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ASSET PROTECTION Flash Presentation Estate Planning Considerations (Long-Term Corporate Planning)
Call for free consultation: (702) 870-5351 If you have studied the prior example, the principal of that story, “John”, who has never been to Nevada, established a corporate base in Nevada to work with his out-of-state business in a way that helped him to reduce his exposure to liability while protecting assets for the benefit of his family and friends. Along the way he found some extra peace of mind, only some of which was derived from his greatly reduced overall tax burden. But saving taxes was nice, too. Let’s move a little farther forward in time. John used to worry about the day-to-day and month-to-month concerns of developing his business and setting aside some free time for his family. Now the kids are all grown up with interests of their own. His California business, CALCORP (CC) has given him a comfortable lifestyle and he’s even managed to set aside personal funds for retirement. His long-term corporate planning (estate planning, in essence) has always considered those whom he would want to benefit after he is gone and he knows they will be well taken care of through the good folks at NEVCORP. John can see how his own estate planning is pretty well taken care of already—not as an “estate”, exactly (because that word has certain connotations that simply do not apply because of John’s foresight)—but more from the knowledge that NEVCORP will be there long after he is gone. Enter “Jim”, a friend of John’s for a long time, who is unaware of the benefits of Nevada corporations. Coincidentally, Jim has never been to Nevada, either. One day Jim and John discuss estate planning considerations. His queries could be summarized: “What is the best way for me to leave my estate while retaining control over my assets while I am alive and minimizing both tax consequences and the burden of probate to my heirs?” John, having worked with Nevada corporations for a long time, replies, “THE ONLY METHOD OF HAVING PRIVACY IN LEAVING AN ESTATE, WHILE AVOIDING PROBATE COSTS AND MINIMIZING MONEY TO ATTORNEYS AND COURTS IS TO INCORPORATE YOUR ESTATE.” John’s Estate-Planning Advice to Jim
John’s “Estate Planning” Advice to JimAs you read the following, imagine this is John advising his good friend Jim, based on John’s personal experience: “Here’s what I can tell you about my kind of ‘guerilla estate planning’, Jim, though it’s not what you might hear from some less informed estate planning professionals: Get a Nevada corporation in whatever name you wish. Issue stock in the corporation to your heirs—divided any way you wish according to likes, dislikes, earned advantages, etc. The stock should be issued as non-voting until your demise (or the demise of, say, both parents—any way you want it). You place within the private corporation all assets: home, autos, stocks; all personal assets of value or importance. Then, when you become deceased the selected ones’ stock voting rights become activated and pre-selected board members, etc., take control of the business. You have carefully written your instructions into the Bylaws of your corporation and everything continues to work like clockwork. There is no probate, there are no holds on bank accounts—the corporation continues to function as if you had only replaced the Chairman of the Board. “At this point don’t get hung-up on such as S-corporations, trusts or other tidbits. ESPECIALLY, DO NOT PAY ATTENTION TO NEGATIVE INPUT FROM YOUR ACCOUNTANT WHEN HE TELLS YOU ‘IT WON’T WORK’! I PROMISE YOU HE IS NOT INFORMED IF HE MAKES AN EFFORT TO DISSUADE YOU! FIND OUT FOR YOURSELF; YOU OWE IT TO YOURSELF AND YOUR LOVED ONES IN THIS TIME OF THE WORST CONFUSION OF ALL HISTORY. BELIEVE ME, THE EARLY ON APPROACH TO THIS MASSIVE EXPECTED COLLAPSE WILL BE TO TAKE OVER ESTATES—THEY WILL NOT TAKE OVER CORPORATIONS. TO MAKE IT WORK, HOWEVER, YOU MUST KEEP ABSOLUTELY UNQUESTIONABLE RECORDS. THOSE RECORDS, HOWEVER, ARE NOT COMPLICATED AND YOU WILL BE SUPPLIED WITH INSTRUCTIONS, A MASTER PLAN AND ALL YOU NEED. KEEP YOUR RECORDS IN PERFECTION AND YOU ARE PROTECTED FROM ANY PIERCING OF THAT CORPORATE VEIL AND YOUR ESTATE PLANNING WILL BE WELL TAKEN CARE OF. “You will want a personal will. It should be kept right along with the corporation records and stock sheets. It is SOLELY for the purpose of preference in seeing to it that certain ones get that personal article, i.e., ring or broach or other personal item. If you trust your heirs enough to leave them anything, then you might trust them enough to follow your wishes as to things like whether you are buried or cremated or other such personal directives. After you are gone it is pretty much up to those who are left anyway. A corporation, however, ensures at least some of your wishes will be given follow-through. For the will you will find a handwritten or simple list of instructions is suitable—you certainly need no accountant nor attorney. This is, however, why they will make an effort at dissuading you from taking this avenue of protection. In the long run, you will save untold amounts of your estate money and ensure proper distribution, for you NEVER need those third parties and their expenses for THIS kind of estate planning. “Personal debts of partners should be evaluated and placed into their proper categories and charged against the individual accounts in order to preserve the basic status of the corporation itself. There should be no quarrel, just good business attended, and that without dispute. At the demise of a partner the remaining partners must bring the records up-to-date, settle the intended instructions to cover properly all