Creditor Planning

As with capital gains tax planning, the most important element in constructing a strong creditor protection plan may be timing. You should establish the structures years in advance of need. Most of the techniques we recommend are relatively conventional techniques used in estate tax planning, sometimes with a twist. For example, a family limited partnership with a corporate GP wholly owned by a trust for your heirs is a powerful technique. (A diagram of this is available in the handouts section of this web site.) The same is true for a house GRIT (QPRT - qualified personal residence trust) for your principal residence.

More exotic techniques are available, e.g., Alaska trusts and non-US structures. However, judicial hostility to non-California techniques suggests first considering our more mundane approaches. (Judges often consider the use of a non-California technique as evidence of a fraudulent intent.) In many situations the timing is not ideal. If it is too tight, we will refer you to an attorney or other professional whose views on timing and risks differ from ours. In some situations with tight timing we can still engage in planning, with a thorough analysis, e.g., an opinion letter from a retired judge that your assets exceed the probable value of the claim.

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