringer

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