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Lev
Lev, Tax Advisor
Category: Tax
Satisfied Customers: 28084
Experience:  Taxes, Immigration, Labor Relations
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This question is two fold. First off, liability. If I'm

Customer Question

This question is two fold.
First off, liability. If I'm planning on investing in stocks/bonds/mutual funds can i create a wall around my assets (trust or LLC) to protect me from unforeseen lawsuit, bk, creditor?
2nd Tax: If i do create a LLC, can it lower tax liability if my holdings are in non-retirmement taxable accounts?
Submitted: 9 months ago.
Category: Tax
Expert:  Lev replied 9 months ago.

If you want to protect Yourself from unforeseen lawsuit against that separated entity as trust or LLC - you are on the right track.

But if you OWN that the entity - and that is a lawsuit against you personally - your ownership is not protected.

In this case you might better to have an irrevocable trust which is not owned by you - but in which you are a beneficiary - then trust assets are protected from judgments against you personally.

If you own the LLC - that will not provide such protection - but will protect you personally from judgments against the LLC.

Expert:  Lev replied 9 months ago.

Regarding tax treatment - if that is an irrevocable trust - it is a separate taxing entity - and files its own tax return.

Expert:  Lev replied 9 months ago.

However - normally tax liability of the trust is higher - so when income is distributed to the beneficiary - it is deducted for the trust and taxed for the beneficiary.

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With the single member LLC - that entity is ignored for income tax purposes - and all income and deductions are reported on YOUR individual tax return - so that makes no difference for income tax purposes.

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