Real Estate Asset Protection: What is your Best
Llc's, S corps, C Corps, Family Trusts, Land
Real estate asset protection do you need it? Well, considering that
real-estate is risky enough as it is, if someone gets killed or hurt you are likely to be sued by the injured
victims or family members. That is a given as accidents do happen but lawsuits are more likely to happen when
people know you own property. Particularity in this age where someone can sue a business because the coffee
they were drinking was too hot or where a lady was awarded 12 million dollars in a foiled suicide attempt on the
Consider this scenario you are sued for $2,000,000, your insurance will cover $1,000,000 but
guess who is left with a $1,000,000 problem. The day before life was rosy but today you are in the poor house. You
could of avoided that issue all together if you had real estate asset protection that is if you didn't have the
property in your name.
The biggest mistake you can make is to put your real estate in your own name as it all a part of public record.
Anyone can look at what you have determine its current market value and deduct what you owe to see what they can
take you for. Putting your name out in public land registry is equivalent to painting a bulls eye on your back to
prying eyes such as attorneys, creditors and even tenants.
But what entity is the real estate asset protection? What entity or corporate structure do I use to buy and sell
to hold real estate? How can I limit my liability exposure? These are very good questions to ask and a good place
Certainly your first protection is liability insurance, but should judgments exceed your insurance or should
your insurance not cover you for whatever reason you need real estate asset protection.
A land trust is a form of an irrevocable living trust used to take title to real estate so the
beneficiaries cannot be easily discovered. However the land trust is not considered to be a separate taxable entity
and there are no tax benefits of transferring property in or out of it.
A corporation is an effective device to buy and sell real estate so if the beneficiary of the
land trust is a corporation one can have the tax benefits of being taxed after expenses at a corporate rate rather
than before expenses and at the higher rate of an individual. As an individual you may also be taxed as a dealer at
15% for buying and selling.
Depending on your tax situation you might be better off with a C Corporation rather than a
S Corporation. A corporation is a C Corporation by default and files a separate tax return whereas
a S corporation is specially set up so that it splits up its profits to its shareholders as dividends. The
shareholders then report their income on their own personal tax returns. In most cases its better to start out as a
S Corporation and later change into a C Corporation when the tax advantages become evident.
A LLC or limited liability company allows the shareholders to participate in the running of the
company without sharing its liability. Like a S Corporation the profits and losses flow to the owners. Buying and
selling may subject the owners as an active activity to a dealers tax of 15% making the C corporation a better
choice. If the business is primarily rents the LLC may be better. Its conceivable that one can form an LLC for
every property and file one personal income tax if there is only one owner.
In any case get as much insurance as your entity can sustain to cover your real estate and business activity.
Insure the entity is the names insured. Making sure the entity holds title to all your real estate to insure you
won't be named the defendant in any potential lawsuit.
Those are some areas to consider before you obtain further professional advice for getting the best real estate