Archive for the 'Asset Protection' Category
The land trust is a very powerful tool for the savvy real estate investor. A land trust is a revocable, living trust used specifically for holding title to real estate. Each property is titled in a separate trust, affording maximum privacy and protection.
Here are seven reasons to use land trusts:
1. Privacy. In today’s information age, anyone with an internet connection can look up your ownership of real estate. Privacy is extremely important to most people who don’t want others knowing what they own. For example, if you own several properties within a city that has strict code enforcement, you could end up being hauled into court for too many violations, even minor ones. Having your real estate investments titled in land trusts makes it difficult for city code enforcement to find who the owner is, since the trust agreement is not public record for everyone to see.
2. Protection from Liens. Real estate titled in a trust name is not subject to liens against the beneficiary of the trust. For example, if you are dealing with a seller in foreclosure, a judgment holder or the IRS can file a claim against the property in the name of the seller. If the property is titled into a trust, the personal judgments or liens of the seller will not attach to the property. This effectively separates the owner or seller from the property.
I know of some people who have become totally caught up in the euphoria of newfound knowledge and just couldn’t stop buying audio programs and attending very expensive seminars and bootcamps. This seminar junkie must have spent at least $50,000 within a 12 month period and still hadn’t bought their first investment property. They were just bouncing around from one great idea to the next.
I don’t know whether, in their case, it was because they were just caught up in the excitement of that environment, whether it was their way of convincing themselves they were active when they may have been too scared to get started, or they were honestly trying to find the best strategy for them. I’m guessing it was a mix of these things.
I also know of an investor who took quite the opposite approach. He stumbled across a pretty good investing strategy and didn’t check out any other alternatives but went ahead and spent over $10,000 getting a good education in that one area. He went on to build a decent portfolio over a few years but then realized there were some even better strategies out there.
This second story isn’t so bad because he built some success and he could afford the further education he now sought. However, he told me once that it was a little disheartening because if he wanted to pursue a different strategy he had to start the learning process all over again and it felt very much like he had his “ladder to success” leaning against the wrong wall. And even though he could now afford the education more easily it was still another $5,000 – $10,000 that he could have avoided spending. If only he’d done his homework first.
For those of you wondering, a Series LLC is a regular LLC with a twist – it can have an unlimited number of subsidiaries (called Cells), and each subsidiary is treated as a separate structure where liability is concerned – if you set the structure up and run it properly. So far eight states have Series LLC legislation on the books (Delaware, Illinois, Iowa, Oklahoma, Nevada, Tennessee, Texas and Utah). But even if you don’t live or own property in one of those states, you can still use a Series LLC by qualifying it to do business in the state(s) where you want to operate.
I think this is perhaps the ideal structure for real estate investors (and anyone else) who wants to keep their assets safe without spending all the profit on legal structures.
Here are my 3 favorite reasons to use a Series LLC with real estate:
By now I am sure you’ve heard that it is legal, permissible, and profitable to invest in real estate using your self-directed IRA, SEP, or Roth IRA. If you’ve been using this technique, you know the drawbacks – delays in funding, fees from your custodian, potential lawsuits against your IRA.
Well, there’s a solution… the LLC-IRA.
Instead of investing directly from your IRA, we set up a single-member LLC that is owned by your IRA. Your IRA account is the sole member of the LLC. The LLC is a legal entity that has powers and protections that are not possessed by any individual or by any regular IRA.
The combination of the self-directed IRA custodian and the LLC produces great results. This is an entirely new type of LLC, not your run-of-the-mill LLC you may have done before. It generally requires an attorney to draft the operating agreement and provide an opinion letter to your IRA custodian. If the LLC operating agreement is improperly drafted, the entire LLC-IRA may be disqualified and taxed.
Lawsuit Protection of Your IRA Account
