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Monday, March 21, 2016

All About Business Series: #1 Limited Liability Company (LLC) Basics

The All About Business article series will cover many common questions that clients ask when they’re looking to form a business (or when they’re “fixing” an existing business). 


Read more . . .


Friday, September 4, 2015

Watch Tiffany Ballenger interview on August 29th episode of Fox News Channel's "Bob Massi is the Property Man"

Tiffany Ballenger, Esq., of Phillips Ballenger Estate Attorneys, is again featured as a legal expert the Fox News Channel's show, "Bob Massi is the Property Man" (episode aired on Saturday, August 29th).

In this segment, Tiffany discusses different legal strategies and options for struggling homeowners.

            Watch Tiffany's interview here.  

            To learn more about the show, click here.

Stay tuned for more episodes of "Bob Massi is the Property Man" Saturdays on the Fox News Channel at 9am PST (12pm Eastern) and Sundays at 12pm PST (9am Eastern).

Thanks for everyone's comments and feedback!  So glad you're watching! 

-Tiffany

 


Tuesday, July 14, 2015

Nevada Secretary of State Fees to Increase under SB 483- Effective July 1, 2015

Pursuant to SB 483 of the 2015 Nevada Legislature, effective July 1, 2015, certain Nevada Secretary of State fees will change as follows:

What does this mean for you?

For many of our clients who have Limited Liability Companies (rather than Corporations), the fees will only increase $25.00 annually.  For those with Corporations (or other entities listed above), the fee increase will be more drastic- a $500.00 fee for the state business license plus a $25.00 increase in filing fees.

Some clients may wish to explore converting their existing entity structure from a Corporation to an LLC, as appropriate.  As always, please feel free to contact us with any questions or concerns!

-Tiffany Ballenger, Esq. 


Tuesday, August 26, 2014

Nevada is voted Best Trust state in America (again)...

Tiffany Ballenger, Esq., Phillips Ballenger Estate Attorneys:

Good news for Nevada residents, practitioners & those who form Nevada based trusts- Nevada wins "by a landslide" once again for best state to form a trust. 

Here's the article from Trust Advisor.com-

 


Read more . . .


Saturday, February 22, 2014

Phillips Ballenger Announces Military and Teacher Discounts

We are happy to announce that all current and former Military service members and current teachers will be offered a discount on Estate Planning, Asset Protection (including LLC formation and Nevada Asset Protection Trusts) and Short Sale/Loan Modification retentions. 

This is our way to thank you for your dedication and service to our country and community!

-Tiffany Ballenger, Esq.


Monday, April 8, 2013

Protecting an Elderly Mother's Assets

Dear Liz: Could you advise us on how to protect our 93-year-old mother's assets if she should become ill or die? She does not have a living will or a trust regarding her two properties.

Answer: "If" she should become ill or die? Your mother has been fortunate to have had a long life, presumably without becoming incapacitated, but her luck can't hold out forever.

Your mother needs several legal documents to protect both herself and her assets. Perhaps the most important are powers of attorney for healthcare and for finances. These documents allow people she designates to make medical decisions and handle her finances for her should she become incapacitated. In addition, she may want to fill out a living will, which would outline the life-prolonging care she would and wouldn't want if she can't make her wishes known. (In some states, living wills are combined with powers of attorney for healthcare, and in others they are separate documents.)

These legal papers aren't important just for the elderly, by the way. You should have these too, since a disabling illness or accident can happen to anyone.

Your mother also should consider a will or a living trust that details how she wants to parcel out her estate to her heirs. Of the two documents, wills tend to be simpler and cheaper to draft, but a living trust means the court process known as probate can be avoided. The probate process is public, and in some states (particularly California) it can be protracted and expensive. A living trust also could make it easier for someone to take over managing her finances in case of incapacity or death.

You can find an attorney experienced in estate planning by contacting your state's bar association. Expertise and competence are important, so you may want to look for a lawyer who is a member of the American College of Trust and Estate Counsel, an invitation-only group that includes many of the best in this field.

If she or you are trying to protect her assets from long-term care or other medical costs, you'll need someone experienced in elder care law to advise you.

-Liz Weston, Los Angeles Times

http://articles.latimes.com/2013/mar/29/business/la-fi-montalk-20130331


Tuesday, March 26, 2013

Bankruptcy Judge refuses to dissolve LLC

A recent case further bolsters Limited Liability Protection, in this case, under Federal Bankruptcy Law. 

