asset protection

Asset Protection Strategies — Transferring a Business to the Next Generation

asset protectionAssume you have a new client who has a business worth over $30 million. The client wants to pass it to his son who has been working with him for over 5 years and has become very involved with and knowledgeable about the business.

How can Dad transfer his business to his son in a way that minimizes his transfer taxes, and does so with a minimum of complexity?  “Opportunity shifting” is the answer. Alan Eber explains how to use this concept in the following excerpt from his book, Asset Protection Strategies:

Dad will set up a pre-inheritance trust (PIT) for his son, fund it perhaps with $100,000, and allocate part of his GSTT exemption to it. The PIT will set up, own 100%, and be the non-managing member of an LLC. Dad will be the non-member manager. The LLC will employ Dad as its president and perhaps his son as its vice-president.

When Dad’s loyal customers have a new project, Dad (on behalf of the new LLC) will sign the contracts with them in the name of the new LLC. All new business will be undertaken by the new entity.

Dad’s old entity will wilt on the vine. In a matter of years, the business that caused Dad’s enterprise to be worth $30 million will have been shifted to the new LLC. The $30 million asset has been removed from Dad’s estate and placed into a GSTT exempt trust for his son without needing to pay a dollar of tax.

Caution: The new entity to which Dad’s business is being shifted should truly be a new and separate entity from the old. It should have its own offices, telephone, letterhead, and staff.

Advantages of Opportunity Shifting

Opportunity shifting allows Dad to shift business opportunities into an entity he sets up for his children, and permits him to afford these opportunities to his children—asset and divorce protected and transfer tax-free. Dad can take an appropriate salary for being the LLC’s manager.

Rather than start a business exposed to creditors or grow the business and have transfer tax concerns, the GSTT exempt trust portion of the PIT, set up for the child by his parents, established the LLC to own the business in asset protected, divorce protected, and transfer tax-free mode.

No Tax on the Transfer

The client is not taxed when he “refers” business contacts to the new entity.

If a person refers business to another, no transfer subject to a gift tax has occurred. When a new business is started or the family has an investment opportunity, a new entity should be formed, and most or all of the equity interests offered in the new entity should be placed in an appropriate trust.

The entity’s design can provide the opportunity provider complete control even though he owns only a small or no portion of it.

Example: The opportunity provider can keep control by being the 1% general partner in an FLP, the 0% non-member manager of an LLC, or the holder of the only share of voting stock in a corporation.


Alan R. Eber, author of Asset Protection Strategies, practices law in the fields of foreign and domestic asset protection and estate planning, trusts, business structuring, and wealth strategies. He is a pioneer in the asset protection field, having since 1974 established a wide variety of wealth preservation structures. He is a sought-after speaker, having presented seminars for the National Business Institute, the Lorman Group, and numerous other organizations.