Design Your Asset Protection Plan With Diligence | Think Realty | A Real Estate of Mind
Design Your Asset Protection Plan With Diligence | Think Realty | A Real Estate of Mind
Abstract
Designing your asset protection plan does not improve by setting up more entities than you need. To cover this inconvenient issue, they suggest that one or more land trusts be beneficially owned by one LLC. The structure appears as follows: How will this structure hold up? When a tenant in the duplex is injured on the property, they can sue the land trust for their damages. Some promoters claim the tenant will never know the owner of the land trust because such information is confidential. If the tenant's attorney can't locate the land trust owner, all they have to do is publish notice of the lawsuit in the paper. "Well," says the land trust promoter as they close shop and move 1,000 miles away, "I guess that didn't work." The other privacy fallacy is that you want to receive the notice of a lawsuit. The beneficial owner is listed as XYZ, LLC. When the tenant sues Land Trust #1, the liability flows to the beneficial owner, or XYZ, LLC. Now if XYZ, LLC were on the title to the property instead of the land trust, the liability would be contained within that one LLC. But in our flawed design structure, the liability flows from the land trust into the LLC. What does the LLC own? Not only Land Trust #1 but also Land Trust #2 and Land Trust #3. So the tenant can also get what the LLC owns, which is equity in all three land trusts. "Well," says the land trust promoter, preparing to move to Alaska, "That didn't work either." As is clear, the design of your asset protection plan really does matter.