There are many other reasons why residents of this state who are of means will want to consider asset protection.
Aside from state or federal taxes, a family legacy can be decimated because of a divorce or because of lawsuits at the hands of disgruntled family members or even third parties.
An LLC may be able to protect a family fortune
There are many different ways a New Jersey resident who has assets to protect can do so. A resident should weight these options carefully with an experienced attorney.
A limited liability company, or LLC, started as a device for smaller business that wanted to get the protection of a corporation but avoid taxes at the corporate rate. In an LLC, individual members pay taxes on the income they receive from the LLC at their individual tax rates.
However, people are allowed to create an LLC for the purpose of putting family-owned investments and other assets into the entity and then pass down ownership shares to the next generation.
Usually, the parents who acquired the wealth will maintain management over the LLC, meaning they make the final financial decisions.
Like a corporation, an LLC is a separate legal entity, meaning that what is in the LLC is normally free from attachment at the hands of a family’s individual creditors.
Moreover, an LLC can be structured in such a way that a spouse or former spouse of a couple’s children will not be able to receive shares from the LLC.
An LLC can also save money on New Jersey taxes
While New Jersey no longer has an estate tax, inheritance taxes still may apply at the time of a person’s death. Federal estate and gift taxes are also still collected, although the federal estate tax applies only to the wealthiest estates.
An LLC allows parents to transfer property to their children at a discounted rate. Specifically, since in a family LLC the children do not have management rights, the book value of their shares is less and can be recorded for tax purposes accordingly.