Being proactive means instead of reacting, you're directing. Why react to a lawsuit when you can direct your assets and avoid a lawsuit all together?
In the real estate industry lawsuits are filed everyday in the United States. If you're not protected, you can easily be caught up in one of them and lose everything. We're talking home equity, other assets and even your car. So if you're thinking about waiting to set up your LLC structure, don't. The fact of the matter is, once you're sued, it's already too late.
So once someone threatens you with a lawsuit, you might want to transfer your assets to someone else to protect them. The problem there is asset transfers after the fact of when a lawsuit is threatened or before it's even filed, can be considered a fraudulent transfer.
A fraudulent transfer doesn't necessarily mean that you did anything that was shady. All it really means is that you transferred the asset outside of the normal course of business.
For example, you can't sell it to your niece for a dollar and think nobody will say anything. But if you sold it for what it was worth, then you'd be okay. Still, the best thing you can do is be ready for a lawsuit.
The best way to avoid a lawsuit is to be ready for one. I've written about a number of ways to do this. One such way is to hide the equity in your real estate from creditors, which you can read about here.
A solution won't just fall out of the sky and into your lap. Remember, the law favors the proactive. And one of the best things you can do to that end is to contact a specialist.
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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