In In re Warner, 480 B.R. 641 (Bankr, N.D. W. Va. Sept 27, 2012,) the trustee in the bankruptcy of an LLC member asked the Bankruptcy Court for a declaration that the LLC was dissolved pursuant to the LLC's own operating agreement, which called for dissolution upon the bankruptcy of a member.  In this case, the Court denied the Trustee's motion, relying on provisions in the Bankruptcy Act that trump other contracts.  This ruling left the trustee with very limited options for liquidating the member's LLC interest and paying out to the bankruptcy creditors. 

 

 

While most of my asset protection planning involves third-party (i.e. non-bankruptcy) creditors, however this case is important in light of the fact that the court upheld asset protection provided by the member's LLC. 

 

-Tiffany Ballenger, Esq.

 

 


Wednesday, March 13, 2013

Why Nevada LLC's might just be the "best"!

SB 405 went into effect on October 1, 2011. It strengthens the asset protections available to Nevada-based entities. The updated charging order language affects Nevada Limited Liability Companies (LLCs), Corporations and Limited Partnerships (LPs). The law changed as follows: the new language in the statute makes the charging order the exclusive remedy of a judgment creditor- including single member LLC’s and single shareholder corporations. A charging order is a remedy issued by the court giving the creditor a lien over the debtor’s interest in the entity. As such, this new language solves the problem brought forth in case law (specifically single-member LLC cases). Using the generous provisions provided by Nevada statute, many opportunities for asset protection and estate planning can be designed to maximize protection and take advantage of the charging order as the exclusive remedy, discouraging litigation and encouraging settlement.

Main Advantages of Forming Entities Post SB 405: No Equitable Remedies Allowed

Most significantly, SB 405 adds key language to the entity statues specifically stating that no other remedies may be applied. Equitable remedies have served to allow a court to evade the “charging order as the exclusive remedy” language in the past. Equitable remedies are court-granted remedies that require a party to act or refrain from performing a particular act. Under the doctrine of limited liability, a corporate entity is liable for the acts of a separate, related entity (or individual) only under extraordinary circumstances, commonly referred to as piercing the corporate veil. Federal common law typically involves a two pronged test for piercing the corporate veil: the party sought to be charged must have used its alter ego to perpetrate a fraud or have so dominated and disregarded its alter ego's corporate form that the alter ego was actually carrying on the controlling party's business instead of its own. In the Ninth Circuit, cases suggest (at least in California cases), that fraudulent intent in incorporation need not be shown to pierce the veil, as long as it can be shown that the separate identity of the corporation has not been respected and that respecting the corporate form would work an injustice on the litigants.   The test for alter ego liability is almost identical to the veil-piercing test.  Alter ego has been defined as a lack of attention to corporate formalities, commingling of assets and intertwining of operations. Alter ego requires demonstrating that the two corporations (or individual and corporation/company) functioned as a single entity. Applying this notion, the court could set aside the protection afforded by the corporation or company by ordering that the company or corporation is the owner’s “alter ego” then piercing the corporate veil by stating that the company and the individual are one in the same (and going after the other’s assets in satisfaction of the judgment). Of course, veil piercing and alter ego concepts are separate and distinct. Piercing the corporate veil allows the court to find A vicariously liable for B's debts. By contrast, a contention that A is B's alter ego asserts that A and B are the same entity. Liability then is not vicarious but direct. Most other forums do not specifically disallow the court from applying equitable remedies and, as such, the court would have discretion to seek piercing the corporate veil under theories such as reverse veil piercing, alter ego, constructive trust and the like.  Of note is that one exception to SB 405 was made. Courts are allowed to apply the “alter ego” theory as the only equitable remedy as to corporations (not limited partnerships or LLCs).  As such, Nevada LLCs and LPs continue to be a favored structure for ease of management and asset protection.

 

Available Opportunities for Planning

SB 405 creates numerous planning opportunities for current business owners and those looking to create entities. Citing the precedent reached in Albright, A-Z Electronics, Modanlo and Olmstead among others, many estate and business planners in the past have been hesitant to utilize single member LLCs because a Court may state that a single member LLC doesn’t enjoy the charging order as an exclusive remedy. Per SB 405, this loophole is now specifically closed by statute. Additionally, out-of-state entities may enjoy protection as well. To bolster the protection provided by a foreign entity, there are many options available:

Start Over In Nevada

A client may choose to “start from scratch”, so to speak, and re-form the company here in Nevada, dissolving the foreign entity. This may be a good choice if the assets themselves are easily transferable.

Domesticate the Foreign Entity in Nevada

If the assets are hard to transfer (or if the entity owns many types of assets), it may be easier to domesticate the entity in Nevada, taking advantage of our favorable laws. In that instance, the individual assets would not need to be transferred, making it simple to effectuate.

