Accounting FAQ’sQ: What is my best option for asset protection if my estate is modest (under $150,000)? A: Depending on your assets and your state of residence, your options will vary. In many states your primary residence and even annuities may be protected from creditors. Q: What is a limited liability company (LLC)? A: They provide similar benefits to limited partnerships as well as limited liability in case of lawsuit or claim against the company.Q: How effective are Limited Liability Companies (LLC) in protecting my assets? A: Most states do not limit creditors from bringing claims against LLC’s or FLP’s so your best asset protection option may be a trust. Q: What is my best option for the privacy of my assets?A: The most effective structure for asset privacy is a living trust; it will help your loved ones from the burden probate and keep your assets private. LLC’s can also help for non-business assets. Q: How can I reduce the taxes to my heirs? A: A living trust that includes provisions for discretionary spendthrift distribution is probably the best option but this will also limit access to the assets by the heirs. Q: How can I protect myself from lawsuits if I own rental properties? A: In most cases the best protection is for you to set up a separate LLC for each property, this will help shelter the individual properties should one be faced with a lawsuit. Q: What are the benefits of an asset protection trust? A: An asset protection trust or APT allows the Grantor to be included as a beneficiary; normally this would violate discretionary-spendthrift trust rules. A LLC can be structured to work with an APT to further protect your assets. Q: What is the False Claims Act? A: The false Claims Act allows individuals with evidence of fraud against the federal government to sue for triple the amount defrauded from the government. The individual that filed the lawsuit receives between 15 to 30 percent of the total recovered as compensation. Q: How does an IRA work? A: An IRA or Individual Retirement Account is a personal savings plan designed to help individuals save for retirement. This is done by securing tax benefits for accumulating money for retirement. Q: What is the difference between Traditional IRA and Roth IRA? A: A traditional IRA lets you take your tax deduction upfront. This is best if you need the tax deduction at the time you open the IRA or if you anticipate being in a higher tax bracket after retirement, a Roth IRA is more flexible allowing you to withdraw your contributions at any time without penalty or mandatory distributions after age 70.5. Q: Is there an age limit for contributions to my employer’s 401(k)? A: The only requirement is that you are still an employee by the company sponsoring the plan regardless of age. Q: Can I transfer my SIMPLE IRA to a Roth IRA? A: Assets in a SIMPLE IRA can be rolled over to another IRA two years after the account was established. The amount you roll over will be treated as normal income and therefore subject to income tax.
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