Fire, tornado, earthquake–if you are the owner of real estate, chances are you have already protected yourself against the monetary impact of any natural disaster. However, too many Americans remain unaware of the cost risks of lawsuits and probate court until they and their family must suffer the consequences.
If you own rental properties, you probably already know that certain tenants can be a natural disaster in and of themselves! While a particularly unkempt and unreliable tenant can be a tiresome burden, the threat posed by a lawsuit from a tenant can be dramatically worse.
Even if you don’t rent out a home, cabin, or lake home and have complete control over all your properties, here’s one unfortunate thought to consider: your eventual death may result in stormy courtroom proceedings between the people you love over rights to your real estate investments.
Don’t fret–there are two great precautions you can take. These two common estate planning tools are essential for real estate asset protection:
- LLC (Limited Liability Corporation) Many individual property owners don’t even think to consider incorporation, but it can prove invaluable for any income-producing property. By placing the properties in control of the company, your personal assets are afforded significant protection and, an added bonus, an extra degree of privacy (the listing is in the company’s name, not your own). Once established, maintenance of the LLC will need to be be done properly at risk of losing these protections, but the steps are not particularly difficult–especially with the help of a Creative Business Lawyer!
- Trusts If you only rarely or never rent out your property, a trust is most likely the better-fitted choice. A number of different trusts exist, but two have particular benefit to property owners: the Qualified Personal Residence Trust (QRPT) and the revocable trust.
The QRPT is irrevocable, leaving it inalterable without the consent of its named beneficiaries. A QRPT typically sets a fixed period in which the owner will use the property, before passing it on to his or her heirs. If you fear your estate may exceed the exemptions set by the estate tax–$1,400,000 in Minnesota in 2015–this is a popular way to reduce the size of your estate prior to death.
If you need some more flexibility, go with a revocable trust. A revocable trust can be changed at any time and does not require the consent of the named beneficiaries. Beyond simply having control over where your assets end up after your death, a revocable trust will keep your assets away from the courtroom–and thus off public record. You control the assets while you live, and after you die, control remains entirely within the hands of the people you choose.
Best of all is that you can set up both LLCs and trusts to protect your real estate assets as the specific property warrants. Depending on your individual circumstances and wishes, we can help you craft a plan that will suit you and your loved ones perfectly.
Call our office today at 612-206-3701 or reach out via our online contact form to schedule a time for us to sit down and talk about a Family Wealth Planning Session, where we can identify the best strategies for you and your family to ensure your legacy of love and financial security.
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