Forcing a square peg into a round hole damages both. Another flaw often found item during the discovery process is the “funding” of assets into the wrong vehicle. Certain vehicles have great use for specific business functions supported by statute, tax law, and case history. You and your planner must have a good handle on these issues and know what pros and cons each entity presents, what the effect on your liquidity will be and what it will take to maintain and support that stated business purpose as a start (starting to see the detail required?).  One good example is the common misuse of Family Limited Partnerships (FLP) to own the client’s personal residence. What is the legitimate business purpose of using a vehicle that is most often created for “family investment management and wealth transfer” to own the house you personally live in? If you’re not paying the FLP commercially reasonable rent, you probably don’t have one. In this case the plaintiffs will successfully argue that you are using the FLP as personal piggy bank that is not legally distinct from you and your personal assets and liabilities and the I.R.S. won’t find it cute either. Similarly, we often see dangerous   Read more…