Thursday, December 22, 2011

Series Limited Liability Company with a Nevada On-Shore Trust

Here in Nevada, we are lucky.  First, as far as natural disasters, we don’t have to worry about hurricanes, tsunamis, blizzards (at least here in Las Vegas).  Tornados are highly unlikely and we have no track record of regular earthquakes.  Second, we’re blessed with pretty decent weather most of the year.  Last but not least, we have the best domestic asset-protection trust statutes in the country!
We’ve talked at length on our blog about the Nevada On-Shore Trust.  Please take a minute to look at our newly revised website www.nevadaonshoretrust.com and tell us what you think.
I really wanted to take a minute and talk about an option that we have used to accompany the Nevada On-Shore Trust.  We regularly team one or more limited liability companies (LLCs) with the Nevada On-Shore Trust to maximize the protection we are seeking for our clients.  For clients with multiple investment properties, or for clients with a broad range of investments that deserve isolation of risk, we have often opted to utilize a Nevada series LLC with the Nevada On-Shore Trust.
A series LLC can be illustrated by the following example:  Imagine the series LLC as a building with four walls and a roof.  Within that building, one could build out individual rooms.  Each room can contain furniture and the furniture in one room does not belong to another room.
The series LLC is like the building.  There is one LLC that is formed with the Nevada Secretary of State, this is sometimes called the “container” LLC.  This means that there is one initial filing fee, and one annual fee.  Within the “container”, one can then begin to create the “series.”  The statutes authorize additional companies to be created and each series is a separate and distinct entity.  The assets and liabilities of each series is separate and apart from the other companies.  Each series must maintain its own separate books and records, should have a separate bank account, and each series is provided its own operating agreement.
The primary advantage to the series LLC is that one can accomplish the goal of having a separate LLC for individual assets (such as investment rental properties) while saving money on state filing fees that might otherwise be prohibitive.
The one down-side to a series LLC is that, from our experience, it is best to keep the series operating only in the State of Nevada.  Perhaps the series LLC would work in other states without too much effort if it is another state that recognizes series LLCs, such as Utah.  But it has proven difficult to achieve foreign LLC status in states that are unfamiliar with the series LLC.  This is because each series does not have its own record with the Secretary of State; therefore we cannot obtain a certificate of good standing for each series.  The only proof of existence is for the entire “container.”  But for clients that have limited their investments to Nevada alone, the series LLC is a nice option when a large number of LLCs has been recommended by counsel.

Wednesday, December 14, 2011

46th Annual Heckerling Institute on Estate Planning

Jeffrey L. Burr and Jason Walker will be attending the Heckerling Institute on Estate Planning in January.  This is the nation's leading conference for estate planners. 

The firm of Jeffrey Burr will also be hosting a booth at the conference to spread the word on Nevada's Domestic Asset Protection trust - what we call the "Nevada On-Shore Trust."

Thursday, December 8, 2011

Irrevocability - Not What You Might Think

There are many types of Trusts that exist under the law.  Trusts can be either revocable or irrevocable.  A revocable trust allows the Grantor of a trust to transfer property into the trust with the unrestricted ability to undo such transfer by transferring the property from trust and even terminating such trust.  In other words, the Grantor is not required to permanently part with ownership and control of property transferred into the trust.  In fact, the trust terms can be amended by the Grantor as he or she deems necessary from time to time. 
With regards to an irrevocable trust, once the Grantor has transferred property into the trust, the Grantor no longer retains the unrestricted right to remove such property or terminate the trust.  The Grantor is unable to amend the terms of the trust.
A very powerful asset protection planning technique involves the use of the Nevada On- Shore Trust (sometime referred to as the Nevada Asset ProtectionTrust or the Nevada Self- Settled Spendthrift Trust) The Nevada On-Shore Trust is an irrevocable trust.  For some, the concept of irrevocability causes some hesitations in proceeding with implementing the Nevada On-Shore Trust as part of their asset protection planning.  The most often asked question by a person being introduced to the Nevada On-Shore Trust is whether or not the terms of the agreement can be amended from time to time.  The answer to such question is “yes.”  Although irrevocable and otherwise not amendable by the Grantor, the trust agreement usually allows for amendments or restatements to the trust agreement, including its dispositive and administrative provisions.  However the Grantor is unable to make such changes directly, and most often calls for a Trust Protector to effectuate an amendment to the Trust.
A Trust Protector can be any person or institution.  However, this person or institution cannot be anyone who has ever made a transfer to the trust.  Thus, the Grantor cannot be his or her own Trust Protector.  The Trust Protector’s powers are usually outlined with the trust agreement itself and, by way of example, often include such powers:
·         The ability to remove and appoint a Trustee;
·         The ability to change the location or governing law of the trust;
·         The ability to remove from the trust agreement any provisions which are no longer operative in the ongoing administration of such trust due to changed circumstances;
·         The ability to amend or restate the trust agreement to cope with changes in tax laws to achieve a more favorable tax status; and
·         The ability to terminate the trust.
Although a trust may be irrevocable, the Trust Protector’s role affords the Grantor the ability to have a trust agreement that can change and evolve to meet the changes both to the law and changes in the Grantor’s life.