Baby Boomer Bob has been an active organic farmer, tending the family farm that he and his siblings think they inherited from their parents. He has been stricken with a cerebrovascular accident" (stroke) and his prognosis is uncertain.
His wife has hired help to harvest the next crop of vegetables, but the farming operations have always required both of their constant attention for the entire season and she is totally occupied with staying by Bob's side at the hospital. Title to the land has not been changed from the names of the dead father and mother. The mother had remarried and relocated by the time of her demise. The three living siblings, their spouses and the surviving stepfather have always gotten along well, but Bob's wife has had to hire a lawyer and so everyone else has hired their own.
Four lawyers, each in different jurisdictions, now have professional obligations to advocate for the property interests of people whose situation may develop conflicts. Their family relationships are cordial, but their property interests are not secure and lawyers do not tend well to familial realities. Unless one of these folks is a natural charismatic leader, conflict will brew. Unfortunately, poor Bob needs his family and neighbors by his side while he heals from the stroke and he may find himself waking up to a very sad situation.
After Dad died and before Mom remarried, Mom could have transferred title to the farm to a New Mexico limited liability company with Bob as the manager and herself and adult children as the members. When she remarried, her new husband would have gained no interest in the land. If she had also executed a Transfer on Death beneficiary designation for her own interest in the LLC, her three children would have received her interest upon her death. When she died, Bob and his siblings would have been able to step in to elect a new Manager and carry on.
The wise next step:
Bob's wife needs help and her family is in a position to help her. If her lawyer were truly interested in avoiding conflict and preserving the family farm, he could create a New Mexico LLC to take title from the probate estate of the deceased mother, all in his own state. A management structure could be put in place and all of the siblings could agree to share in the company; a fair share for Bob might be proportionately higher because of his sweat equity in working the land.
A NM LLC is a valuable and wise decision for so many people. Perhaps you can identify with one of these case studies. By reading about Organic Farmer Bob, Surprised Colin, and High Risk Marilyn, you can learn about the pitfals - and recoveries - that many of us face right now or in the future.
Marilyn is an anesthesiologist with a young stay-at-home husband and three wonderful children. She knows from discussions with her colleagues and her advisers that she is at high risk of being sued for malpractice.
She is covered by professional liability insurance and she makes sure that all of their assets are in her husband's name. Her husband's partner in a real estate investment is sued in a high-profile case and, after his deposition in the case, her husband is named as a defendant in the lawsuit.
Couples often assess their relative risks for liability and put title to their property into the name of the least likely to be sued. No person with assets is immune from being sued for liability, if only by alleged association with a primary defendant. While the actual outcome for every legal case would depend on the presentation of evidence, the cost of bringing a case to trial usually pushes parties to offer settlement prior to trial. The substantial marital assets will be revealed during the discovery segment in this case and their value will affect the negotiations for settlement. Real property can be tied up with a lis pendens, a public notice that the property is involved in litigation.
It is relatively simple to isolate assets into separate New Mexico LLCs so that each company owns only one property. Liability connected with one asset, such as an apartment building that burns down, is thus contained in the company that owns it and, absent personal negligence, the owners of the company and the owners' other assets are not vulnerable.
The next wise step:
Since Marilyn's husband is already a party to a lawsuit, he cannot try to hide his assets, but he is not prohibited from transferring title to his assets at their current value to an entity he owns. So he can transfer out-of-state real property to a New Mexico LLC listing the actual value of the property as the actual value of his capital contribution to the LLC. Running a business is not easy. With AttorneyMadeCompannies, you will learn solutions to common management challenges
Colin is an antique dealer whose inventory has become larger and more valuable as time goes by. He is a busy man and he loves the thrill of buying entire estates and combing through catalogs to determine the value of the things he has inadvertently acquired.
He has worked with the same accountant for many years and they have a system for tax reporting his sales that the accountant says is compliant with federal laws. Last year, his elderly aunt in Iowa died, and he went to help his cousins clear out
the barn. He sold some of the items from his EBay account and shared the proceeds with his cousins.
Now the cousins inform him that they have to file an inheritance tax return on the value of the aunt's estate.
Only a few states have an inheritance tax and Iowa is one of them. His accountant is unfamiliar with the process. His records are not adequate to complete the Iowa inheritance tax returns and show which of the items on his website came from Iowa.
Even veteran purveyors of tangible property get caught in the snare of differing laws in different states. If Colin had formed a New Mexico LLC and transferred title for the Iowa assets from the estate of his aunt into the New Mexico company, there would be a clear chain of title and a clear segregation of these items and the proceeds of their sale from the rest of his inventory.
The wise next step:
The tangibles taken from the barn were described on Colin's Ebay listing along with the offering price and the actual amount received. A New Mexico LLC can be created with a retrospective effective date that accurately lists the tangibles "purchased" from the aunt's estate and the distribution of the proceeds to the cousins