Whether you are an experienced real estate investor or building a new real estate business, asset protection & financial freedom have to be on your mind. Scott Smith, Royal Legal’s founder, and lead attorney, recently sat down with real estate investor Whitney Sewell to discuss Asset Protection for Financial Freedom.
This informative discussion covered the importance of protecting your assets and why a real estate investor should not solely rely on insurance policies for protection against lawsuits.
#1 Insurance doesn’t provide asset protection from lawsuits
As a real estate investor, you have to know that you can’t hold assets in your name and rely on insurance to protect you. The amount of coverage insurance is insufficient, and you may find yourself on the wrong end of a lawsuit.
Scott provides a personal anecdote about a friend who got sued for breach of contract and lost. Because his friend relied only on insurance and held his assets in his name, he lost $3 million in real estate.
That’s not to say that you shouldn’t have insurance. It would be best to get insured, but you must realize that insurance does not completely protect your assets. Insurance covers you from things like negligence. However, it does not protect you from things like breach of contract, fraud, and gross negligence claims.
Breach of contract, fraud and gross negligence claims have the potential to derail your real estate investment business. To get 100% bullet-proof protection, you have to think and conduct business like a wealthy person.
#2 Think like a wealthy person
We live in a litigious society, and having assets may make you a target for lawsuits. To protect yourself, adopt the same strategies that wealthy people use. That means:
- Don’t own anything in your name.
- Create asset holding companies.
- Secure your anonymity.
Think about it like this: Wealthy people don’t own things. Instead, they have companies that own stuff for them. When someone sues a wealthy person, there isn’t anything to get. The asset holding company protects wealth and ensures privacy from litigation. That’s why asset protection for financial freedom is such a critical step in wealth generation.
#3 What is the most cost-effective way to achieve asset protection for financial freedom?
The Series LLC is the most cost-effective way to protect your assets. With a Series LLC, you can isolate your investments from one another.
If the worst happens and you get hit with a lawsuit, the plaintiff cannot get to your other investments, nor can they get to your assets. The Series LLC helps you think and do business like a wealthy person because:
- You don’t own anything. Your LLC owns your assets.
- The trust holds your assets and companies.
- The trust is anonymous.
These layers of a Series LLC work together for maximum protection of your assets and investments. Savvy investors use the anonymity of the LLC to prevent people from locking onto them as a target to sue, and it allows them to keep their investing strategy private from competitors.
#4 How does the Series LLC provide asset protection?
The Series LLC efficiently and affordably protects your assets from lawsuits by using a “parent-child” structure. The process goes like this:
- Create “parent” LLC.
- Create individual “child” Series LLCs with no additional filing.
- Each “child” LLC minimizes your liability.
Each of the “child” LLCs protects assets and isolates them from the rest. If you did not have a Series LLC, you would have to pay to establish an individual LLC for each of your assets to create separation.
The best protection from lawsuits is anonymity. When people think that you have nothing of value, they have no motivation to sue you. A Series LLC shields your assets from the public and makes it an unprofitable decision to sue you.
If a plaintiff sues you, the Series LLC “parent-child” structure makes it so that only one of your assets is at risk.
Do you have a plan in place already? If not, let us show you how to achieve asset protection for financial freedom and build generational wealth through the use of a Series LLC.
Read this article to decide if it is the right way to get bullet-proof protection for your assets, Series LLC For Real Estate Investors.
Asset Protection for Financial Freedom Wrap-Up
And there you have it! An explanation about how to achieve asset protection for financial freedom.
We started by discussing the shortcomings of focusing solely on insurance for liability protection, noting that insurance provides some, but not all, of the asset protection you need.
We’ve also talked about the tips and tricks that wealthy people use to protect their wealth. Then, we went over what a Series LLC is and how it provides the most cost-effective way to protect your investments.
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