C.A.L.M. Level 2:
Got Assets? Get Protection!
(If you haven’t read C.A.L.M Level 1 - Please Read It First!)

Many people who have assets have heard of setting up Limited Liability Corporations (”LLC”) — but usually, just for their business.

And many more people will tell them how having your business under an LLC won’t be as much protection as they might think.

And understandably so.

There’s a lot of mis-information out there - rumors and myths - and even a few facts get mixed in to make the information seem legitimate.

There are so many different aspects of setting up an LLC that we can’t go into all of them here.

But here are just a few aspects:

• The actual type of legal entity.
• The jurisdiction it’s set up in
• What assets should be owned by the LLC

Don’t get us wrong - we believe that anyone with any assets should protect them by use of an LLC. Note: in some places, they are called “Family Limited Partnerships” (”FLP”).

Introducing C.A.L.M. Level 2 Protection:

Level two of the C.A.L.M. program makes sure you and your assets are protected.

If your asset protection plan is wanting, C.A.L.M. 2 will get you protected using a Family Limited Partnership. In some cases, you may need more than one.

An FLP forms the foundation of any domestic asset protection plan. You can, with this inexpensive tool, start protecting yourself and your assets from business creditors and personal creditors.

Warning: As foundational and as useful an FLP is, it is not a cure-all. We highly recommend it as the cornerstone of nearly all domestic asset protection plans. But it is not a cure-all. We mention a situation below where they are not appropriate.

Who Needs C.A.L.M. 2 Protection? Let’s look at who is at risk… If you are a professional, if you hold a professional license of any kind - you are at risk:

That means:

• physicians,
• attorneys,
• CPAs/accountants,
• insurance agents,
• financial planners,
• stock brokers,
• mortgage brokers,
• real estate brokers/agents,
• architects and
• engineers

…to name but a few.

Not a licensed professional? If you own any of the following assets - you are also at risk:

• Personal Residence
• A brokerage account
• bank account
• CDs
• Rental property
• Vacation condo
• IRA (depending on the state)
• A boat, plane, waverunner, snow mobile
• Anything else of value

(Note that it doesn’t matter if you own them in your own name, or in a revocable living trust, or in a C- or S-Corporation, or Partnership.)

In other words, if you have a pulse and breath and are of age, you undoubtedly need protection.

Licensed professionals mostly know, all too well, that they need asset protection. If they didn’t learn it in school, they learn it from professional seminars, colleagues and hopefully not from their own personal experience.

But if you’re not, let’s take a few examples of the kinds of risks you face:

Homeowners:

Teenage Children:

Vacation rental:

“The Right Jurisdiction”: What You Need To Know About Where Your LLC Or FLP Gets Formed

C.A.L.M. Level 2 Protection involves using properly set up LLCs and FLPs. Part of setting them up properly is having them set up in the correct jurisdiction.

We’ve already covered the danger you and your assets could be in from the risk of a lawsuit.

In order to explain why the right jurisdiction is important, let’s assume someone has sued you successfully for $2 Million dollars. This is more than your umbrella liability policy of $1 Million dollars - or, if you are a physician, assume it’s more than the $1 Million dollar malpractice insurance covers.

If your assets are in your name, or under incorrect or improperly set up legal and business entities, the plaintiff is coming after your assets.

With an FLP, will your assets be safe? Let’s look…

With a properly set up FLP, your assets remain in the FLP.

The judge cannot:

• transfer the interest in the FLP to the creditor or force the debtor to sell his/her interest and turn over the sale proceeds to the creditor.
• force the FLP to sell assets.
• force an FLP to distribute income.

What can a judge do, then?

He can give the creditor a “charging order.”

What does the creditor get with a “charging order”? Not much.

They still can’t

• get the interest in the FLP transferred to them, or force the debtor to sell his/her interest and turn over the sale proceeds to them.
• force the FLP to sell assets.
• force an FLP to distribute income.

What does the creditor get? The creditor gets the right to pay income taxes on income generated in the LLC but NOT distributed.

Let’s say you were successfully sued, you have your assets in an FLP, and the judge issued a charging order. You have a brokerage account owned by the FLP that earns $1000. Even though the FLP retains the $1000, the creditor gets to pay taxes on it. They get what is called a K-1 for the income.

That’s right. Even though the creditor has seen no money in their bank account from you, the debtor - they still have to pay income tax on any income. Every year. Even though the assets of the FLP are not distributed.

Collecting nothing but paying income taxes to the government, a charging order is hardly attractive to the plaintiff — or the plaintiff’s attorney.

But this only works well in about 6 states. In only 6 states are the charging orders statutes strong enough to withstand a challenge by a creditor. In the rest of the 50 states the FLP statutes are weak.

As a C.A.L.M. plan member, you will want to have your FLP set up in a state with strong FLP statutes, with strong charging-order language in it. If you do not live in a state with strong FLP statutes, as a C.A.L.M. plan member, you will be provided with lawyers to set up your FLP(s) in a state that is geographically distant from your home and office.

An example:

You are a California C.A.L.M. plan member. You set up a Nevada FLP, since Nevada has strong FLP charging-order language in their FLP and LLC statutes.

If you are sued, do you think a California attorney representing a California creditor would want to incur the time, expense and risk to hire a Nevada attorney to ask a Nevada judge to issue a charging order? Not too likely. And, as a CALM plan member in California, you will have access to Nevada attorneys. These C.A.L.M. plan attorneys specialize in drafting FLPs and are able to represent you in Court, should you need a Nevada attorney to help you protect your Nevada FLP assets.

You Need C.A.L.M. Level 2 Protection!

Over 99% of our clients have inadequate asset protection.

You may have C.A.L.M. Level 2 protection already.

Not sure?

We invite you to call us to find out more.

The C.A.L.M. Plan provides the best protection in multiple states and jurisdictions.

With C.A.L.M. Level 1 you get a comprehensive asset protection Review. Perhaps the most important part of this Review is the Action Plan that you can start implementing, to protect you and your assets.

The Action Plan will generally cover C.A.L.M. Level 2 Protection as a first step. This provides core domestic asset protection through the forme doneation of a Family Limited Partnership (FLP). Normally, it would cost $3,000-$5,000 when done by an asset protection attorney. Through your C.A.L.M. membership you can get one set up for the reduced price of $2,500. Since Level 1 costs $495, your cost savings for Level 2 pay for your C.A.L.M. Level 1 membership.

But it’s better than just the cost savings. (And there are more potential cost savings. If you should need additional FLPs and LLCs, for instance, you will get those at a discounted rate as well.)

The design and implementation of this core level of protection will be performed by a collaborative team of professionals with special training in Wealth Preservation Strategies. A key member of this team will be your Certified Wealth Preservation Planner (CWPP™). You can contact your CWPP™ Advisor right now for more information and a free, no pressure, no obligation consultation about how we can get you started today.