96. Save $100,000s – Protect your assets in case of a personal bankruptcy, corporate bankruptcy or a divorce
In case of a potential future personal bankruptcy or you get sued personally:
You could put your assets (house, money, cars) into a company. Like you get personally sued for $500,000, the judge makes a judgment in 6 months, you quickly (prior to the event) transfer like $300,000 worth of assets to a new company and avoid losing your assets.
Another advantage of placing your house into a company is that in case of personal bankruptcy, the corporate veil protects your corporate assets, including money and house.
Be careful with the shares of the company, do it such that nobody can claim ownership if they steal the shares, the shares must be in name and not anonymous. In the will, you can easily divide the shares of the company amongst your children. Or in case your spouse dies, he/she automatically gets the other half of the shares, draft a continuation planning agreement.
For inheritable estates: Transfer all the assets, like inheritable money, house, etc in a ESOP company.
In case of a potential future corporate bankruptcy or you get sued as a corporation:
Same way when your company gets sued for x, you transfer the assets of that company to another company that you control, so you are not going bankrupt.
In case of a divorce:
Transfer the house (and other assets) in a company whereby both persons have equal shares as so to sell the house at the right price (over time, like over several years) instead of selling the house under pressure, resulting in avoiding losing big money on the divorce settlement.
Also, for tax reasons:
1. Before your divorce, find and copy all business tax returns for your spouse’s corporation or partnership. The IRS will not give you copies of your spouse’s business returns if you did not sign them.
2. When in doubt about how to file, consider a separate return. This ensures that you will not be held liable for the actions of your spouse, if she omits income or overstates expenses. But even if you file a joint return, the innocent spouse provisions of the tax law will protect you if you weren’t aware of the misstatements on the joint return.
3. Consider the tax implications of support. Child support is not deductible, but alimony is. Calling child support "family support" makes it fully taxable to the recipient and deductible to the payer, just like alimony. Do not characterize the payments as "family support" unless you will end up with more money after taxes are paid.
4. Follow the 5Ds for alimony deductibility. If you want a deduction for the alimony you pay (it will be taxed to your ex), it must be paid in dollars, under a decree or written agreement, and cease on your ex’s death. After the divorce, you must maintain your distance (you can’t live with your ex), and the payments can’t be designated as non-taxable or child support.
5. Keep a calendar of the days (and nights) your child spends at your house and at your ex-spouse’s. This will provide documentation for the courts and for the IRS (for dependency exemptions and head of household filing status), and also help you avoid disagreements with your ex-spouse about what really happened on a particular day.