Asset Protection Plan

11 Replies

Hi, I am fairly new to the investor world and I am concerned about asset protection. I use most of my cash flow to pay down the mortgages on the properties but the more equity I have in the house the more I am concerned about protecting that asset.  What is the best way to do this?

There is no one-size-fits-all answer to your question.  Whatever asset protection plan you implement needs to be tailored to fit your specific needs and circumstances.  You need to have this conversation with your accountant, your attorney, your estate planner, and your tax adviser -- preferably with all in the same room at the same time.

Originally posted by @Ben Bourgeault :

Hi, I am fairly new to the investor world and I am concerned about asset protection. I use most of my cash flow to pay down the mortgages on the properties but the more equity I have in the house the more I am concerned about protecting that asset.  What is the best way to do this?

I personally have each of my properties in a separate LLC, they all have individual insurance policies, and then I have an umbrella insurance policy to cover anything else.

-Christopher

Thank You, I do have the separate insurance policies and the umbrella as well and I am in the process of putting them in individual LLCs.  Have you run into any trouble with the bank for changing the name from yours to the LLCs?  Could someone still come after the equity in the house? 

@Ben Bourgeault

You have some good questions and concerns. I recommend you listen to the below podcast 109 to help put you mind at ease.

This podcast cleared up a lot for me and I am sure it will do likewise for you.

BP Podcast 109: You Will Get Sued. Here's How To Survive With Attorney Scott Smith

https://www.biggerpockets.com/renewsblog/2015/02/12/bp-podcast-109/ In This Episode We Cover:
  • Forming an LLC right off the bat
  • The ins and outs of Insurance vs. Assets
  • Ten things you need to know to protect your assets
  • What exactly an Umbrella Policy is and why it might not do what you think it will
  • Why you shouldn’t put all your properties under one name
  • What you should know about the Delaware Statutory Trust
  • Scott’s advanced strategies for real estate investors
  • Everything you need to know about LLCs vs. Trust Funds
  • Who you need as part of your team when investing
  • And SO much more.
Originally posted by @Christopher Brainard :
Originally posted by @Ben Bourgeault:

Hi, I am fairly new to the investor world and I am concerned about asset protection. I use most of my cash flow to pay down the mortgages on the properties but the more equity I have in the house the more I am concerned about protecting that asset.  What is the best way to do this?

I personally have each of my properties in a separate LLC, they all have individual insurance policies, and then I have an umbrella insurance policy to cover anything else.

-Christopher

Hi Chris, I am running into an issue doing what you did. I can't seem to find an insurance carrier to give me an umbrella policy that covers properties in different LLCs. They say that to issue me a policy, they must be owned by the same LLC or same person (ie. me)

Can you please share who provided you with the policy? 

Originally posted by @Account Closed :
Originally posted by @Christopher Brainard:
Originally posted by @Ben Bourgeault:

Hi, I am fairly new to the investor world and I am concerned about asset protection. I use most of my cash flow to pay down the mortgages on the properties but the more equity I have in the house the more I am concerned about protecting that asset.  What is the best way to do this?

I personally have each of my properties in a separate LLC, they all have individual insurance policies, and then I have an umbrella insurance policy to cover anything else.

-Christopher

Hi Chris, I am running into an issue doing what you did. I can't seem to find an insurance carrier to give me an umbrella policy that covers properties in different LLCs. They say that to issue me a policy, they must be owned by the same LLC or same person (ie. me)

Can you please share who provided you with the policy? 

My current coverage is through Farmers. My properties are held by a Series LLC, so my situation may be slightly different than yours, as this type of LLC is not available in all states.

-Christopher

Originally posted by @Christopher Brainard :
Originally posted by @Sajju Shah:
Originally posted by @Christopher Brainard:
Originally posted by @Ben Bourgeault:

Hi, I am fairly new to the investor world and I am concerned about asset protection. I use most of my cash flow to pay down the mortgages on the properties but the more equity I have in the house the more I am concerned about protecting that asset.  What is the best way to do this?

