Call Us: +714 330 6705

Call Us: +714 330 6705

Faqs

(Faq’s) Asset Protection Planning for Business

How does asset protection planning differ for a business compared to an individual?

Regarding safeguarding the assets, businesses have a unique advantage: they can tap into various legal structures designed to shield their wealth in ways individuals can’t. Here’s a breakdown of some options and what makes them stand out:

  • Limited Liability Company (LLC): Think of an LLC as a hybrid—part partnership, part corporation. It’s a flexible, powerful tool that offers limited liability, meaning your assets stay safe if the business hits trouble. Plus, it comes with something called “charging order protection,” which limits what creditors can grab. LLCs are recognized everywhere in the U.S., and you’ve got options for how they’re taxed. Even if you’re hands-on managing it, your liability stays limited—a win for business owners.
  • Corporations: These have deep roots, going back to the founding of the U.S. A Supreme Court ruling in 1886 even granted them “corporate personhood,” meaning they get many of the same legal protections as people. That’s a big deal! Corporations are a classic choice for holding assets because they keep the owners and officers insulated from personal liability. It’s a tried-and-true way to protect what you’ve built.
  • Partnerships: These come in two flavors—general and limited. Back in the ‘80s, Family Limited Partnerships sparked a wave of interest in asset protection, laying the groundwork for what we see today. General partnerships? Not much help—they leave you fully exposed. Limited partnerships are better, offering some protection, but they’ve largely been overshadowed by LLCs. Why? In a limited partnership, the general partner’s still on the hook with unlimited liability, while an LLC keeps everyone—managers and members alike—shielded.

No need to overhaul everything—there are still smart, straightforward moves to protect your corporate shares from creditors:

  • Set up a buy/sell agreement with your fellow shareholders. It’s a simple way to block creditors from snagging your stock by ensuring it stays within the group.
  • Consider placing liens on your shares through a UCC filing—think of it as putting a “do not touch” sign on them.
  • Or, transfer your shares to an LLC. This wraps them in charging order protection, adding an extra layer of security without dismantling your current setup.

(Faq’s) Special Power of Appointment (SPA) Trust

What is a Special Power of Appointment Trust?

A Special Power of Appointment Trust (SPA Trust) is a type of trust designed to protect your assets from creditors. It includes a special clause that prevents anyone—including creditors—from accessing the trust’s assets if you, the person who created the trust (the Settlor), can’t access them yourself.

In simple terms, this type of trust ensures that neither you, your estate, nor your creditors can reach the trust’s assets. Since you’re not listed as the trustee, protector, or beneficiary, creditors can’t get to what you don’t control.

Although you give up direct ownership and control of the assets (what lawyers call “dominion and control”), the trust’s Protector—a trusted individual of your choosing—can later help restore benefits to you if necessary.

In most of our trust structures, the trust owns an interest in an LLC, and you manage the LLC. So, as the manager, you retain control over the day-to-day handling of the assets.

We can structure the LLC with voting or non-voting interests depending on what level of control or involvement you want.

Yes, but indirectly. The trust includes a Protector—someone you trust fully—who has the legal authority to amend the trust and appoint you as a beneficiary in the future. That means if circumstances change, the Protector can give you access to income or assets at a later time.

All it takes is a simple legal document referencing the right section of the trust to make that change.

Yes, it is. Once the trust is created, you can’t revoke it. However, you can give powers to others—like the Protector—who can take action that benefits you, including possibly restoring access to assets later.

No—not at the start. If you were a beneficiary, it would expose the trust’s assets to creditors. Only a handful of states allow you to be both the grantor and a beneficiary, and even then, it’s risky. The good news? Your Protector can later appoint you as a beneficiary if and when the coast is clear.

No, it’s completely private. It isn’t filed with any government agency, so there’s no public record of it. Even if the trust holds ownership in corporations or LLCs, those filings don’t mention the trust’s name.

Plus, there are no annual filing fees to maintain it.

You can put almost anything in the trust—except retirement accounts (like IRAs). Most people hold assets through LLCs and then place those LLCs into the trust. This setup lets you maintain control over managing, selling, or distributing the assets while still getting the protection benefits of the trust.

A DAPT lets the person who sets up the trust also be a beneficiary—which might sound convenient, but it comes with risks. In most states, if you’re a beneficiary, the protection from creditors doesn’t hold up.

For example, California doesn’t recognize DAPTs set up in other states like Nevada. So, if you live in California and set up a DAPT in Nevada, California courts can simply ignore it.

On the other hand, a Special Power of Appointment Trust is recognized in all 50 states and is far more durable—especially in creditor-friendly states like California. If you don’t have access to the assets, neither do your creditors.

Nope. The trust is treated as a “Grantor Trust” for tax purposes, meaning all income, gains, or losses flow through to your personal tax return. Your tax situation doesn’t change.

Yes, you can transfer your home directly into the trust or first move it into an LLC, which is then owned by the trust. If you transfer it directly, you’ll likely need to pay rent to the trust since you no longer “own” the property. That helps show that the arrangement is legitimate and at arm’s length.

Nope. They can live anywhere in the U.S. There’s no requirement that they live in the same state as you.

Generally, no. While the concept has been around for a while, it hasn’t been widely used compared to LLCs or Limited Partnerships. Because of that, most creditor attorneys aren’t familiar with the nuances of SPA Trusts—and that works in your favor.