past decisions and restructure the corporate officers’ roster to suit the needs and for the convenience of ongoing business and settlement. “Now, if there have been misuses of the corporation as to borrowings, outstanding debts of some personal nature without full approval of the Board of Directors, there is possibly no demand against your corporation but it will fall to the individual estate of the departed party or the party’s other corporations or holdings (assuming they are using this approach to estate planning). Careless use of a corporation does not make the carelessness valid nor impacting on all parties to the corporation. “Long-term corporate planning is not just for estate planning. Estate planning by itself is done in contemplation of death, and such planning has tax implications and interpretations by the IRS that simply don’t apply here—at all. When you have done your long-term corporate planning, then you have successfully accomplished a dynamic feat. A few personal notations to be carried through and the rest is set to simply continue. Those instructions can be left with the corporate records or management persons. Even if you have neglected to do your personal structuring, it can be set forth as desired by those who will come to set forth the individual corporate setup which attends the circumstances. Set up the family estate as a corporation and the corporation simply carries on after your demise—as established or desired according to YOUR wishes—after your “resignation” through retirement or death or whatever you might choose as the criteria. It also keeps the kids from fighting over the spoils as they perceive them vs. reality of same. “Why is this a dynamic feat? Because with your long-term corporate planning (which is not really ‘estate planning’ with all of the tax consequences that go along with it) little exists for a lawyer to muddle. Your estate isn’t consumed by legal expenses or taxes. That is why some lawyers are not going to tell you how to take advantage of long-term corporate planning. It is bad for their business—unless of course, they choose to work for our corporate management services where it is their JOB to inform you and then protect you from raiders. “This brings to attention one reason to keep your corporations small—to avoid the raiders who feast on big corporations to make their ’kill’. We have no wish to raid any corporation and we expect to protect our projects from raiders and robbers. It’s only so much the nicer that estate planning is taken care of in the process. “Don’t expect, either, that the tax collectors will tell you these things because they would be unable to rip apart the results of your life’s work with tax grabbing. “What is the magic here? Well, let’s face it, Jim, corporations are immortal (unless terminated by statute or by the corporate ’articles’). Corporations do not cease to exist because one of their key people does. And that’s how I’ve taken care of my estate planning.” THIS PLAN WORKS MOST EFFECTIVELY WHEN STRUCTURED IN NEVADA CALL (702) 870-5351 TO MAKE AN APPOINTMENT FOR A FREE CONSULTATION
“Estate Planning”, Step by StepHere is long-term corporate planning we suggest you consider. The sequence is important so please follow closely. If you pass something you don’t understand, you will never understand, so go back and restudy until you do comprehend. Step One Acquire a corporation which when formed is what is called a “corporate shell” (just like John did, years ago). For the purposes of this example, let’s call it LEGACY CORP or LC. It has no assets, no liabilities, and its stock is worthless at this point. If it’s set up for privacy with nominee officers and director, so much the better. Better still, why not get one a few years old? It costs more but it can help in some ways: for instance, it sounds better to be able to say that it’s been in business since a few years ago; it’s more “established” and has more prestige. Step Two Cause the sale of its worthless (because it has no assets yet) stock from the corporation to your investors (heirs) at one cent ($.01) per share (or better, perhaps, “for services rendered”). Distribute by the prorated amounts you choose to balance percentages to each heir the way you want them to be. Since the stock has been sold to them, it is NOT a gift. One object of all stock is to increase in value over a period of time. If the stock does increase in value, then nothing wrong, illegal, unethical or strange has occurred. (A condition of sale of this stock would be that the stockholders must assign an irrevocable proxy to the limited partnership, which is formed next.) Step Three Form a limited partnership with you as General Partner and your heirs as Limited Partners. The sole purpose of this limited partnership is to HOLD (control by means of irrevocable proxies) the stock of the corporation you just formed. In a limited partnership the General Partner manages the business and the Limited Partners take no part in the running of it. Remember that the business of this limited partnership is to hold the stock of the new corporation. This means the General Partner (YOU) will vote the stock at any stockholders’ meeting. All of the stockholders (you and your investors/heirs) put their newly acquired stock into the limited partnership. In return you become general partner and a 2% limited partner (which could be 1% for “him” and 1% for “her”). Your investors/heirs become 98% limited partners. The general partner (YOU) will manage the business. You vote the stock. This limited partnership will have a set life. It will be in existence for a certain number of years. That number depends on you. Make the term of years long enough so that when the limited