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Posted about 8 years ago

How To Protect Your Assets & Real Estate Properties From Lawyers

Real estate is a popular investment, and for good reason. It nearly always rises in value, and even with the occasional bump in the road, has proven to be a profitable venture over time. However, owning real estate such as vacation homes or rental properties can be a liability in the event of a lawsuit.

If you are a medical professional, wealthy, or own a business, your chances of getting sued go up dramatically. While your average person might carry very little risk of a lawsuit, for those in certain professions or with perceived "deep pockets," the risk is very real.

Circumstances like these beg the question of how to protect your important assets - such as real estate - when you're sued. The simple answer is: you can't. Once a suit is filed, it's usually too late to protect your assets from potential seizure. The time to take the necessary preventative measures is now - before you get sued.

Asset protection should be an integral part of your financial planning strategy. Along with generous liability coverage, your assets simply need to be legally protected from potential suits and the aggressive lawyers that usually come with them. When it comes to real estate, you may be especially vulnerable.

How to Protect Assets from Real Estate Creditors

There are several ways you can protect your assets and properties, ensuring they aren't left vulnerable to creditors after a lost lawsuit. Your strategy will likely vary, depending on where you live. Consult an asset protection specialist to learn about the different measures that may be used in your situation.

  • Homestead laws - Some states have laws in place that can protect your primary residence from creditors. Florida and Texas, for example, have what is called homestead exemptions that can shield your own home from lawsuits. In other states, however, you may be entitled to little or no protection.
  • LLC or LP - In the case of business or investment real estate such as rental properties, you may consider setting up an limited-liability partnership (LLC) or limited partnership (LP). Placed in effect before a lawsuit, these measures can guard your real estate holdings against creditor claims. However, they must be properly structured and operated to be effective.
  • Family trust - A family trust can protect your real estate by effectively gifting it to your children or other family members. This method may also reduce your tax liability. One disadvantages of putting real estate in a trust, of course, is that you lose all the financial benefits of owning it. Also, with most other asset protection measures, this strategy won't help you in the case of a current suit or creditor, as transferring ownership under these conditions would be considered fraudulent conveyance.
  • Qualified personal residence trust - Unlike an outright gift or family trust, a QPRT places your home in a permanent trust but allows you to retain the right to live there and claim any financial benefits. A QPRT remains in effect for a certain length of time, at the end of which ownership of the property is transferred to your beneficiaries.
  • Tenancy by the entirety - In some states, this provision is available to married couples and may help you protect your home from lawsuits. Under tenancy by the entirety, your home can't be sold to pay debts unless both spouses agree to the sale. If one spouse is sued, the other could block the sale of their home. However, if both spouses are named in the suit, this provision would be useless.

The Bottom Line

Most importantly, act now. Your best bet in protecting real estate from creditors or lawsuits is to have your own legal counsel, who can advise you on how to shield your assets today. Remember that laws and available strategies can vary widely by location, business structure, and more. Consult an asset protection expert to help you design and carry out the legal measures available to you - before any trouble arises.

Jackson Cooper is a investment & finance enthusiast, involved with the experts at American Society For Asset Protection. Look to American Society For Asset Protection, true leaders in the professional Asset Protection industry, to properly guard your assets from lawsuit & litigation. Connect with them on LinkedIn, Facebook. Learn More On YouTube