Get Serious About Protecting Your Real Estate Investments

I want to congratulate you on taking the tine to become the best real estate investor you can be. At Royal Legal Solutions, we're committed to make sure you have the best tax and legal information to make the most money you can. Visit us at our website at royallegalsolutions.com at the website and phone number below you'll always be able to reach us. Schedule a consultation, get the information, and make some money.

What is Fraudulent Transfer?

[00:08] If you're thinking of waiting to set up your LLC structure duct, the fact of the matter is that if you're sued, it's already too late. Transfers after the fact of even when a lawsuit is threatened before it's even filed can be considered a fraudulent transfer and a fraudulent transfer of doesn't mean necessarily that you did anything that was shady. All it really means is that you transfer the property outside of the normal course of business, so it means that you have $100,000 property. You would have to have sold it for $100,000 to somebody. You can't sell it to your niece for a dollar thinking that you're going to be able to protect it. The law favors the proactive in the sentence. You need to move all the properties before you ever think that there's going to be a problem with potential lawsuits. Don't think that waiting is going to be an appropriate measure in this circumstance. Contact specialist, call us at royal legal solutions. We can give you a consultation to be able to let you know what you should do for your particular circumstance. My name is Scott Smith. I'm an asset protection attorney in Austin, Texas. I'm a real estate investor and I want to help you.

[01:23] Hey, thanks for watching this video. If you want more high quality content just like this, you can find it here on our youtube channel are going to our website, royal legal solutions.com we have a ton of free content from our blogs or videos, the podcasts that I had been featured on. Whatever question you have, we're going to have it there for you for you.

Limitations for Canadian Investors

Asset Protection: Insurance or Something More?

When it comes to asset protection, insurance companies are basically a criminal business.

They collect premiums, then deny coverage when you need them to cover something they should cover. If you have a big claim, you'll have to sue the insurance company just to get them to pay.

As an investor, you shouldn't have to rely on insurance for asset protection. Sure, your policy will cover the slip and fall accident that happened on your rental property's front porch because it was a little icy outside.

But what about when your tenant falls through a staircase and ends up permanently disabled? All of a sudden the insurance company will say "this is a case of gross negligence outside of your policy. You can sue us and spend thousands of dollars against our millions of dollars and hope that someday, maybe, we'll eventually pay you something."

Good luck with that.

To protect your assets as a real estate investor, you need to understand asset protection basics, then you need to come up with a custom asset protection plan. You need to understand land trusts and limited liability.

Setting Up And Properly Structuring LLCs: The Cost

Setting up and properly structuring LLCs isn't cheap. I know this. However, they pay dividends in the long run. Okay, everybody sets up an asset holding company, because that's where you have a lot of your money tied up. The question becomes is, do I really need an operating company? Do I really need the shell corporation for me to do all of my business with? The answer, I believe, is yes. What a shell corporation does, this operating company, is it allows you to have a face to the world. To limit your personal liability from all of the business dealings that you do. This means real dollars, because a lawsuit against you, even if they can't collect against the assets, it goes against your credit score. And with a low credit, score it means that you are not able to obtain the financing and be able to operate your business and acquire property, do deals the way that you want to. Those are real dollars. If you're talking about less than $1,000 to protect your credit score, you're talking about pennies on the future dollars that a bad credit score will cost. My name is Scott Smith, I'm an asset protection attorney out of Austin, Texas. I'm a real estate investor, and I want to help you.

Dear Real Estate Investor: Lawsuits Are a Money-Driven Business

[00:07] As a real estate investor, you have to understand that lawsuits are a business and anybody's looking to sue you. They're looking to get money out of you. I've proper asset protection strategy keeps you from going from finding out what you own and if they ever were to see you, it limits what they can get to, but more importantly, a great asset protection strategy exhausts their will and the resources to fight you. This keeps people from continuing with the lawsuit. It gets them to settle early. It gets them, in most cases, to stop the lawsuit before it even starts. What you have to understand is that because law suits our business, the main part is how do we get money out of somebody when we sue them. This is what an asset protection strategy fights. Since it protects the assets from being seized by somebody via judgment, then that person doesn't believe that they're going to get anything out of their investment in a lawsuit because you see lawsuits only paid for in two ways.

