Estate Planning For Real Estate Investors and Landlords

 Posted on November 01, 2022 in Estate Planning

Estate planning is crucial for everyone, whether you are single or have a family. But incorporating a strong and effective estate plan is especially important for real estate investors and landlords, as these titles can open the individual up to liability if not properly protected. Another name for this form of estate planning is referred to as “asset protection”.

Asset protection is vital for real estate investors and landlords for many reasons. First, occurrences such as recession, death, taxes, and lawsuits serve to threaten the economic surety of individuals and families that own investment assets, such as rental properties and vacation homes. Many real estate investors and landlords improperly structure their business because they either place the properties in their individual name, or they put multiple properties under one LLC instead of distributing them to avoid liability.

The attorneys at Peace of Mind Asset Protection, LLC specialize in assisting real estate investors and landlords with coordinating a proper business structure that encompasses asset protection, while also creating a cohesive estate plan that furthers the individual’s particular estate planning goals. By focusing on business structure, asset protection, and estate planning all in one, Peace of Mind Asset Protection, LLC can effectively protect and prepare real estate investors and landlords for the uncertainties that lie ahead.

Business Structure and Asset Protection

By implementing a proper business structure at the outset, there is a greater chance that their assets will be protected in the case of a lawsuit. A proper business structure plan should result in investors and landlords placing real estate assets beyond the reach of creditors, eliminating the concern associated with lawsuits, recessions, and death. To have a proper business structure in place, it is recommended to use LLC’s and Land Trusts to protect real estate interests.

One structure that is very useful in asset protection is the implementation of an LLC, or a Limited Liability Corporation. An LLC helps in asset protection because the property placed into the LLC will be owned by that entity, rather than the individual in their own capacity. This then shields the individual and their personal assets from being accessed by courts by and creditors if an action is commenced against the LLC. LLCs are recommended for non-homestead properties, such as vacation homes and rental properties. This is because the owner is typically not present, making it easier for trespassers to access the property. If the trespassers, or a tenant if the property is a rental, is harmed while on the property, then an action can be brought against the owner of the property. If the property is owned by the individual, then they are putting their personal assets at risk of being seized from a lawsuit. But, if the property is owned by the LLC, it is unlikely that the individual owner’s personal property can be reached. 

An LLC is a good idea if there is only one property. But, for landlords and real estate investors, it is often the case that there is more than one non-homestead property. Putting multiple properties into one LLC can contradict the whole goal of asset protection, because if an action is brought against the LLC for one property, the other properties within that LLC can be accessed. To property protect each property, it is recommended to establish a Series LLC. A Series LLC is an upgraded LLC, where there is one “parent” LLC, and there are individual LLCs within the parent LLC, and each series will hold one property. This helps in asset protection because the owner of the property will be the Series LLC, which restricts the access of the other properties owned by different series LLCs.

A different method that can serve as a successful business structure is the use of a Land Trust. A Land Trust is like a general Trust, except it is meant solely for real estate. By putting real estate into a Land Trust, it allows a legal entity to have authority over the property. A Land Trust is used to protect property owner anonymity, meaning that the owner can be shielded from liability. A Land Trust also avoids probate, allows for a seamless transition of property at death. 

Estate Planning for Real Estate Investors and Landlords

A proper estate plan needs to be established to effectively take into consideration any LLCs or Land Trust’s that have been created. The best estate plan for these matters will be a Living Trust, because the property and businesses can be specified and distributed according to the wishes of the individual. Along with estate planning comes legacy planning. The goal of Real Estate Legacy and Succession Planning is to pass the individual’s investment, rental, and vacation properties in a way that essentially minimizes or eliminates estate taxation, real estate taxation, and capital gains taxation. The best way is through a Trust, because a Trust can distribute property and, by placing property into the Trust’s name, there will be a seamless transfer at death with no need to go to Probate Court.

Peace of Mind Asset Protection, LLC for Kendall County

If you are a real estate investor or landlord and would like assistance on devising a proper business structure and estate plan of your investment properties, the staff and attorneys at Peace of Mind Asset Protection, LLC are eager to help. Our firm specializes in accounting for asset protection while meeting the goals of the individual at the same time. We provide our services in Kendall County, including Yorkville, Oswego, Plano, and the surrounding areas. We offer free initial consultations and are available for in-person, -virtual, and home visits. To inquire about the services we provide, give our office a call at 630-780-1034 or contact us via email.