By: Michael Ioane
At some time in your life you may be asked to play the role of a “friendly party” in another person’s asset protection program. Your relationship with this person would probably be one at a deep level of trust and understanding as you would not have been asked to take on the task otherwise. This would either make it easy for you to say “yes” or make it difficult for you to say “no”. Before you decide, read along to learn more about what you are being asked to do so that you can make an informed choice.
Get as much information as you can from the person wishing to involve you in his plans. Then, consult with an expert as laws vary from state to state and hardly remain constant over time. It is to your best interest to be well-informed regarding details and issues. What we would share below are generalities and, although unlikely, may not apply to your exact situation.
What role would you be taking on? Depending on your friend’s plans, you could be asked to be a leading member of a Limited Liability Company (LLC), a business partner, a part of a corporation, a trustee, or a partner in a limited partnership. You are basically being asked to increase your friend’s privacy by being the signee of documents required by his business entities.
There is little more for you to do beyond this point. If the LLC throws a little profit your way, you would need to declare this in your 1040 income tax schedule C return. At most, if your friend lost a judgment, you may be asked to take part in some legal paperwork to foreclose property or transfer it into an LLC.
Would you be in trouble for getting involved? The short answer is: very unlikely. If a plan is structured and executed well, there should be no reason for you to worry. If everything fails, remember that it is not your property at risk. If you do invest some of your money in the business entity, the risk to which you are exposed is very small as an LLC isolates its assets from your friend’s personal assets.
Look for details that may introduce a higher form of risk than the ones mentioned above. Do not participate in any plan in which the collection of debts is delayed or hindered up to the point of making the assets worthless. This might lead to a fine against you for participating in civil conspiracy.
There are a host of other red flags that you should look for when studying the details of someone else’s asset protection plan. These are the same flags that a judge may look for should this plan come under scrutiny or attack. To view the entire list of such red flags, get a copy of the “Asset Protection Manual” by Michael S Ioane. There’s so much more to know about your possible role as a friendly party in an asset protection plan.