that could be included in the Living Trusts / Wills and estate plans.
is a major expansion of the typical protections offered in standard living trust/will formats.
4. Durable Power of Attorney for Asset Management. This document is used primarily to direct your attorney-in-fact on how to manage, run, control or dispose of your assets (or certain assets) in the event of certain illnesses, incapacity, or disability. In the event of disability, this document is critical. It will allow you to direct the person(s) of your choice in making business decisions over certain real or personal property (and businesses). It can be very effective for small and family businesses, and landlords (rental properties). For example, per your direction, it could allow for the refinance or sale of real estate.
5. Family Limited Partnership (FLP). This is a very popular business and estate planning instrument (especially before the LLC) used for many purposes, some of which include asset protection, favorable pass-thru taxation, ability to control transferred property (as managing member or per the LLC), reducing estate or income taxes, life insurance ownership, and fractional gifting with use of beneficial "discounts" (e.g. a tax free gift of $20,000 may be worth conservatively (approximately) $30,000 thereby reducing income tax on its appreciation or growth, and eventually, estate taxes). This device is a limited partnership, which requires a general partner and at least one limited partner. But be aware that, by definition the general partner has "control", and also unlimited liability. The "limited's" have no management powers (and cannot, by definition "manage') and are therefore are afforded limited liability.
Charging Order - The family limited partnership will protect its assets from partner creditors. It has the power of the favorable asset protection charging order laws. (Ca.Corp.C 15522, 15673; Fla. Stat. 620.22; Ariz.Rev.Stat.Ann. 29-341; Nev. Rev. Stat. 88.535; NY Partnership Law 111 McKinney; Tex, Code Ann art. 6132a-1 7.03, etc.). However, be aware, in California, effective January 1, 2003 the law changed to allow "foreclosure" of interests. This is a dangerous change and a blow to the asset protection feature of the charging order. Normally a charging order is the exclusive remedy and will only allow the creditor to obtain certain distributions from the entity, if any, and not the assets. However, in such cases, generally the creditor would receive a taxable event (RevRule 77-137) upon the issuance of a charging order (as constructive income), even if he/she receives no cash or property. This could be a powerful settlement device. It appears that one should consider opening an FLP (or LLC) in a state that does not allow "foreclosure", like Wyoming or Nevada, and then qualify to do business in their own state. For example, in California a foreign entity to qualify to do business is about a $100 filing fee. In this example, that would invoke the California Corporations Code respecting the application of laws of the situs concerning the integrity or governance of such entity (or the charging order).
By tax definition the limited partners are "passive investors" with passive income or loss. To obtain limited liability for all members, see the Limited Liability Company (LLC) below. To allow passive investors some voice in management without fear of losing limited liability, see the LLC. To make passive investors active without loss of limited