I just met with my attorney today and we talked about several asset protection models. The most inexpensive asset protection strategy we discussed is for me to establish a revocable trust to hold my "dangerous" assets. Next, he wants me to establish a single member LLC to take title to all my rental properties. The single member will be my trust.
I get all the asset protection features of an LLC and meet my estate planning goal of avoiding probate. Since my LLC is a disregarded entity, no tax returns for the LLC.
If I did not have multiple out of state properties, requiring ancillary probate in three different states, we would have just put everything into a revocable trust for the probate avoidance and purchased an umbrella insurance policy for the maximum amount for which I would be likely to be sued.
My attorney also stressed that 99% of the time, a large umbrella liability policy is more than adequate "asset protection" since lawsuits arising from a rental property activity tend to go after the insurance limits of liability.
What we decided upon is two individual trusts, one for me and one for my wife. We also decided to establish two single member LLCs, one for me and one for my wife. We will title the rental properties to the LLCs so that each LLC owns about half of the equity in the rental properties. This way, we maximize the federal estate tax unified credit available to us, and enjoy a step up in basis for the rental property when each of us passes on.
[ Edited by NewKidInTown3 on Date 08/22/2007 ]
Chris, you are right on. My dangerous assets would be rental property and business activities. Safe assets, those with a low probability of a lawsuit, are brokerage accounts and bank accounts.
The attorney suggested a Qualified Residential Property Trust for the primary residence and further suggested that we leave the family car in our own name with as much liability insurance as would be practical.
Revocable trusts are not taxable entities, and therefore, no tax returns are required. Just the opposite with an irrevocable trust. Revocable trusts while we are stlll alive because we have the flexibility to change things if life circumstances change. Not true with an irrevocable trust.[ Edited by NewKidInTown3 on Date 08/28/2007 ]
Look into craigslist in your area. Alot of wholesalers advertise there.
I just met with my attorney today and we talked about several asset protection models. The most inexpensive asset protection strategy we discussed is for me to establish a revocable trust to hold my "dangerous" assets. Next, he wants me to establish a single member LLC to take title to all my rental properties. The single member will be my trust.
I get all the asset protection features of an LLC and meet my estate planning goal of avoiding probate. Since my LLC is a disregarded entity, no tax returns for the LLC.
If I did not have multiple out of state properties, requiring ancillary probate in three different states, we would have just put everything into a revocable trust for the probate avoidance and purchased an umbrella insurance policy for the maximum amount for which I would be likely to be sued.
My attorney also stressed that 99% of the time, a large umbrella liability policy is more than adequate "asset protection" since lawsuits arising from a rental property activity tend to go after the insurance limits of liability.
What we decided upon is two individual trusts, one for me and one for my wife. We also decided to establish two single member LLCs, one for me and one for my wife. We will title the rental properties to the LLCs so that each LLC owns about half of the equity in the rental properties. This way, we maximize the federal estate tax unified credit available to us, and enjoy a step up in basis for the rental property when each of us passes on.
[ Edited by NewKidInTown3 on Date 08/22/2007 ]
newkid,
could you explain what you men by dangerous assets?
Did the atty explain why an irrevokable trust?
I assume by "dangerous assets" newkid means anything liable to get you involved in a lawsuit.
He also said "revocable trust", not irrevocable- so that you can sell the asset or transfer title if you so choose, I presume.
Of course I suppose I should let him say what he means rather than giving my interpretation...
Chris
Chris, you are right on. My dangerous assets would be rental property and business activities. Safe assets, those with a low probability of a lawsuit, are brokerage accounts and bank accounts.
The attorney suggested a Qualified Residential Property Trust for the primary residence and further suggested that we leave the family car in our own name with as much liability insurance as would be practical.
Revocable trusts are not taxable entities, and therefore, no tax returns are required. Just the opposite with an irrevocable trust. Revocable trusts while we are stlll alive because we have the flexibility to change things if life circumstances change. Not true with an irrevocable trust.[ Edited by NewKidInTown3 on Date 08/28/2007 ]