How to Protect Your Real Estate and Wealth in New York

New York is one of the most lawsuit-friendly states in the country, making asset protection a must-have strategy for real estate investors, business owners, and high-net-worth professionals. Tenant lawsuits, creditor claims, foreclosure deficiencies, and regulatory penalties can threaten your wealth at any time.

Many investors mistakenly believe that forming an LLC or using an Irrevocable Spousal Trust (IST) is enough to shield their assets. However, New York’s legal system is highly creditor-friendly, meaning these strategies alone will not provide complete protection.

This article explains:

✅ Why New York real estate investors are prime lawsuit targets

✅ The limits of LLCs and out-of-state structures in NY

✅ The role of an Irrevocable Spousal Trust (IST) in estate planning

✅ The strongest legal structure for protecting assets in New York

🚨 Why NY Real Estate Investors Are Lawsuit Targets

If you own rental properties or commercial real estate in New York, you will face legal risks. The state’s strict landlord-tenant laws, aggressive regulatory enforcement, and high litigation rates make asset protection critical.

Here are the biggest threats investors face:

✅ Tenant Lawsuits – Slip-and-fall claims, wrongful eviction, habitability disputes.

✅ Foreclosure & Deficiency Judgments – Personal liability for unpaid loans.

✅ Fire & Carbon Monoxide Claims – A fire code violation could result in $1M+ in damages.

✅ Structural Failures – A balcony collapse or gas leak could lead to multi-million-dollar settlements.

✅ Regulatory Violations – Zoning penalties, short-term rental fines, ADA compliance lawsuits.

📌 Example: In Brown v. Landlord LLC (2023), a New York OB/GYN investor faced a $1.5M judgment after a gas leak in his rental property caused severe injuries. The court pierced his single-member LLC, allowing creditors to seize his personal assets, real estate, and medical practice earnings.

💡 Lesson: One lawsuit can wipe out an entire real estate portfolio.

🚨 Why LLCs Alone Won’t Fully Protect You

Many New York investors incorrectly believe that forming an LLC is enough to shield assets. While an LLC offers some liability protection, it does not make you lawsuit-proof.

🔹 5 Reasons Why NY LLCs Are Weak for Asset Protection

1️⃣ Charging Orders – Creditors can get a charging order against your LLC, forcing it to pay lawsuit settlements.

2️⃣ Piercing the Corporate Veil – If you don’t follow LLC formalities, courts can disregard your LLC and seize personal assets.

3️⃣ Personal Guarantees – If you personally guarantee loans, creditors can still come after your home, savings, and income.

4️⃣ Fraudulent Transfers – Moving assets after a lawsuit is filed won’t work—courts can reverse transfers.

5️⃣ Single-Member LLCs Are Weak – Courts often disregard single-member LLCs, making them ineffective for lawsuit protection.

💡 What About a Wyoming LLC? Some NY investors think forming a Wyoming LLC will protect them—but this won’t work.

📌 New York law applies to NY-based real estate, regardless of where the LLC is registered. A judge will ignore Wyoming’s protections and apply New York laws instead.

🔹 How an Irrevocable Spousal Trust (IST) Fits into Asset Protection

An Irrevocable Spousal Trust (IST) is often used for estate planning and tax benefits in New York. It allows one spouse to transfer assets into a trust that benefits the other spouse while keeping assets out of their taxable estate.

✅ Benefits of an IST

✔ Reduces estate taxes by removing assets from taxable estates.

✔ Protects surviving spouses by keeping wealth in the family.

✔ Can provide income to the beneficiary spouse.

📌 Example: A couple transfers $1M in stocks and a family home into an IST. This removes these assets from their taxable estate, saving their heirs from hefty estate tax bills.

🚨 BUT…ISTs Do NOT Protect Assets from Creditors

New York does not recognize self-settled spendthrift trusts, meaning ISTs do not provide lawsuit protection.

📌 Case Law:

• In re Portnoy (1996) – A New York court allowed creditors to access an IST despite the settlor’s intent.

• In re Brooks (1998) – Confirmed that NY law does not shield IST assets from lawsuits.

• In re Lawrence (1998) – Reinforced that ISTs are not true asset protection tools.

💡 Lesson: ISTs are great for estate planning but will not protect you from lawsuits.

🔹 The Best Asset Protection Structure for NY Real Estate Investors

The strongest protection for real estate investors comes from using a multi-layered strategy that combines:

1️⃣ LLCs → To separate individual properties.

2️⃣ Asset Management Limited Partnership (AMLP) → A management entity that shields LLCs.

3️⃣ Bridge Trust® → The ultimate asset protection tool that moves assets offshore if a lawsuit arises.

🚀 Why This Structure Works

✔ Keeps rental properties separate – Prevents lawsuits against one property from affecting others.

✔ Prevents creditors from seizing rental income – AMLP blocks charging orders.

✔ Adds offshore protection – If sued, assets transition offshore where NY courts have no jurisdiction.

✔ You remain in control – The Bridge Trust® allows you to manage your assets while protecting them.

📌 Example: If a tenant sues and wins a $2M judgment, the Bridge Trust® ensures your wealth is beyond the reach of NY courts.

🔹 Case Study: A High-Risk OB/GYN Facing a $1M+ Real Estate Lawsuit

📌 Case: Brown v. Landlord LLC (2023)

• A New York OB/GYN owned rental properties through a single-member LLC.

• A gas leak caused an explosion, severely injuring a tenant.

• The tenant sued and won a $1.5M judgment.

• The court pierced the LLC, allowing the tenant to seize the doctor’s personal assets.

💡 What Would Have Prevented This?

✅ Multi-member LLC with proper formalities (stronger legal protection).

✅ LLCs → AMLP → Bridge Trust® (placing assets out of reach).

✅ Equity stripping (so no visible equity remained).

🚀 The Best Time to Protect Your Assets Is BEFORE a Lawsuit

If you are a high-net-worth professional or real estate investor in New York, you are a prime lawsuit target.

✅ What You Should Do Now:

1️⃣ Evaluate your current legal structure – Are your assets at risk?

2️⃣ Implement a multi-layered protection plan – LLCs alone won’t cut it.

3️⃣ Use the Bridge Trust® + AMLP – The strongest legal protection available.

📌 Don’t wait until you get sued—protect your assets now.