Thoughts on Asset Protection with Irrevocable Trust

[Steve Williams]

Hi All -

Without knowing all I probably should about an irrevocable trust, I'm getting the feeling I might be gambling a bit here. I currently own two SFR and one duplex rental properties with no debt in Cleveland under my Florida LLC, approximately $730k with an average NOI of about 7.3%. I'd greatly appreciate some feedback from seasoned investors, especially with multiple rental properties, your thoughts on putting it all in a trust. And, perhaps some recommendations.

Much Obliged -Steve W   

[Stuart Udis]

There are certain benefits but don't believe your objectives are the correct reasoning for an irrevocable trust. Sadly, many attorneys who are willing to form an irrevocable trust for the real estate investor who owns 3 properties valued at $730K in Cleveland are not necessarily going to be the best advocates. Ask those same attorneys how the irrevocable trust will stop the landlord dispute, prevent a lawsuit in the event of a premises liability claim, payment or performance related dispute with a vendor such as a contractor or property manager. That's what you should be focused on.

There are better strategies beginning with how you operate your rental portfolio and who you associate with as vendors. Then there's equity stripping, and having appropriate insurance (assuming you avoid negligent conduct). Something as simple as a single member LLC as the deed holder combined with these more practical strategies will reduce the likelihood your name will find itself into the docket.