There’s always something new that investors can learn about defending themselves with the tools and strategies of asset protection. We also understand though, that this area of law is less commonly understood. Heck, there are even solid business attorneys even who know about asset protection tools but still have fundamental misunderstandings about actually practicing this legal art. In the interest of clearing away some of the mystique that surrounds our growing field, we wanted to begin answering some of the most common questions that we get from our real-life clients. Let us know in the comments section if you learned something new today, or what FAQ you think needs to be on our next list.
Woah, we’re just getting to know each other. In all seriousness, we can’t tell you what’s best for you without knowing more about you, your goals, and of course, your business and major plans.
In fact, if anyone tells you they can divine the ideal tool set for you without knowing much or anything about you, your B.S. Detector should ding. There is no one-size-fits-all asset protection solution, and in fact, our circumstances are all so vastly different that there can’t be.
There are, however, some common basics. Most of us in the real estate world will need an entity as the foundation of our asset protection system. Limited Liability Companies are great choices, as they offer an easy way to both organize your business and have inbuilt mechanisms that prevent lawsuits. Your entity can also be used alongside anonymity tools like land trusts, and other legal work including strong contracts.
Full service firms like ours can even use retirement and estate planning tools to strengthen your asset protection plan. If you really want to learn about the best tools for you, schedule a consultation with an asset protection expert.
Since the Traditional LLC is in all 50 states, we’re guessing you might be talking about our good friend, the Series LLC. This entity is indeed great for investors in most states, yet it isn’t offered in every state. Daily, we get emails and social media messages from investors scattered across the country lamenting that their state doesn’t have a Series LLC option.
It’s okay if your state hasn’t yet been hit by the Clue Train. You can always form a Series LLC in another state. For instance, many Royal Legal Solutions clients use Texas Series LLCs but haven’t even been to, let alone owned property, in Texas. Some leverage our presence here, cost-reducing flat fee offerings, and ability to serve as the Registered Agent for more effective Series LLCs than their home-state would ever offer.
We get this question and variations all the time. Perhaps a little history lesson will help. The first Series LLC was born in Delaware back in 1996--over 20 years ago. Let’s compare that to the Traditional LLC, which Wyoming pioneered not even 20 years earlier in 1977. Not so new after all, right?
So, the reality is that the Traditional LLC, so often hailed as long-established institution, isn’t much older than the Series LLC. It’s not a huge departure legally speaking either, but simply an offering with more nuance and possible uses for the savvy investor to exploit.
Some criticize the Series LLC as “untested,” but this is also untrue. It’s simply harder to document the structure’s “wins” because of its defensive nature. You can see plenty of Traditional LLC court cases where the structure was “tested”--and lost. The absence of a reliable way for attorneys to pierce the properly-established (S)LLC structure is a huge point in its favor. It’s hard to count how many lawsuits didn’t happen. But this structure effectively stops them before filing.
If you’re using Anonymous Land Trusts correctly, meaning under an experienced attorney’s guidance, there’s nothing illegal about using them for asset protection purposes.
For the ethically concerned, consider that you are using tools that anyone can. Anyone with a wifi connection can read this article and others like it to learn about the power of trusts. So, you’re not getting an unfair edge. In fact, these tools were once so cost-prohibitive that only the exquisitely rich could use them. Why shouldn’t you? But some investors also mistakenly believe, or at least fear, that anonymity is only necessary for those with something to hide. Well, that’s just plain false.
Thinking privacy is just a shield for wrong-doing is a huge mistake. You want your privacy as a real estate investor, above all else, to protect yourself. The more difficult you are to connect to your valuable assets, the more difficult you are to sue: end of story.
Further, asset protection tools aren’t designed to help someone who’s up to no good or breaking the law. Your lawyer actually can’t help you break the law on purpose. These tools are all about preserving the wealth you’ve already built.
Specific, tangible asset protection experience. Those like us at Royal Legal Solutions who are investors ourselves will also bring that experience to you. You can verify your attorney’s credentials with their state Bar, and your attorney ca
Scott Royal Smith is an asset protection attorney and long-time real estate investor. He's on a mission to help fellow investors free their time, protect their assets, and create lasting wealth.
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