[01:12] It's either I pay an attorney to sue or that the attorney takes it on contingency. But if in my research of the individual, I find out that they have no assets that it looks like on paper, then they qualify for food stamps. How much money am I willing to risk for a judgment which is merely a piece of paper without an asset to be able to seize a judgment is worthless. Moreover, there is no attorney that's worth his salt that ever going to take a case like that on contingency, which is free for the client and the attorney risks everything. Attorneys only take sure fire cases that they are very confident that they can win and collect on. So when you ask yourself, how do I protect myself from a lawsuit, which you should really be asking yourself is how do I make it look like I don't own it? My name is Scott Royal Smith. I'm with royal legal solutions and I'm an asset protection attorney for real estate investors and I'm a real estate investor myself, and I'd like to help you

[02:16] if you thought this content was good, you have to go see the bigger pockets podcast that I did. It was the top 10 things every real estate investor has to know about asset protection, and you can go listen to it right here.

Asset Protection Means Making Litigation A Nightmare For The Other Guy

Asset Protection: Make Litigation A Nightmare

If anybody looks to sue you, you want to look like you own nothing. You want to make it impossible for them to try to come after you. One of the ground rules of asset protection is that you need to make litigation a nightmare for them.

And what does a nightmare in litigation mean? It means having to risk thousands and thousands of dollars with the mere hope of being able to get something out of the other party.

Now ask yourself, as an investor and as a business person, do you go to gamble in Vegas expecting to win big? Probably not, and neither will an attorney asked to take the case on contingency. Listen, attorneys are in the business of only taking basically guaranteed wins. And we make it such a gamble for them to try to come after your money they just won't do it.

And that's what we specialize in. We make it as difficult as possible at Royal Legal Solutions for anybody to find out what you own or succeed against you in a lawsuit. And even if they were to succeed in a lawsuit against you, their ability to come after your assets would be minimized to the fullest extent of the law.

My name is Scott Royal Smith I'm with Royal Legal Solutions. I'm an asset protection attorney specializing in real estate asset protection, I'm a real estate investor myself and I'd like to help you.

The Only Two Ways to Lose Money Real Estate Investing: Lawsuits and Bad Investments

[00:08] Real estate investors lose money in two ways. The first is because they actually made a bad investment. The second is because somebody took it from them and they can do that easily through a lawsuit and lawsuits are basically just legalized stealing. So one of the key things that we have to do to guard against half of the way that we will lose our money in real estate investing through litigation is protect ourselves from that. That's what an asset protection strategy is. A proper asset protection strategy protects you from those lawsuits. It protects you from anybody looking to try to sue you. Now when we look at how does that do that is because if your assets are held properly and compartmentalized inside of an LLC structure, it greatly diminishes somebody, his desire to want to sue you. We do this because we start taking them into the deep waters.

[01:04] We start exhausting their will and their resources to fight because if we make it look like you don't have much to come after and we make it look like it's very tough to get to and it actually will be very tough again, then the person on the other end of that says, how much am I willing to invest and put up my hard earned dollars with just the hope or the chance that I might be able to get something out of it? Most people won't put their hard earned dollars on a gamble just like they were going to Vegas to go for a lawsuit, and in fact the last, the attorneys to take the case on contingency. Well, what I can tell you is that attorneys are only taking cases on contingency because they believe that it's going to be an easy win for them because that's their business and we make it a gamble or somebody to come after your hard earned dollars and your real estate investments. The reality is is that it won't make business sense and they just won't do it. My name is Scott Smith and I'm an asset protection attorney specializing in real estate asset protection. I'm a real estate investor myself and I'd like to help you

[02:28] if you thought this content was good, you have to go see the bigger pockets podcast that I did. It was the top 10 things every real estate investor has to know about asset protection, and you can go listen to it right here.

What is a Self-Directed IRA?

Many people are only using their IRAs to invest in mutual funds and other types of stock investments. But a lot of people that are in the know are using their IRAs to be able to invest in real estate and other more productive assets.

One thing that you can do to be able to make more money and to be able to streamline the process of allowing yourself to invest easier, is using a self-directed IRA. This allows you to control the money in your IRA through an LLC without having to involve your custodian.

Truth is, custodians usually aren't that responsive when it comes to what kind of deals that they can move into and how quickly they can move into them. With a self-directed IRA, you get complete control of your IRA assets to be able to move them inside of any investment you want within the bounds of the law.

