Asset Protection and Real Estate Investing

June 21, 2016 — Leave a comment

Original article

Real Estate Investments

Asset Protection for your investment property. Illustrated below is a complete strategy for an asset protection plan with investment properties. Each element of the plan protects your assets, privacy or is a deterrent for a legal opponent.

Asset Protection Strategy

The first element of this asset protection strategy is a Land Trust that holds the property. The first thing you gain here is privacy, the property is titled to a trust, not you. This means when a legal team makes a plan to pursue an individual, they run an asset check to see what is within reach. This is as simple as searching public records to see what you own. With your property titled to a trust, it won’t come up on an asset search. With this type of asset protection element, you control the beneficiary of the property and can do whatever you want with it at any time, just as if it were tied directly to you.

Limiting internal liability, which is liability created by your asset, such as property, will be addressed with either a Corporation, Limited Partnership or Limited Liability Company. This is the beneficiary of the Land Trust holding the title to your investment property. Here we gain lawsuit and asset protection as well as tax and estate planning benefits. One of the most common questions we answer is how many legal entities do I need? In general, you want to limit the amount of equity per legal entity to around $200,000. There are a lot of conditions here and this isn’t a blanket policy and there really isn’t with asset protection, each individual is different and their needs, risk and exposure need to be completely assessed in order to start forming legal entities.

The structure continues to grow in detail here with some estate planning tools. We take the beneficiary entity and put that into a Living Trust. This allows you to specify exactly who or what receives your assets upon death, will reduce your probate costs and could reduce some estate taxes. At this point, your investment property is privately held in a trust, which the beneficiary is a legal entity that is held by a Living Trust. You have privacy, internal liability protection, lawsuit protection and estate planning all within your asset protection strategy.

One final measure that is a detouring factor is to have an LLC mortgage the equity in your investment property. This is a publicly recorded note that makes your property void of equity. These structures are in place and each offer a different degree and angle of protection. All of your liability is mitigated with the right tool and as far as a legal opponent planning to pursue your assets, there is quite a lot of detouring factors to get passed and in the end, there isn’t a prize.

More Asset Protection Articles

No Comments

Be the first to start the conversation!