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? In California, if you own any real property in your name, your assets will go through probate – a lengthy, expensive and messy court proceeding.
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.
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 protections that you planned for remain intact.
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. A revocable trust is commonly used for a primary residence. 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 Probate - 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 a primary residence and rental properties. At Timeless Estate Planning, we can help you decide on the best course of action for your individual circumstances.
Proper estate planning can keep your family out of conflict, out of court, and out of the public eye. If you’re ready to create a comprehensive estate plan, contact us to schedule your Family Wealth Planning Session. Even if you already have a plan in place, we will review it and help you bring it up to date to avoid heartache for your family.
I have five children, two of my children have special needs and one is my step-daughter. On a deep level, I understand how every family has special gifts, dreams, fears and goals and I am deeply committed to be your trusted advisor who helps you make the very best personal, financial, and legal decisions for your family throughout your lifetime.