Plus, because these trusts are solidly backed by legal precedent and are recognized nationwide, they’re extremely difficult to challenge or break

Yes. One key case is Wilmington Capital LLC vs. The Big Whale Trust (Case No. 12C01113, Superior Court of California, County of Los Angeles – West District, 2012).

California is notoriously creditor-friendly, so when a trust wins in a case like this, it’s a big deal. This case was dismissed on a Demurrer, which means the court found there was no legal basis to challenge the trust—further affirming the legal strength of SPA Trusts.

(Faq’s) Friendly Lien Preparation

What is a “friendly lien”?

A friendly lien is when a company you control—or someone you trust controls—places a lien on your assets. This is typically done with real estate, but it can also involve business assets using UCC filings.

There are several ways to set it up, but the usual method involves a company (owned or controlled by you or someone you trust) filing a lien against your property or business assets.

Not exactly. We take a more structured and transparent approach. Here’s how we do it:

  • We form a brand-new company and fund it with a promissory note.
  • In exchange, that company gives you 100% ownership through the note.
  • The company then takes collateral for that note—this becomes the lien.

This gives the lien a clear business purpose and ensures it’s fully under your control—not in the hands of a stranger.
We also form the LLC in a state that keeps ownership and management private and allows business-related terms like “finance” or “loan” in the company name.

And the best part? Since you own and control the lien, you can release it whenever you want—no need to go through us.

Yes. You need to make payments on the promissory note, which goes to the LLC you own. Typically, the note has deferred or negative amortization terms, and at a minimum, you should make payments at least once a year.

Since you’re essentially paying yourself, you can either leave the money in the LLC for business use or withdraw it. Just make sure you follow through—if you don’t treat it like a legitimate structure, a judge won’t either.

It depends. If you’ve actually borrowed money from a third party, it makes sense for them to hold the lien. But if someone is offering to set up a lien and control it themselves, be very cautious.

If that third party disappears, you could have a hard time removing the lien. Worse, if they act dishonestly, they could even try to foreclose on your property.

We’ve seen this happen before—a company in Nevada filed thousands of liens and then shut down, leaving clients scrambling. We’ve helped hundreds of people in that exact situation reclaim their property.

Usually, no. If you own the LLC placing the lien, then you’re just moving money from one pocket to the other—what’s income to the LLC is a deduction for you. But you should always check with your tax advisor, or have them reach out to us for specifics.

We can typically get everything set up within 7 to 10 business days—sometimes even faster. It mostly depends on how quickly the government processes the filings.

Absolutely. We can tailor the setup to match your current business structure. Whether it’s a trust deed on real estate or a UCC filing on business assets, we ensure it’s done in a way that’s both effective and purposeful.

You have options. You can handle it yourself, or we can prepare the release paperwork for you. If you prefer, we can even prepare the release documentation upfront—at the same time as we create the lien—so you’re free to cancel it anytime in the future.

(Faq’s) Pre-Inheritance Trust

What is a Pre-Inheritance Trust (PIT)?

A Pre-Inheritance Trust is an irrevocable trust that allows you to transfer assets to your beneficiaries while you’re still alive—essentially giving them part of their inheritance early.

No. Once you move assets into the trust, they are no longer part of your personal estate. The trust legally owns them from that point on.

Typically, the trust is set up as a grantor trust, which means you’ll continue to pay taxes on any income generated by the trust assets.
You can also have the trust structured to cover your tax bills directly by allowing distributions for that purpose.

Assets are moved into the trust by retitling them in the name of the trust. If the trust is set up to own an LLC or another type of entity, then the trust simply becomes the owner of that entity.

There’s no hard limit, but there are gift tax rules to keep in mind.
You can transfer up to your lifetime exemption amount (currently around $5.5 million per person) without triggering gift taxes. Your spouse can do the same.
If you go over that limit, gift taxes may apply.
You can also gift up to $14,000 per person, per year, tax-free—and that annual gifting rule has no time limit.

Only if you want them to. The trust has a trustee who decides when and how distributions are made.
To enhance protection, you can split roles:

  • Your beneficiaries can serve as investment trustees, managing how the trust invests.
  • A third party can act as distribution trustee, controlling when funds are distributed to protect against outside claims (like from creditors).

You can also give your trustee a Letter of Wishes, outlining your preferences for how and when beneficiaries should receive support.

And if you’d like, beneficiaries can work for one of the trust’s underlying companies and receive a salary for their contributions.

While you can’t be the trustee, there’s still a way to stay involved.
You can put the assets into a business entity like an LLC or corporation, and then have the trust own that entity.
You can then act as the manager or officer of the LLC, giving you control over operations and allowing you to earn compensation for your role.

No. The assets belong to the trust—not your beneficiaries—so their creditors can’t touch them.

Nope. Since you’ve transferred ownership of the assets to the trust, they’re no longer part of your estate. That means your creditors can’t claim them either.

That’s one of the big advantages of a Pre-Inheritance Trust.
Assets in the trust are no longer in your estate, so they’re not subject to estate taxes—even if the value of the trust grows substantially over time. For example, if the trust’s value grows to $20 million, there would still be no estate tax owed on that amount.

Not at all. Since your child doesn’t legally own the assets (the trust does), an ex-spouse has no claim to them during a divorce.

FOR MORE INFORMATION PLEASE CONTACT

ASSET PROTECTION, INC.

Call: 714-330-6705