ASSET PROTECTION STRATEGIES:
UNLEASH THE PIT BULLS, LIMIT LIABILITY,
AND DECREASE TAXES
Asset protection strategies reduce risk and limit your liability. Do not own anything in your name, especially, real estate because it's the most sought-after asset in recovery lawsuits.
All the world's money can not buy peace of mind; only asset protection strategies can. Many investors work hard to amass an investment portfolio and build a business, only to have it ripped away from them due to their inability to shield it from predators, lawsuits, and the prying eye of the public.
Who Needs Asset Protection?
Beginning, Intermediate, & Experienced Investors
Maximum Personal Liability Protection
Business Maneuverability
Privacy
Tax Benefits
Low Audit Risk
Probate Pass-Thru
Some would say to add an umbrella insurance policy to your asset protection strategies. Yes, this is fine but keep coverage to a minimum. If you look like you have insurance to cover a lawsuit, you position yourself as a potential target.
And what if you submit a claim to your insurance company and it is denied?
Wouldn't you love to know that your company structure and trusts securely protect your assets? Cover Your Assets (CYA)
What Is The Best Asset Protection?
Together C corporations, LLCs, Land Trusts, and Family Limited partnership Trusts are a total protection package. By combining strategies, you'll get the highest level of security, privacy, and tax savings for both you and your real estate investing business without giving up control.
Plus, these asset protection strategies present your business with a legal and transferable position that can smoothly be transitioned to a purchaser or bequeathed to your heirs (almost always) without taxation.
C corporation is the first layer. It's viewed as another entity under the law, separate from you, even though you still control its activities. By forming a corporation, you'll lower your risk of an IRS audit. And the tax write-offs are generous; you can deduct expenses like medical bills and child care—also all REI resources and educational materials.
A corporation establishes you and your company in a serious business role. And it'll increase the opportunity for raising capital to buy properties and grow your business. Two weeks after creating a C corporation, Experian will automatically have a credit file for your investment company.
Is Forming An LLC Worth It?
Limited Liability Corporation (LLC) is the second layer. The LLC goes the extra mile and gives investors flexibility, hassle-free maintenance and is recognized as a pass-through entity that eliminates double taxation.
An LLC creates the opportunity to partner with someone on a deal without giving them access to your entire real estate business. It is perfect for short term JV investments.
However, avoid a single-member LLC because it is easy to pierce and expose your assets. If you need a second member, use a spouse or another entity like a C corporation (which we prefer) that will automatically give you more privacy and limited liability. Get more LLC details.
It's crucial your C corporation or LLC never own any business assets because assets are not protected due to their charging order. That is why it's essential to use multi-layered strategies and add Land Trusts and Family Limited Partnership Trusts to your plan.
Does Putting Assets In A Trust
Protect It From Creditors?
Yes. These trusts are valuable because they hold your properties so that no one can have access to them if your company is sued. Often, company assets are frozen, but if a land trust owns the investments in your company, you'll be able to continue business as usual, buying and selling without any interruptions.
Land trusts also keep each property separate. So if you get sued and lost, they could only get the one property in the land trust. All your other business investments and personal assets would be safe and secure. Get more Land Trust details.
Family Limited Partnership Trust (FLP) is the final layer. The layer gives probate pass through to your heirs without inheritance taxes. And it'll pass your assets through automatically without a ton of paperwork.
Plus, your FLP creates a charging order protection. That means if you, personally or your company, gets sued and lose, then the winning side cannot collect the judgment. It sounds complicated, but it's not. Details about FLP trusts.
Besides insulating your assets and become judgment-proof with limited creditor remedies, your family limited partnership trust will give you certainty. There may be times when your deposition will be taken. If your asset protection strategies are correctly in place, you'll be able to answer the questions honestly while keeping your assets protected.
Asset Protection Strategies With Leverage
Asset protection strategies do not need to be complicated to work. It can be a creative and almost automated form of protection using debt. By keeping your properties mortgaged to 95% of their value, you have already taken out the equity. No one will find any money here if your assets get searched.
Our favorite part - say you want to pay off your properties and have no debt. Investors can create a separate company that lends money and holds the mortgages on all your properties. It will form a debt structure with your "finance company" having liens in the first position. Claims from others can not reach your properties and company. Plus, you get to put all the equity from the property in your pocket, tax-free, and you get to keep the property. That's tight asset protection strategies working at their best. And you can write off the interest from the mortgage on your investment company's taxes.
The "finance company" can also loan money to your C corporation for business purposes and to other investors.
Your financial security is one of the essential elements for building success. Now is the time to CYA, cover your assets, and get all legal on it.
In summary, the best asset protection strategies enable you to "Own nothing and control everything" - Nelson Rockefeller.
Trusted Legal Advice Real Estate Investors
Rely On To Cover Their Assets
Asset protection to real estate investment strategies
