If you own real estate, chances are you have purchased insurance to protect your assets against damage or loss. But have you taken the necessary steps to protect your assets against lawsuits or probate?
If you own rental properties, there is likely a nagging fear in the back of your mind about being sued by one of your tenants. And if there isn’t, there probably should be. It’s a major risk.
And while it may be heartbreaking to think about, there is always a chance your death could trigger a family feud over your home, vacation home or other real estate investments.
Two common estate planning tools for real estate asset protection include limited liability companies (LLCs) and trusts:
LLC. If you have income-producing property, then an LLC probably makes sense for you, since it protects your personal assets from lawsuits or claims that result from your ownership of the real estate. LLCs may also offer owners privacy since the property can be listed in a company name, not in your name directly. However, you must be sure you maintain the LLC properly so the planned for protections remain intact. It’s not too difficult though, especially with counsel.
Trusts. If you own vacation home property that you do not rent out on a regular basis, then a trust may be a better choice for you. There are several options: a Qualified Personal Residence Trust (QRPT) is an irrevocable trust (meaning it cannot be changed without the consent of the beneficiaries) that allows an owner to use the property for a fixed term, and then pass the property on to heirs. This is a commonly used structure to reduce the size of your estate for estate tax purposes.
A revocable trust (which can be changed without consent of the beneficiaries) is more flexible and, if you choose a dynasty trust, can last for multiple generations. The major benefit of the revocable trust, besides control of what happens to the assets after the death of the grantors, is that it keeps your assets out of the hands of the Court after your death, and totally within the control of your family.
You can also use a combination of LLCs and trusts to protect real estate assets if you have a combination of primary residence and rental properties. We can help you decide on the best course of action for your individual circumstances.
As a Personal Family Lawyer®, I can further advise you on all your options and make things as easy as possible for your family during a Family Wealth Planning Session. If you would like to have a talk about estate planning for your family, call our office today to schedule a time for us to sit down and talk.
To your family’s health, wealth and happiness!
David Feakes
P.S. Want to get started on the most important planning you’ll ever do for your family? Give our office a call at (978) 263-6900 to get started. You’ll be so glad you did.
David Feakes is the owner of The Parents Estate Planning Law Firm, PC – a law firm for families in the Acton, Massachusetts area. David helps parents protect the people they love the most. If you would like to receive David’s exclusive, free report, “Six Major Mistakes To Avoid When Choosing An Estate Planning Attorney,” you can get it right here.
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