There are restrictions to this, you can't violate the IRA rules. And you can't loan money to a disqualified person, for example. And there are certain assets that you can't invest in such as certain precious gems or artwork, and collectibles.

However, the self-directed IRA is the tool to be able to move your IRA funds into the most productive asset classes possible with the ease of not having to involve a custodian. My name is Scott Smith, I'm an asset protection attorney with real estate. I'm a real estate investor myself, and I want to help you.

How to Start a Self-Directed IRA With an LLC

[00:07] People will tell you that your IRA is safe and their raw, your IRA is only safe from lawsuits against you and somebody's coming after your IRA. But your Iras invested in an asset class such as real estate where it can be sued. The IRA itself is exposed. Also your IRA is exposed in the sense that it can be disqualified if any of the transactions of the IRA are expert. So there's two things that we do. The first thing that we do is we can split up multiple IRA accounts. So that way if any one type of investment, uh, is disqualified or has some type of issue, um, that I, that the IRS would look at, well that limits your exposure because it's only that one account that we have to worry about. The second thing that you can do is set up a self directed IRA with an LLC. Read about the benefits of self directed IRA here.

[00:57] I like to do it with a series LLC, but that allows us to do is if you look at our videos regarding the series LLC structure, we can take each different asset belonging to the IRA and put it into its own series. So that way if there's an issue with acid a, it doesn't affect acid, B, c, d, et cetera. And this way, if you have one property that has a lawsuit against it, somebody that can't take your entire IRA amount, they could only take a very limited amount of that structure. So make sure that your IRA is properly structured with asset protection because it's not by default, the safest way to do it. My name is Scott Smith. I'm an asset protection attorney with real estate. I'm a real estate investor myself. I want to help.

[01:40] Yeah,

[01:46] we're not like a normal law firm. We believe in putting out only high value content that's going to help you directly. You can get it on our youtube channel. You can get it on our website, or you can listen to all the different podcasts that I do. I am constantly putting out information because I know that this is going to make me the most valuable person in your life. Go check it all out right here.

[02:07] Good.

Business Trust for Investors in California

If you're a California investor with an IRA, looking to set up a self directed IRA structure, don't use the LLC. With the LLC, you end up having to pay $800 per year for the franchise tax, as a California resident. Instead, what you should use is what's known as a business trust. Business trusts aren't subject to the franchise tax laws in California. And therefore, what you're able to do, is perform all of the actions that you would normally be able to take in a self directed IRA. I.e., direct the funds where you would like to and the investments you would like to without having to involve the custodian. But without having to pay the franchise tax. An important point to note here though is that, you're not gonna have the asset protection piece that an LLC or a series LLC would provide, so keep that in mind. My name is Scott Smith, and I'm an Asset Protection Attorney. I'm a real estate investor, and I wanna help you.

How to Maintain the Records and Accounting of a Company

Why file an LLC and manage your company that way if it's just going to get invalidated anyway? Can't a good litigation attorney just pierce an LLC? That advice is just wrong. It's not true. LLCs are incredibly hard to pierce if they are maintained correctly. The problem is that most people, your average Joe Plumber that's running their company, doesn't do the things that are necessary to maintain the adequate corporate structure. So what are the things that you need to keep in mind? The first thing you need to keep in mind is that you must maintain records and an accounting of your company. What is the money that's coming in? What is the money that's being spent? You need to run everything through a bank account for your company so it has the appearance of being a legitimate, separate entity from yourself. You cannot treat the money of the company as if it were your own piggy bank. This means that in the accounting of your company, if you ever need to take money out, you must keep an accounting of it as a dividend from the company. If you fail to do these steps, the corporation can get pierced. If the corporation is pierced, it provides no protection. However, if you were diligent in maintaining adequate records of the company, you will be protected. My name is Scott Smith. I'm an asset protection attorney out of Austin, Texas. I want to help protect you.

Single-Member Versus Multi-Member LLCs

Multi member LLCs aren't always required. It depends on the state statute. See our article on Single Member Vs. Multi Member LLCs.

In Texas, for example, a single member LLC is fine. In Florida, on the other hand, you need more than one member and they can't be married.

What's important here to note, is that you could file a real estate LLC in Texas and use that LLC in any state that you would like. When the court reviews whether to uphold that LLC in the other state, they're going to look to see whether that LLC is properly formed in the state of Texas.

