A long time subscriber has asked if there are some ways
to protect U.S. real estate from the litigation epidemic besides converting
the equity into cash and going offshore. According to Bob L.
“I have always been leery of those islands. The tale is a little
too sunny and breezy. Nifty way for the rip-off artists and lawyers to
get rich. The islands are fine for folks in the narcotics business. What
the hell, in that world, tax dodging is not something you are going to
lose a lot of sleep over. Aren’t there other subjects that you could cover
in detail? I think of real estate ... (and) I am not alone. There are plenty
of people who own real estate (of various kinds). As I understand it, real
estate is one the most vulnerable assets you can have.”
Residential real estate can be best protected in states with generous
homestead laws, such as Florida, Texas and Kansas. A secondary option for
a residence is available for those who live in the states that provide
for tenancy by the entireties for the ownership or real estate by a husband
and wife. A third option would be the use of a qualified personal residence
trust.
Mark Warda suggested the use of
dual living trusts for a husband and wife in those states that do not recognize
tenancy by the entireties as a form of ownership. Another form of protection
is to borrow out the equity as much as possible and then put that money
into some protected form - such as a family limited partnership or a life
insurance contract. A more extensive explanation of these tactics are available
in the November, 1994 issue of APS. More information
on tenancy by the entireties is available on the internet at http://www.protectyou.com.
This is a web site sponsored by Howard D. Rosen, Esq. For more information
on qualified personal residence trusts, ask for a free article on that
subject by Gideon Rothschild, Esq.
It seems that the preferred method of protecting the equity in non
residential real estate is to put the real estate title into a family limited
partnership, limited liability company or sub chapter S corporation.. Borrowing
out the equity and putting the cash into a more protected form (like a
homestead or life insurance contract) is another device that is often suggested.
Another option is to transfer ownership of the real estate to a trust in
which children are irrevocable beneficiaries.
Of course, some of these methods can be enhanced with the use of
a foreign asset protection trust but you’ve indicated that you aren’t comfortable
with offshore devices.
Further details about protecting your assets from future lawsuits
are available in our subscriber's web
site. Changes in the tax laws and various federal and state laws
affecting various asset protection devices are provided in our monthly
newsletter on Asset Protection Strategies.
