Plainfield Asset Protection Lawyer: Asset Protection Strategies for Landlords

 Posted on March 14, 2023 in Estate Planning

Landlords are subject to significant risks in owning rental properties. For example, if a tenant falls and hurts themselves on the property, the Landlord can be sued, and all personal assets can be subject to the lawsuit. Creating a cohesive asset protection plan minimizes liability risks against landlords. Therefore, it is crucial to construct a coherent asset protection plan to ensure minimal risk to the Landlord should a case arise.

One of the best ways to limit the risk of a creditor accessing personal assets is for the Landlord to remove the rental properties from their name individually and place it into a separate entity, preferably either an LLC or a Land Trust. Doing so eliminates the Landlord as the owner of the property. It, therefore, protects their assets from a lawsuit because the tenant would have to sue the LLC or Land Trust as the property owner.

Creating an LLC

One way to protect a landlord's assets is to create an LLC, a Limited Liability Company. An LLC is an entity that can hold property and serve as a shield for the owner of the LLC. By making the LLC the rental property owner, the Landlord is protected from a lawsuit. In addition, his assets will be saved, as it is challenging to reach through the LLC to the Landlord and access those individual assets. 

To ensure the Landlord cannot be part of the lawsuit, the Landlord must take steps to safeguard the personal assets that are not blended with the LLC. This means the residential lease should be entered into with the land trust, and an additional bank account should be set up in the LLC's name. The proper use and set-up of the land trust and the LLC as the beneficiary of the land trust create safeguards to protect a landlord's property interests. Setting up a property management company is simple; alternatively, the LLC may accept rental payments. Receiving proper rental fees in the LLC's name will integrate with the Landlord's bank accounts. Following proper guidelines and procedures maximizes liability protection for landlords. These liability reduction strategies prevent unauthorized dissipation of the Landlord's assets through rental property creditors. The creditor is limited to assets of the rental property LLC. This minimizes the personal exposure of the Landlord. Landlords make vital mistakes by commingling one's assets with their rental income business. Commingling one's investments with the business property expose landlords to unnecessary litigation efforts. These litigation efforts threaten the financial insolvency of landlords and their families. 

Creating a Land Trust

Another way to protect a landlord's assets is to create a Land Trust. A Land Trust transfers the property's title to a Land Trust Company via a quit claim deed. Doing so will take the Landlord's name off the property's title, and the Land Trust company will hold legal title. It is important to note that, although a separate company will have legal title, the Landlord can still be made a beneficiary to the land trust so that the Landlord can still make all decisions regarding the operation of the property.

A Land Trust has a unique privacy aspect in that the Landlord's name is not connected with the property. In addition, a claim against the property owner by the tenant or other persons will be against the land trust, which provides asset protection against liens and judgments. An advantage of this is that if a judgment is entered, it could not result in a tax lien being placed against the property. This can be an essential factor for landlords, as some lawsuits can result in significant judgments.

Combining a Land Trust and an LLC

Some landlords may choose a dual asset protection plan encompassing a Land Trust and an LLC. In this instance, the Landlord will create an LLC to shield them from individual liability. At the same time, the Landlord will create a Land Trust to convey legal title to a Land Trust company. In this instance, instead of naming the Landlord individually as the beneficiary, the Landlord will name the LLC as the beneficiary. By doing so, the LLC would hold decision-making authority and serve as an additional protection against the Landlord being sued individually.

Plainfield Rental Property Asset Protection Attorneys Near You

Rental properties can generate a large amount of income in exchange for a large amount of risk. Therefore, choosing a proper asset protection plan is crucial to ensure your assets are sufficiently protected from a lawsuit. Here, At Peace of Mind Asset Protection, LLC, the attorneys and staff are ready to assist in determining the best asset protection plan based on your situation. To inquire about our services and discuss asset protection in more detail, call our office at 630-884-2467 to set up a free initial consultation.