- The LLC, the corporation, or the Sub "S" was undercapitalized for it's intended business purpose or
- Formalities were not followed or
- The owner used the LLC, Corporation or Sub "S" mostly for personal purposes or
- It did not serve a "bona fide" commercial purpose or
- It lacked in economic substance and was merely an alter ego of the owner whose sole intention is to frustrate the creditor(s) and many other reasons.
A single member LLC (one owner), Corporation, or Sub "S" will not protect the owner or his or her assets because the charging order protection that is highly regarded is based on protecting the "innocent" non-debtor. Only an irrevocable trust such as the UltraTrust with an independent trustee will protect your assets from a past, present, and potential future creditor.
How does the UltraTrust protect your assets? The house you live in, the car you drive, the investments you own are actually owned by an LLC and the LLC, in turn, is owned by the UltraTrust. The irrevocable UltraTrust is a superior irrevocable trust which has stood its test of time. The irrevocable trust, UltraTrust, has seen many legal battles and like a skilled warrior with swift accuracy and litigious force it protected its owner and its owner's assets.
So what do you need for a superior irrevocable trust to be implemented? Be prepared ahead of time. "Preparation, preparation, preparation." Just like when you buy a house they say, "Location, location, location." Asset protection is about reducing the risk, not only from outside creditors, but you need to worry more about the inside creditors such as your spouse, your brother-in-law, damages caused by your minor children, your dog, and your business partners.
A revocable trust is not worth the paper it's written on since you have the power to void or amend the trust. A trust essentially is nothing more than a contract. If you can void any section of the contract, you have the power to void the whole contract which is what a revocable trust allows you to do. The root word is "revocable." It's like allowing a party in a contract to change the contract at will without the other's consent. Now what is the point of the contract in the first place if the contract or trust can be amended?
Your lawyer most likely suggested the revocable trust because he or she knows that you will need his or her services when you have a revocable trust. It's not only that you will be able to revoke your trust but your trust will be revoked in court as well! Why would you pay for this insurance of protecting your assets when it will not function as its intended purpose?
Another common mistake in creating trusts is the election of self in a revocable or even an irrevocable trust. Most estate planning lawyers will tell you, that you can write an irrevocable contract, even if you are at the center of the agreement by electing yourself to be the trustee. These lawyers just went to law school to warm up the seats. If you run into one of these lawyers who instruct you to do be a self-elected trustee you should run and don't walk because their incompetence is going to cost you plenty. If you elect yourself the trustee then you have, in essence, defeated the purpose of assigning your assets to another entity. If you defeat the purpose of assigning and allocating your assets to another entity it means that you, technically and legally, still own the assets. The purpose is not to own the assets so others who are or will be suing cannot access your assets in the first place because you, technically and legally, do not own the assets. Make sense? You can trust the UltraTrust since this irrevocable trust was designed from the ground up with this sole purpose in mind and was designed to protect your assets from attorneys who will try and find a security hole in the trust contract.
Let me say it clearly, unequivocally and without recourse. The power of a trust contract vests with the power of the independent trustee. Period. Your trustee must be independent of you. He or she cannot be related to you by blood or marriage. The greater the independence of your trustee is the stronger your asset protection plan. When you are into court, even by your siblings, spouse, best friend, partner or some other person who wants to garner your funds, you can look at the judge straight in the eye without a smirk on you face and calmly state, "Your Honor, I don't have any assets."
About the Ultra Trust®:
- Part 1 - Estate Street Partners
- Part 2 - What is the Ultra Trust®?
- Part 3 - What is a Trust?
- Part 4 - Asset Protection Plan
- Part 5 - Asset Protection Eligible Assets
- Part 7 - What is Probate?
- Part 8 - What is Estate Tax?
- Part 9 - Medicaid Spend Down Rules
- Part 10 - What is the Ultra Trust®?
- Part 11 - Irrevocable Trust Benefits
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