partnership ends, you either won’t be around or if you are, you won’t want to control the corporation any longer. The limited partnership may have a life of any number of years for you make the decision. THE LIMITED PARTNERSHIP CAN BE DRAWN UP SO THAT IT ENDS UPON THE DEATH OF ANY OF THE GENERAL PARTNERS, SO WHEN YOU DIE, THE LIMITED PARTNERSHIP TERMINATES AND THE OTHER PARTNERS (YOUR HEIRS) TAKE THEIR 98% OF THE STOCK IN THE CORPORATION AND GO HOME. ONLY YOUR 2% OF THE STOCK WILL GO THROUGH PROBATE AND HOPEFULLY YOUR ESTATE WILL BE SMALL ENOUGH, BECAUSE OF YOUR WISE PRIOR PLANNING, TO ELIMINATE ANY PROBLEMS. THIS IS JUST ONE WAY TO HANDLE THE HEIRS PROBLEMS. Assuming you do the above, your heirs will now have the stock and own the company but you, by virtue of your general partnership, have complete control of the corporation: its assets while you are alive: its money, real estate—everything. You can sell these assets and pay yourself the money, or add to the assets, pay for any and all reasonable expenses, travel, medical expenses and so forth. You can do anything you want for as long as you live. Step Four Put your assets and money into the corporation1. Some suggested possibilities as to how you may accomplish this are as follows: Sell the assets to the corporation in exchange for a demand promissory note to mature in 50 years or whatever term of time you deem appropriate. Take money out of the corporation any time you wish and mark it “to apply on promissory note”. Word the note so that in the event of your demise, any sums remaining payable to you by the corporation under the note are automatically forgiven. We suggest the demand promissory note bear interest, probably at 12% simple interest per annum because it’s easy to calculate, and that the corporation pay you the interest when it becomes due. This will satisfy the IRS. Where does the corporation get the money to pay this interest? You are simply taking money out of one pocket and putting it into another. It’s true the interest received by you may be taxable, depending on your adjusted gross income—that is, on your “taxable” income or, stated another way, on how good or bad of a manager you are. There are also ways to borrow from the corporation so check out the proper and most propitious methods of managing your affairs. Always KNOW the laws applicable and those very laws will offer your security. Also, you might consider the possibility of taking from the corporation a contract in exchange for your services rendered: a lifetime contract and guarantee that the corporation will provide FOR YOU, including all your medical bills, convalescent care, and such other expenses in addition to items as you may wish. This is similar to purchasing a lifetime annuity, whereby a lump of money is converted into an income stream. (Be careful of possible tax consequences here. Make sure you know your tax regulations. But with the difficulty of filing tax returns you probably already have a tax adviser—check with him regarding this program. Some people won’t have a tax problem because they don’t have any assets to speak of. This is a good position in which to find yourself at the end of your road.) In addition to the possibility of taking back stock a demand promissory note as described earlier, ask yourself: ”How do people generally ’lose’ assets (which are always lost to another party)?” Sometimes by investing in worthless stock or stock that goes bad; sometimes by losing a lawsuit or settling out of court; sometimes by making a bad business deal. With just a little thought, innovation and ingenuity, you will discover many other ways to transfer your assets into the corporation successfully. Often the services of a good attorney are invaluable at this stage—as long as you stick with the overall program. There, so much for getting the assets into the corporation. When you put your assets into the corporation, the value of its stock increases but there are no taxes until such time as dividends are paid by the corporation or the stock is sold. In both cases this is a matter over which you have complete control and for which you can adequately plan in advance to legally avoid taxes. KNOW WHAT YOU ARE DOING! The results will be wonderful. THIS PLAN WORKS MOST EFFECTIVELY WHEN STRUCTURED IN NEVADA CALL (702) 870-5351 TO MAKE AN APPOINTMENT FOR A FREE CONSULTATION
Your Wonderful Legacy Using This Kind of “Estate Planning”This Nevada Corporation Strategy Helps to Protect Assets, Save Taxes and Avoid ProbateThe bottom line here is this: When you pass on, your heirs already own all you want them to have. If you’ve ever thought about striking back from the grave, here is your chance to have your say when you’re gone. This is almost like being the Executor or Executrix of your own will. Since your heirs already own your estate when you pass on, there is no transfer; no probate; no big taxes—no problems. With this “estate planning” you know what is going to happen to your loved ones when you pass on. Everything you have worked for, acquired and have is going to the ones you wish to have it. There won’t be a long drawn-out probate case in court. You can have peace of mind. You don’t have to worry about little or nothing existing for your heirs after all the legal fees, expenses, inheritance taxes and so forth are paid. What can take years of legal delay, astronomical expenses, waste and agony for the ones you love is accomplished by them at their stockholders’ meeting through the election of directors and officers (probably prearranged). The transition is smooth. Everything continues without interruption. You have the peace, joy, satisfaction and confidence of knowing that your loved ones have exactly what