Asset Protection Planning
What is protected from CREDITORS in the state of texas?
Texas is one of the best states in the country for asset protection planning. Under Texas statutes, the following assets are protected from creditors:
(B) Retirement plans
(D) Life insurance
(E) Personal property up to $100,000 (for married couple) and up to $50,000 for a single individual
If you own assets located outside the above identified categories, there are other types of planning that may be implemented to help protect those assets from personal judgment creditors. Such additional planning may consist of the creation of an irrevocable inter vivos asset protection trust for the benefit of a spouse for life with remainder to the descendants in asset protection trusts. It may also consist of the creation of a limited liability company and/or a limited partnership to receive title to certain types of assets you may own. Asset protection planning is not a cookie cutter type of planning. Each individual's needs and the types of assets he/she may own is unique. There are certain tools that may be utilized in asset protection planning, but how those tools are implemented is different for each individual.
If you have a business you should make sure your business assets are also protected from creditors. For example, if your operating business also owns the commercial real property n which the operations are conducted, then you should separate this real property from the business operations. The way to do this is spin-off the commercial real property into a separate entity and then have the main operating entity lease the real property from the separate entity. In order to perform a spin-off correctly all the right hoops must be complied with, especially if the main operating business is taxed as an S corporation or a C corporation. If all the hoops for the spin-off are not complied with then a very bad tax result could be imposed on the shareholder of the corporation. Additionally, since Texas state statutes do not give corporate shares the same protections against personal judgment creditors that membership interests in a limited liability company and/or limited partnership interests in a limited partnership enjoy, then once the spin-off is complete, if the main operating entity is a corporation you should consider converting such entity into a LLC taxed the same as the corporation. This new LLC would have the same tax identification number as the corporation which means there would be no change in the tax reporting requirements for this entity. This additional planning would protect the interests in the business operating entity from being taken by a personal judgment creditor of the member of the LLC. Please contact our office to schedule a free consultation for a review and analysis of the specific needs your estate and/or business planning may have in this area of law.