I recommend that you form your LLC in Texas or a similar state with strong asset protection laws so that way you're not stuck with getting caught on a technicality.

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What is the Due on Sale Clause?

Despite what you might read on the internet, don't worry about the due-on-sale clause. The fact is is, since before 1960, we haven't seen any bank foreclose based upon a violation of the due-on-sale clause while the note's performing. The fact is is that banks are in the business of making loans and collecting mortgage payments. The due-on-sale clause would allow them to foreclose on your property by transferring the asset. But why would they do that? This could only hurt their interest. Like I've seen it a couple of times, where banks have foreclosed based upon it. But those were always in situations where the mortgage wasn't getting paid, and that was gonna get foreclosed on anyway. So in that sense, don't worry about it. Protect yourself with your proper asset protections strategy. My name is Scott Smith. I'm an asset protection real estate attorney, out of Austin, Texas, and I wanna help you.

Why a Registered Agent Is Required For Every LLC

A registered agent is required for every LLC in every state that it does business. The only reason for the registered agent to even exist is because if someone wants to sue your LLC, and they're not able to get to a member or manager personally to be able to serve them. Then this allows them to serve the lawsuit onto the Secretary of State and be able to have a person that must receive service of process or the lawsuit. Typically, these services are able to be engaged for anywhere from between 40 and $75 per year online. And they're all fungible, meaning that they're all the same, no matter where you go. So I always recommend saying, what's the best deal that you an get, and be able to go with that. My name is Scott Smith, I'm an Asset Protection Attorney at Austin, Texas. I'm a real estate investor, and I wanna help you.

What Is a Charging Order?

So I'm a real estate investor. I have my properties properly structured inside of an LLC. And out of the blue I got into a car wreck. And this resulted in a judgement against me because it exceeded the limits of liability of my auto policy. Now they have tried to record that judgement against my LLC. Can they take it? The answer is no. This is part of the protections that an LLC gives you. It allows you to be able to know that your assets are gonna be protected from the personal actions that you take in your day to day. You'll know the exact laws that'll happen inside of your particular state. Because it'll be under the heading of what's called a charging order. In most states, the way it works is that they can't take your membership interest in the LLC, they can't take over a management function, they can't force you to sell the assets of your LLC. What they can do is put a lien against your LLC. So that way, if there's any distributions from that LLC to you that it goes to your creditors. There's ways around this if you ever end up in that situation. One of the ways that we would think to do that, is by selling your interest in the LLC to another party. But you always want to keep that in mind with what's gonna happen in your particular state. With what's known as the charging order. Look it up, make sure you know those laws whenever you're setting up your LLC to know exactly what the limits are of your liability there before you end up setting up your structure. My name is Scott Smith, I'm an asset protection attorney specializing in real estate. I'm a real estate investor myself and I wanna help you

Judgment-Proof

This might sound strange to you as a real estate investor, but you're in one of the most high-risk industries in the United States. The United States is already a very litigious country, and real estate is the most litigated of all of those industries. You're exceptionally at risk if you hold any assets in your personal name. What we specialize at Royal Legal Solutions is making you what's known as judgement proof. That means if anybody sues you, they get nothing.

Title Clouding Within Real Estate Investing

[00:08] The reason that it's important to be able to use a series. I'll all see it's because you want compartmentalization of the asset. If there's ever a lawsuit against you and you're on the property personally or your LLC and your LLC owns multiple properties, you should be prepared for some filing against all of your properties known as a Liz pendens. What that means is that there's a potential lawsuit regarding that property. This is does something that's called clouding title. It prevents you from being able to sell that property to other people and gives a significant legal advantage to anybody trying to sue you. Think about how much that hurts your business if you're not able to sell a potential flip or being able to liquidate an asset if you're having to wait for potentially years to resolve some litigation. My name is Scott Smith. I'm an asset protection attorney out to Austin, Texas. I'm a real estate investor and I want to help you.

[01:05] Hey, thanks for watching this video. If you want more high quality content just like this, you can find it here on our youtube channel are going to our website, royal legal solutions.com we have a ton of free content from our blogs or videos, the podcasts that I had been featured on. Whatever question you have, we're going to have it therefore you for you.

Investment Structures That Avoid California Tax Requirements (Video)

You're from California. You know that your state loves to tax, especially when it comes to LLCs. Knowing how to avoid California's franchise tax is an important part of your asset protection strategy.

