Protecting Your Assets

Residential Real Estate Attorneys in Naperville, Aurora, and Plainfield, Illinois

The first major asset is your primary residence or otherwise known your “home”. There are two (2) major strategies to protect your real estate equity. The first strategy is to set up your house as tenants by entirety.  Tenants by entirety is a way to structure your real estate deed and ownership in the State of Illinois for husband and wives. First, tenancy by entirety only applies to your primary house or your homestead property. This means that your real estate must be your primary residence where you reside or intend to reside.  

Second, tenancy by entirety is reserved for spouses such as husband and wives. The benefit of tenancy by entirety deed ownership is additional protection against creditor problems. The creditors of a husband or wife cannot foreclosure a judgment against husband and wife when husband and wife jointly own the house as tenancy by entirety. Simply put, a creditor’s options are limited to placing a lien against your property unlike joint ownership of property such as joint tenancy with right of survivorship.  

With joint tenancy with right of survivorship, a creditor of one of the two co-owners of real estate can foreclosure a judgment despite the judgment being against one of the two (2) co-owners.  For example, John and Sue own real estate as co-tenants as joint tenants with right of survivorship. John and Sue are unmarried. Sue has a credit card judgment against her for $22,000 by her past creditor, Visa. 

John and Sue have a significant amount of equity in their jointly owned property. Visa has the right to place a lien against John and Sue’s property and foreclosure the jointly held property to obtain payment of their judgment. In the same scenario where John and Sue are married and hold title to the property as tenancy by entirety, Visa cannot foreclosure the jointly held property because tenancy by entirety limits a creditor’s right to foreclosure property jointly owned by husband and wife (where the property is characterized as tenants by entirety.

Limited Liability Corporations and Series LLC Attorneys in Naperville, Bolingbrook, Plainfield, and Romeoville, Illinois

Sean Robertson and Gateville Law Firm are experienced real estate investor and landlord attorneys that understand how to set up Limited Liability Corporations to protect investment property. In Illinois, an Illinois Limited Liability Corporation (hereinafter referred to as a “LLC”) is a hybrid between a partnership and corporation.  Limited Liability Corporations and Series LLC Attorneys in Naperville, Bolingbrook, Plainfield, and Romeoville, Illinois

Unlike a Corporation, an LLC has a great deal of flexibility in arranging the stock and voting ownership interests. Similarly, to an S corporation, an LLC is a pass-through entity. Pass-through entity income is income from an LLC or S corporation which passes through to the individual members or owners personal tax returns. Thus, the LLC structure is disregarded for tax purposes, which means that an individual owner or member will pay taxes as though they were self-employed as partners or sole proprietors. 

Owners of an LLC do not pay tax as the LLC, but rather, they pay taxes based upon their own individual circumstances on their personal tax returns. LLC owners only file an informational return through their own 1040 tax returns and do not file a corporate or LLC tax return.

Generally, real estate investment property is an LLC versus a S corporation.  S corporations have tax limitations with respect to passive real estate income. Thus, an S corporation taxation is much more limited than LLC with respect to the ownership of real estate investments and income. In contrast, an LLC allows passive investments in real estate ownership unlike an S corporation. Typically, real estate ownership of a greater period than one (1) year will find that the LLC is much more preferential than S corporations.

Another benefit of an LLC is limited liability protection of individual owners. An LLC provides real estate investors with asset protection and liability protection benefits.  Real estate investors often hold title to real estate assets in their personal name or jointly held names. As discussed earlier, jointly held assets may be jeopardized by one co-owner’s debts and liability concerns. An LLC limits the legal ability concerns of real estate to that particular property.  

It is highly recommended that each real estate property has its’ own LLC. A Series LLC is a creation under the State of Illinois law which allows for creation of multiple LLCs at a fraction of the costs of multiple LLCs. One of the benefits of a Series LLC is after the initial set-up of the first LLC, the cost of each additional LLC is $50. Furthermore, the Series LLC only provides one annual report versus an annual report for each LLC. The cost of an annual report in Illinois per LLC is around $250.