While there may be many reasons for forming a business entity of one type or another, one of the most important reasons is the limited liability of individual owners for the debts and obligations of the company. Unlimited personal liability for the debts and obligations of the business exist for general partners in a partnership and sole proprietors. Owners of limited liability entities, such as corporations or limited liability companies, on the other hand, have personal liability for the debts and obligations of the business only to the extent of their invested capital and to the extent that they may have assumed personal responsibility for the same.

I was honored to be one of the presenters at the Salt Lake Estate Planning Council’s Fall Institute on Thursday. I had a chance to teach other planners about the tools and techniques that can be used when planning for legacy assets, like a family cabin or a family farm. In attending one of the other presentations during the day, I was struck by this comment from Alan Gassman and attributed to Bob Burke:

Given Kobe’s current worth of approximately $150 million, a lack of planning will probably cost him dearly. Without a pre-marital or post-marital agreement and the fact that he lives in a community property state, it is likely his ex-wife will end up with half of his fortune.

While no asset protection strategy is foolproof, proper use of DAPTs in conjunction with other legitimate asset protection strategies increases your chance of protecting your hard earned assets in our increasingly litigious society.