Transferring Assets Into Your California Asset Protection Plan

It’s typically pretty easy to transfer assets into your asset protection plan.  That’s especially true of Lodmell & Lodmell asset protection plans.  However, there are occasionally some complications and difficulties that arise with the creation and funding of asset protection strategies.  For example, California state laws impose onerous burdens relative to other states.  The purpose of this article is to discuss some of the obstacles to funding asset protection plans and to offer some general advice for making sure that your plan gets funded efficiently and with as little cost as possible.

California Franchise Tax

If you are a California resident, you must pay a franchise tax for each business entity that you own.  That’s true regardless of whether the business entity itself is formed in California.  For instance, if you live in California and you form a California limited liability company, you’ll be required to submit the appropriate tax forms and remit the franchise tax payment.  The same thing is true if you own a Nevada limited liability company or limited partnership.  The tax still applies.  It’s important to keep all this in mind when forming your asset protection plan.

Avoiding Tax Base Reassessments

Another quirk about California is that upon any transfer of ownership of real estate the state can (and will) reassess the value of the real estate for tax purposes.  Effectively that means that if you don’t fund your plan carefully, you could end up paying much more in property taxes.  Since many plans involve holding real estate in limited liability companies which are themselves owned by a limited partnership, it can be tricky to transfer property into your plan without incurring additional taxes.  So here’s what you need to do:

• If you plan to transfer property into a limited liability company, make sure that company is owned by the same people and in exactly the same proportions as the property is owned right now.  Also, check with the recording clerk in the deed office to see what disclosures are necessary to make sure that no tax reassessment occurs.
• Transfer the property into the limited liability company with a quitclaim deed.
• Follow-up with the deed recording department to make sure that you have adequately disclosed to them that the property is still effectively owned by the same people  and in the same proportions as it was prior to the transfer and that no reassessment will occur.
• Transfer the limited liability company into your family limited partnership.

The same rules apply regardless of whether you are transferring property into a limited liability company, a family limited partnership, or an asset protection trust.

By following the steps outlined above very meticulously, you can avoid having your property reassessed for tax purposes, which can potentially save you thousands of dollars in property taxes every year.  The bottom line is that it’s just not fair to have an increased tax burden simply because of your desire to lawfully protect your hard earned assets.