Message-ID: <000f01c057e2$93d662a0$a0ca0041@saltlk1.ut.home.com>
From: "Robert Smiley" <robsmiley@home.com>
To: <lancair.list@olsusa.com>
References: <LPBBIJGIKJFBMDDJPEGHGEBDCCAA.jwrightdo@worldnet.att.net> <3A20A89A.49D8480A@home.com>
Subject: Re: liability
Date: Sun, 26 Nov 2000 12:53:41 -0700
Reply-To: lancair.list@olsusa.com
Mime-Version: 1.0

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liability,

I am not an attorney and do not practice law but I have been through the
estate planning and asset protection scenario pertaining to my parents
estate and our own personal finances.  This is what I have learned. You
would be advised to further pursue this with your counsul.

A LLC or family LLC is different from a corp either C or S; because if a
judgement is awarded against the LLC a "Charging Order" is issued against
the LLC which means that dividends to shareholders  are attachable "....If
and when distributed...".  Interesting also is a charging order is a poison
pill in that the order is a taxable event meaning the recipient has an
immediate tax liability even though no dividends are attachable.  Further a
distribution from the LLC in the form of dividends, to be attachable must be
distributed within the statute of limitations time frame.  A court order
might compel the general to act within his powers under the LLC but that is
like stepping in the place of the general.  A successful plaintiff cannot
take over the place of a general in an LLC nor assume the stock of any
stockholder. So the issue of compelling might be arguable.  I have heard
where a judge might be vindictive and place the general in jail for contempt
for failing to comply with a court order to distribute dividends.  I have no
proof of such an incident.  The general partner is exposed to liability as
well. The shareaholders are exposed only to the extent of dividend
attachment as explained above.  The pilot is also liable.  So if you are the
builder, the general partner, or the pilot; I don't know how you can escape
any liability relieve for flying the bird into a schoolhouse.

There are reasons for establishing an LLC and the creation of such an entity
must be documented and established such that the intent is not for asset
protection per se at that will nulify your objective.  They must be
carefully and timely accomplished without any appearance of fraud or
deceipt.

There was a good article in Sport Aviation recently regarding legal
ramifications of selling, whole or parting out a plane.  Parting out doesn't
absolve you of liability because you are still the manufacture of the
part(s).  I have reconciled a possible scenario if I should sell a plane I
would get liability release forms from the purchaser,  spouse, and children.
If children are minors then I would discount the sale price to allow for
court appointed persons to represent them to get the release.  In other
words any "party of interest to the purchaser" would have to be involved.
Else  I would keep the plane to my grave, have the estate distribute all
other assets and then finally as the last act sell the plane out of the
estate and not pass it through to an  heir.  Does that make sense?

The manufacturer of a plane, ie you has a product liability responsibility
for fifteen years after the first sale date of the plane.  If you are the
builder and sell it to the LLC It is possible the time for product liability
might tick away.  I would advise you however that in other areas of law the
concept of "arms length" transactions and close and immediate family ties in
realestate transactions nullify an unusual sale  and bargain sale situations
and courts regarding IRS rulings usually go to fair market vulations.  The
same principle of law might apply here as well if a plaintiff wants to come
after you the manufacturer 25 years from now.

You might consider another idea; put all your other assets into the FLP. Do
not be the general, receive dividends etc.and go flying with your airplane.
There are doctors who own in their name only a car, some furniture etc and
carry no liability insurance and that is all.  The spouse owns the rest. How
secure is your marriage? Then of course you have community property
situations.  Did you build your plane with wages, which are community
assets?  Did you build your plane with funds from an inheritance, which is
separate property?  Did you register the plane in your own name?  Have you
conclusively documented each and every purchase and expenditure from
separate funds? These are the types of issues, ownership, how acquired with
what funds you will be required to defend in a legal situation.  Can you
successfully do it?  I have been through these issues and have come to the
conclusion that if I stuffed the plane into the ground it won't matter. Ala
the Don Geotz insurance philosopy,  Get liability insurance only, in the end
you won't be around to repair the plane.  It is a very difficult situation
in life to totally protect yourself if and when a "horizon event" occurs
where you are liable for a mishap.

We should take reasonable cautions to protect ourselves, our families and
others but we have chosen to live a life style that has an inherently higher
risk.  Our spouses have agreed with us for these actions.  If an innocent
party is involved and suffers from a causal relationship on our part we
should probably, as Dr Laura says..."now go and do the right thing".

I would like to know the best cureall for these problems.  I even considered
expatriating and going offshore prior to the sale of our major business but
alas, even though we are counting chads; this is still the best country in
the world to reside.  Would you agree?

Bob Smiley
N94RJ
robsmiley@home


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