If you own real estate, chances are you have purchased insurance to protect
your assets against damage or loss. But have you taken the necessary steps
to protect your assets against lawsuits or probate?
If you own rental properties, there is likely a nagging fear in the back
of your mind about being sued by one of your tenants. And if there isn't,
there probably should be. It's a major risk.
And while it may be heartbreaking to think about, there is always a chance
your death could trigger a family feud over your home, vacation home or
other real estate investments.
Two common estate planning tools for real estate asset protection include
limited liability companies (LLCs) and trusts:
LLC. If you have income-producing property, then an LLC probably makes sense
for you, since it protects your personal assets from lawsuits or claims
that result from your ownership of the real estate. LLCs may also offer
owners privacy since the property can be listed in a company name, not
in your name directly. However, you must be sure you maintain the LLC
properly so the planned for protections remain intact. It's not too
difficult though, especially with counsel.
Trusts. If you own vacation home property that you do not rent out on a regular
basis, then a trust may be a better choice for you. There are several
options: a Qualified Personal Residence Trust (QRPT) is an irrevocable
trust (meaning it cannot be changed without the consent of the beneficiaries)
that allows an owner to use the property for a fixed term, and then pass
the property on to heirs. This is a commonly used structure to reduce
the size of your estate for estate tax purposes.
A revocable trust (which can be changed without consent of the beneficiaries) is more flexible
and, if you choose a dynasty trust, can last for multiple generations.
The major benefit of the revocable trust, besides control of what happens
to the assets after the death of the grantors, is that it keeps your assets
out of the hands of the Court after your death, and totally within the
control of your family.
You can also use a combination of LLCs and trusts to protect real estate
assets if you have a combination of primary residence and rental properties.
We can help you decide on the best course of action for your individual