I personally have each of my properties in a separate LLC, they all have individual insurance policies, and then I have an umbrella insurance policy to cover anything else.

-Christopher

Hi Chris, I am running into an issue doing what you did. I can't seem to find an insurance carrier to give me an umbrella policy that covers properties in different LLCs. They say that to issue me a policy, they must be owned by the same LLC or same person (ie. me)

Can you please share who provided you with the policy? 

My current coverage is through Farmers. My properties are held by a Series LLC, so my situation may be slightly different than yours, as this type of LLC is not available in all states.

-Christopher

Thank you. I just checked and they are available in CA, however, the state still wants $800 per "unit" per year. 

Originally posted by @Account Closed :
Originally posted by Saj Shah:
Originally posted by @Ben Bourgeault:

Hi, I am fairly new to the investor world and I am concerned about asset protection. I use most of my cash flow to pay down the mortgages on the properties but the more equity I have in the house the more I am concerned about protecting that asset.  What is the best way to do this?

I personally have each of my properties in a separate LLC, they all have individual insurance policies, and then I have an umbrella insurance policy to cover anything else.

-Christopher

Hi Chris, I am running into an issue doing what you did. I can't seem to find an insurance carrier to give me an umbrella policy that covers properties in different LLCs. They say that to issue me a policy, they must be owned by the same LLC or same person (ie. me)

Can you please share who provided you with the policy? 

My current coverage is through Farmers. My properties are held by a Series LLC, so my situation may be slightly different than yours, as this type of LLC is not available in all states.

-Christopher

Thank you. I just checked and they are available in CA, however, the state still wants $800 per "unit" per year. 

That's ridiculous. I actually moved from California and moved to Las Vegas because of issues like this and taxes. The difference in dealing with the government here vs there is astonishing. I pay $400 total a year total and that's including the fee my lawyer charges to do the filing and using his address as my address. 

-Christopher

Ben, All great information. Asset protection for real estate investors is what I've been doing for 15 years. There is no one-size-fits all. I customize everything to the investor. So it's a been of long explanation for here. My website has like 10 - 15 hours of free asset protection video instruction on various aspects. But I can help you out in CO too. So if you want to give the office a call and set up a time to chat, I'm happy to do so. There's no fee for that.

Jeff

Originally posted by @Christopher Brainard :
Originally posted by @Sajju Shah:
Originally posted by @Christopher Brainard:
Originally posted by @Sajju Shah:
Originally posted by @Christopher Brainard:
Originally posted by @Ben Bourgeault:

Hi, I am fairly new to the investor world and I am concerned about asset protection. I use most of my cash flow to pay down the mortgages on the properties but the more equity I have in the house the more I am concerned about protecting that asset.  What is the best way to do this?

I personally have each of my properties in a separate LLC, they all have individual insurance policies, and then I have an umbrella insurance policy to cover anything else.

-Christopher

Hi Chris, I am running into an issue doing what you did. I can't seem to find an insurance carrier to give me an umbrella policy that covers properties in different LLCs. They say that to issue me a policy, they must be owned by the same LLC or same person (ie. me)

Can you please share who provided you with the policy? 

My current coverage is through Farmers. My properties are held by a Series LLC, so my situation may be slightly different than yours, as this type of LLC is not available in all states.

-Christopher

Thank you. I just checked and they are available in CA, however, the state still wants $800 per "unit" per year. 

That's ridiculous. I actually moved from California and moved to Las Vegas because of issues like this and taxes. The difference in dealing with the government here vs there is astonishing. I pay $400 total a year total and that's including the fee my lawyer charges to do the filing and using his address as my address. 

-Christopher

 I wish I could make that move too. But sadly I have too many roots here now. On the plus side, that gives me the excuse to hit up the craps tables at the Cosmo once a year 

@Account Closed Do you own 51% of the LLC's? If so, there are commercial Umbrellas out there that do not have a limit of LLC's as long as their is a common majority ownership in all of them.

  I will PM you info on the premiums my clients are seeing.