ARE YOU HOLDING YOUR REAL ESTATE THE RIGHT WAY? GARRETT SUTTON
But there are tremendous tax benefits to owning real estate. The government wants us to own real estate. We
just need a good way to protect it.
You should consider holding your real estate in an entity for protection purposes. A properly formed and
maintained entity can discourage an attack. Holding real estate in your own name invites attacks.
So, how are you best protected when owning real estate? The answer comes down to six words: Limited
Liability Companies and Limited Partnerships.
Why?
Because limited liability companies (LLC’s) and limited partnerships (LPs) provide the greatest asset protection
possible. Unlike a corporation, where a creditor can attack your shares and control the company, (except in
Nevada, where the charging order also applies to corporate shares) in many states a creditor cannot assert
voting control over your LLC or LP interests. They can’t force you to sell the property. They can’t vote in new
management. Instead, they only obtain what is known as a charging order, a right to receive distributions from
the entity.
It is not attractive for creditors to obtain a charging
order when the result is that no distributions are
received. In fact, knowing that your assets are held
in LLCs and LPs may be enough to prevent a
lawsuit from being brought in the first place.
Lawyers know that lawsuits involve two battles: 1)
winning in court and then 2) collecting.
If they
sense it will be difficult to collect against an asset
they, in most cases, will rely on the insurance
monies to satisfy their clients claims and not go
after any of your assets held in LLCs. That is why it
is good to have both an insurance policy and asset
protection entities.
The insurance policy is the first line of defense.
Most attorneys in these types of cases are on a
contingency fee, meaning that only get paid
when money is collected. The attorney will
advance all the costs of the case and put in their