you intend for them to have. Individual circumstances demand individual and careful understandings, if possible, prior to the need or execution of the program. If there is a complicated array of things to consider you need it to be sorted with knowledgeable help and have the next in line be aware of what is expected of him/her/them. If you have left some wishes or instructions with someone who can accomplish your wishes should death or disability overtake you prior to setting up your plans into paper “cement”, your manager can see to the structuring. What we’re saying is this: Corporations never die, they just get a new president. Take advantage of this corporate immortality. Put what you have into a corporation and the corporation will live long past you to successfully distribute your assets to the people you wish to have them. This will eliminate the normal pitfalls of estate planning, probate and taxes. Even though you utilize this long-term corporate planning (“estate planning”), have a simple will to handle any loose ends that, for one reason or another, might not have gotten into the corporation. This will can be drawn up easily by yourself. You could will everything to the corporation which would be simple and make distribution consistent with your plan. This is an excellent idea in many cases, as the new corporate president can execute your wishes according to your instructions and/or weed out the very personal from the estate itself. If the limited partnership sounds like a good approach to you2, the agreement probably needs to be prepared by an attorney as every agreement needs to be tailor-made to suit each particular case—unless you know exactly what you want and what you are doing. Just be careful so you don’t get talked out of the overall program through the push-pull of either heirs or planners. Soon you can relax and enjoy those “golden years”, comforted by the knowledge that you have done the very best to take care of your loved ones even after you are gone. There are many considerations that may be peculiar to your particular circumstances, so we strongly advise that you think through your whole situation before engaging in this or any other strategy presented. And yes, of course, listen to what your hired professionals tell you—but look at the situation in light of the possibilities presented in this manual and THINK FOR YOURSELF. The combination of conventional knowledge and this specialized knowledge can probably help you to devise a strategy that fits your personal situation; preserving your estate while leaving you with control—and corporate perks—for as long as you live. THIS PLAN WORKS MOST EFFECTIVELY WHEN STRUCTURED IN NEVADA CALL (702) 870-5351 TO MAKE AN APPOINTMENT FOR A FREE CONSULTATION
Footnotes1 The accountant says, “NEVER put your real estate into a corporation. It causes nothing but problems. You will lose mortgage-interest deductibility or, in the case of commercial property, the depreciation tax deduction.” If the estate is small and the real estate is a long way from being fully owned, with many years of mortgage payments remaining, it probably is not advantageous to include the real estate in this long-term planning—for now. On the other hand, if the estate is larger and the real estate is owned outright or has few mortgage payments remaining AND the intent is to pass it along to the heirs, the advantages to this approach can be magnificent—starting with entirely avoiding the probate process. If more than one property is involved, you might consider a separate corporation for each property. The nice part about holding property in a corporation is that when it comes time to sell you have the additional option of selling the corporation, which will not trigger transfer taxes. 2 Limited partnerships work very well for asset protection because a successful litigant can only ever obtain a “charging order” against any distributions to the individual limited partner. If there are no such distributions, nothing is lost. In any case, only that limited partner’s interests are affected. A private C corporation can work well, too, with less expense but greater management responsibility. A Limited Liability Company established as a partnership gains the same asset-protection advantage as a limited partnership, when the LLC is structured properly. If you go with either a private C corporation or an LLC, it will pay you to spend some time re-working the bylaws of the corporation or the operating agreement for the LLC to suit your needs. PLEASE TAKE THE TIME TO DISCUSS YOUR PARTICULAR SITUATION WITH ONE OF OUR NO-PRESSURE, NON-COMMISSION CONSULTANTS, WHO CAN HELP YOU WORK OUT A PLAN FOR YOU TO CONTROL YOUR ESTATE WHILE YOU ARE ALIVE, PROTECT THE ASSETS AND SAVE ON TAXES, WHILE DEVELOPING A CORPORATE BASE IN THE HAVEN OF NEVADA. THIS PLAN WORKS MOST EFFECTIVELY WHEN STRUCTURED IN NEVADA CALL (702) 870-5351 TO MAKE AN APPOINTMENT FOR A FREE CONSULTATION
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The estate planning considerations demonstrated in this Nevada corporation strategy example are numerous: It shows how to avoid probate costs and problems; how to retain control over the estate while alive; how to develop a corporate base in the haven of Nevada; how to protect the assets; and last, if not least, how to enjoy tax savings and pass those benefits on to your heirs. Avoiding probate by itself is a major accomplishment, so we hope you will take the time to study and understand the entire presentation. For details related to your specific circumstances, we invite you to discuss your situation with one of our seasoned, no-pressure, non-commission consultants.
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