Form a Nevada Holding Company

This type of “hybrid” option involves forming a Nevada entity, such as an LLC, and transferring ownership of the foreign entity to the Nevada entity.  As such, no individual assets would need to be moved and the companies would enjoy Nevada-based protection. This is a great choice for clients who have a number of foreign entities or existing Nevada corporations.

What do I do if I have a corporation?

LLCs and LPs have been favored over corporations by many planners because of greater creditor protection. The alter-ego theory cannot be applied against LLCs or LPs, but can be applied against a corporation. Clients who have foreign and Nevada corporations would still like to make use of the protections now available under SB 405 to increase their creditor protection. The options above can still be used, relatively easily and with minimal expense. To conclude, Nevada’s passing of SB 405 greatly enhances its creditor protection laws for Nevada LLCs, LPs and corporations by excluding all potential equitable remedies (with the exception of the alter ego remedy for corporations).  It goes even further by stating that single member or single shareholder companies enjoy the limits of a charging order remedy, therefore setting our laws above and beyond the laws of the rest of the country.

 

-Tiffany N. Ballenger, Esq.


Wednesday, March 13, 2013

Domestic Asset Protection Trusts & Battley v. Mortensen

In May of 2011, a federal bankruptcy caseBattley v. Mortensen, Adv. D.Alaska, No. A09-90036-DMD (2011) led many planners and clients to doubt the protection afforded by Domestic Asset Protection Trusts (DAPTs). Judge MacDonald set aside Thomas Mortensen’s transfer of real property to an Alaska asset protection trust as a fraudulent conveyance. This case came in direct opposition from previous holdings on the same issue, as the Grantor of the trust was not only solvent when he transferred the subject property, but he was also beyond the state statute of limitations for transfers.  In Alaska, the statute of limitations is fours but only two years in Nevada. What does this mean for those who have created DAPTs as part of their overall estate planning and asset protection structures?

Following an expensive divorce, Mr. Mortensen drafted an Alaska Asset Protection Trust by himself. The trust was created to hold real property located in Alaska, worth only approximately $60,000 at time of transfer in addition to a cash gift of approximately $100,000 from his mother.   In 2009, more than four years after drafting the document, Mr. Mortensen become ill and subsequently racked up credit card debt.  He then filed for Chapter 7 bankruptcy.    Though he disclosed his personal assets and the fact that he had a DAPT, he did not disclose the property held by the DAPT.

Even though Alaska has a four-year statute of limitations on transfers to a DAPT, the court applied federal Bankruptcy law which enjoys a ten-year statute of limitations from the date in which a bankruptcy is filed.  Thus, the transfer to the DAPT was unwound, and the property transferred to the DAPT was sold to satisfy his creditors.

Practitioners are somewhat split as to this ruling.  Some believe that this case may be a death knell to transfers to a DAPT however, this case should be distinguished on its facts.  Unfortunately in this case, Mr. Mortensen drafted the DAPT and filed bankruptcy without legal counsel.   Had he not filed Chapter 7, Mr. Mortensen would have been protected from the unsecured creditors via the four-year statute of limitations and the ten-year federal rule would not have been applied.  Additionally, Mr. Mortensen was not in a good position to form a DAPT in the first place since he had declining income, low net worth and escalating debt.

Rather, I like to view this case as a whole as validating the fact that Asset Protection trusts should not be created to defraud creditors.  As such, this type of planning can still prove to be an integral part of one’s overall estate plan.

 

-Tiffany N. Ballenger, Esq.


Wednesday, March 13, 2013

Asset Protection Techniques

Every day, potential clients come to find out how to protect their assets from potential creditors and lawsuits. Nevada law offers many “free” exemptions under NRS 21.090. However, many assets are still vulnerable such as non-homesteaded real property, bank accounts and investments. Fortunately, Nevada also offers other options for helping to safeguard these exposed assets.

Once risks and areas of exposure have been identified and the potential protection strategies have been carefully explored, a cost vs. benefit analysis should then be conducted before finally deciding which asset protection strategies to employ.

Two of the most widely used Nevada asset protection structures are the Nevada Limited Liability Company (LLC) and the Nevada Asset Protection Trust (NAPT).

Nevada LLC

limited liability company formed in Nevada offers excellent domestic protection. Most practitioners agree that Nevada offers some of the most favorable corporate laws in the country. Some of the pros of a Nevada LLC are:

  • Nevada’s statues generally favor businesses;
  • The organizational requirements are quite informal- no annual meetings or minutes are necessary;
  • LLC’s are flexible structures that can be used in many different ways- to own property, to manage an operating business and to hold liquid assets;
  • LLC’s can be taxed in four different ways: as a disregarded entity, a partnership, an S-Corp or a C-Corp;
  • Nevada, unlike many other states, has no state income tax or corporate tax; and
  • Nevada LLC’s can be structured to maximize privacy and anonymity.

