A common misconception is that only wealthy families and people in high risk professions need to have an asset protection plan. But in reality, anyone can be sued. A car accident, foreclosure, unpaid medical bills, or an injured tenant can result in a monetary judgment that will decimate your finances.
Asset protection planning is the use of legal structures and strategies to safeguard property that creditors might snatch away, by completely, or, at the very least, partially, protecting it from the creditor’s reach.
Unfortunately, this type of planning cannot be done as a quick fix for your existing legal problems. In fact, if you transfer assets to shield them from existing creditors, it could be considered a fraudulent transfer, resulting in legal penalties. Instead, you must put an asset protection plan in place before a lawsuit is imminent, let alone filed at the courthouse. So, now is the time to consider implementing one or more of these tips.
Below are three tips that you can use right now to protect your assets from creditors, predators, and lawsuits.
There are two types of liability that you should be concerned about with rental or investment property:
An LLC will limit your inside liability related to the real estate, such as a slip and fall accident or a fire caused by faulty wiring, to the value of the property. In addition, in many states, the outside creditor of the member of an LLC cannot get their hands on the member’s ownership interest in the company (in some states, this will only work for multi-member LLCs, while in others, it will also work for a single member LLC). At a maximum, the outside creditor would only be entitled to the member’s share of the distributions and would have no voting or management rights.This type of outside creditor protection is often referred to as “charging order” protection. This means that if properly protected, a creditor will have to look to your liability insurance and any unprotected assets to collect on their claim, not the LLC.
If you are interested in asset protection planning for your investment real estate using an LLC, then you will need to work with an attorney who understands the LLC laws of the state where your property is located to insure that your LLC will protect you from both inside and outside liability.
You have worked hard to accumulate the assets you have. Don’t let a lawsuit take it all away from you. Give us a call today so we can evaluate your situation and craft an asset protection plan that best serves you and your family.
The Legacy Law Firm – Where Your Legacy Lives On
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