You have to pay $800 per year and franchise tax per LLC. This is true even if you live in California and you have a Texas LLC that only owns Texas property. You could still be subject to the franchise taxes.

One solution to this may be the Delaware Statutory Trust.The Delaware statutory trust is a trust structure and assets is not subject to the franchise taxes as the rules currently are defined by the franchise tax board. The Delaware Statutory Trust or DST is an entity that is formed in the state of Delaware and can have a series structure just like a series LLC.

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LLCs Can Protect You From Issues That Insurance Refuses To Acknowledge

LLCs Can Protect You From Issues That Insurance Refuses to Acknowledge

[00:08] The truth is is there's a lot of that information when it comes to real estate investing and how to protect your assets, whether it's Joe Lucky, the keyboard warrior from an internet form or your CPA or the worst case scenario, a general practitioner that thinks he has a clue about what it means to be a real estate investor. If they tell you that all you needed shirt is insurance, they are wrong and Sherman's protects you from different types of claims than an LLC does. Let's take for example a case that I had a client a, it wasn't a slip and fall on her front porch. It wasn't that a, you know, somebody had a simple case of negligence and the management of the property. Well those would be things that insurance would cover and hurricanes is that she remodeled the house and she replaced the plumbing underneath the house.

[01:02] The buyers asked her in an email, what plumbing underneath the house did you replace? And her response was all of the plumbing in the house had been replaced. Come to find out three months later after the sale that there was a leak. In the plumbing resulting in tens of thousands of dollars to damage because the buyers at that point, we're out of town. Well, what do you think happened? Well, a loss of habit because the buyers were saying that your email was intentionally fraudulent. When you told us that all of the plumbing in the house had been replaced. This isn't a case of a seller who was intentionally misleading a buyer. This is a case that happens with almost all losses. It's a misunderstanding. You don't have to be a bad person to get sued. All you have to have is a misunderstanding. Luckily for my client, Jen, a proper asset protection strategy in place with a series of little seat that allowed us to negotiate the very advantageous resolution to the case. In fact, that particular case, we were able to get completely drunk. My name is Scott Smith. I'm an asset protection attorney specializing in real estate company structures. I protect my clients and make them judgment and I'd like to help.

[02:32] If you thought this content was good, you have to go see the bigger pockets podcast that I did. It was the top 10 things every real estate investor has to know about asset protection, and you can go listen to it right here.

The Benefits of Homestead Exemptions

If your state has homestead protections, never put it into an LLC. But you may put it into a trust for estate planning purposes. Every state that has homestead protections will allow a different amount for what they consider to be the exemption -- that means the amount that people can’t come after or you’re out.

Now consider the amount of homestead. If your homestead exemption is here (high) and your house is here (low), well it makes sense to pay off your entire house because we know all of that money is going to be protected from a lawsuit because the exemption tells us that nobody can get to it. If your house value is here (high) and your homestead is here (low) then what we want to do is create a lien against the property to cover that gap so it makes it look like the property is more encumbered than it might otherwise be.

We talked about that in another video about the ways we might cover that property, whether using a home equity line of credit and another bank loan or establishing our own mortgage company to be able to loan against that.

So always know what your homestead protections are, never transfer them to LLC, but you may do so to a trust for estate lending purposes.

Is an IRA Custodian Worth It?

Every IRA is required to have a custodian, and not all custodians are made equal. Especially if you're going to have a custodian that's going to invest on your behalf. Think about it, a custodian is the person that you have to have be responsive to any particular deal you're going to get into.

So to make sure that you don't miss out on a particular opportunity. And you're gonna want somebody that's going to ensure that you're investing in an asset class that's not disqualified. Or through some type of investment that's disqualified because it's with a disqualified person, or some other type of circumstance that's in violation of the rules.

Now you might not need a custodian that's all that great if you have a self-directed IRA, and you're willing to take on all of those responsibilities yourself.

Or if you have an attorney that you're working with and making a deal happen, that's familiar with those IRA rules.

Always keep this in mind whenever you are working with your IRA custodian that you pay for what you get. And if you're not gonna pay for it, make sure that you know what you're gonna do.

Or that you have another attorney that's looking over your shoulder to make sure that every deal is gonna be in compliance.

My name is Scott Smith, I'm an asset protection attorney. I'm a real estate investor myself, and I wanna help you.