Perhaps most importantly, the members’ interests cannot be attached by a creditor. The only remedy against a member is to obtain a “Charging Order” allowing the creditor to lien or “charge” the member’s profit distribution rights when, or if, a distribution is made by the member of the LLC. As such, assets within the LLC are safe but trapped.

Nevada Asset Protection Trust

Nevada Asset Protection Trusts (NAPT) were created by The Nevada Spendthrift Trust Act, NRS 166.010 et seq. in 1999. Nevada is one of just a handful of states that provide a Trust of this sort.

This unique law lets an individual create a valid Grantor Trust where he or she is both the Trustee, the person who controls the Trust assets, and the beneficiary, while the assets within the Trust remain protected from creditors. Unlike many other states with similar laws, the Trust creator does not need to be a Nevada resident to create a NAPT. Additionally, any category of asset such as real property, personal property or liquid assets in any location can be protected with a NAPT.

NAPTs work in the following manner: By law, the Trust prohibits the assignment, alienation, acceleration and anticipation of any interest of the beneficiary under the Trust by the voluntary or involuntary act of the beneficiary or by operation of law or any process. Payments by the Distribution Trustee, a third party who has discretion to make distributions, are made only to the beneficiary who can also be the person establishing the Trust. The Trustee of a Spendthrift Trust is required to disregard and defeat every assignment or other act, voluntary or involuntary, that is attempted contrary to the provisions of the Nevada Spendthrift Act.

Some of the benefits of the Nevada Asset Protection Trust are:

  • You keep control of your assets;
  • You may receive the full benefit and use your own assets;
  • You don’t need to give away your assets;
  • You can protect any type, and an unlimited amounts, of assets from creditors;
  • The Nevada Asset Protection Trust is less expensive to form and maintain and much less complex than foreign or offshore Trusts which are often troubled by IRS audits and complicated tax reporting requirements;
  • The Nevada Asset Protection Trust may avoid loss of the assets through a bankruptcy; and
  • The Nevada Asset Protection Trust can be integrated with your estate plan (remember, a “Living” or “Family” Trust does NOT provide the creditor protection benefits discussed above).

With all of its benefits, there are some disadvantages to an NAPT. If the Grantor of the Trust is also a beneficiary, a third party Distribution Trustee must serve as well, which means that the Grantor does not have absolute discretion. Additionally, there is a two-year seasoning period. If a creditor is a current creditor when the transfer of the asset to the NAPT occurs, the creditor must bring suit against the property transfer within two (2) years of the transfer or within six (6) months after the creditor discovers, whichever is later. After the seasoning period is over, the creditor is barred from bringing suit to recover said property.

Both of these techniques, amongst others, can be extremely useful in protecting assets and providing peace of mind in our volatile economy.

 

-Tiffany N. Ballenger, Esq.


Wednesday, March 13, 2013

Nevada's Homestead Protection

The Nevada’s Homestead Exemption Protection law provides homeowners with an excellent asset protection device.  Nevada defines a “homestead property” as: Land with a dwelling on it; a mobile home whether or not the underlying land is owned by the mobile home owner; and/or a unit (such as a condo).  This protection is only available for one’s primary residence, not investment properties or second homes.

The amount of protection from creditors is the equity associated with the property up to the limit of $550,000.  A homesteaded property is not subject to forced sale on execution or any final process from any court, except as otherwise provided by subsections 2, 3 and 5, and NRS 115.090 (and unless otherwise provided by Federal law.)  Furthermore, judgments cannot be executed against homesteaded properties, as defined by In re Contrevo, 23 Nev. Adv. Op. No. 3, March 8, 2007.

Remember, this protection is not automatic.  You must record a valid homestead claim/declaration.  If you have previously recorded a homestead declaration, but later refinanced the property or quitclaimed it to your living trust, please ensure that that you still have a valid declaration recorded.

If your residence qualifies for the exemption (as provided above), and you record the appropriate forms per NRS 115 , the equity in your residence up to $550,000 will be protected from creditors’ claims. Of course, a homestead declaration does NOT protect homeowners from any mortgage or deed of trust (including junior lien holders such as second mortgages or HELOCs).  Also, it does not protect against super-priority lien holders such as HOA fines.

The Clark County Assessor’s website is a wonderful resource for more information on Nevada’s homestead law, as well as information regarding completing the Homestead Declaration Form.

 

-Tiffany N. Ballenger, Esq.


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