Hi, I am trying to figure out how to best protect my personal assets. My spouse and I are full time property managers focused exclusively on Airbnbs.
- My spouse and I own 3 properties.
- Spouse owns 2 properties in State A and are held in personal name
- I own a property in State A held jointly with a business partner
- Homeowner insurance for the 3 properties cover short-term rentals
- Spouse is the managing member of an LLC, which is a property management business. The LLC leases apartments in State B and rents them out in Airbnb. The LLC also manages the properties in State A.
- LLC has a commercial general liability policy up to $2M ($1M per incident)
I would like to protect our personal assets from lawsuits from the property management business. What specific strategies should be employ?
- moving the properties to LLCs
- More insurance. Would an umbrella policy protect us from commercial claims if our coverage isn’t enough? Or the insurance denies the claim?
- Moving the assets (properties, stocks, other investments) into a trust for our child
@Michael C. Your first two strategies of moving the properties into LLCs and additional insurance certainly will help. Also, you should not group too many properties into one LLC and split them out. There is not a specific rule of how many properties per LLC, but keeping in mind the costs and administrative burden of maintaining LLCs.
Do also keep separate bank accounts for real estate and personal use. Do not for any reason comingle your funds.
Best of luck!