A subscriber has asked if there are some ways to
protect U.S. real estate from the litigation epidemic besides
converting the equity into cash and going offshore. According to Bob L.
“I have always been leery
of those islands. The tale is a little too sunny and breezy. Nifty way
for the rip-off artists and lawyers to get rich. The islands are fine
for folks in the narcotics business. What the hell, in that world, tax
dodging is not something you are going to lose a lot of sleep over.
Aren’t there other subjects that you could cover in detail? I think of
real estate ... (and) I am not alone. There are plenty of people who own
real estate (of various kinds). As I understand it, real estate is one
the most vulnerable assets you can have.”
Residential real estate can be best protected in states
with generous homestead laws, such as Florida, Texas and Kansas. A
secondary option for a residence is available for those who live in the
states that provide for tenancy by the entireties for the ownership or
real estate by a husband and wife. A third option would be the use of a qualified personal residence trust.
Mark Warda suggested the use of
dual living trusts for a husband and wife in those states that do not
recognize tenancy by the entireties as a form of ownership. Another form
of protection is to borrow out the equity as much as possible and then
put that money into some protected form - such as a family limited
partnership or a life insurance contract. A more extensive explanation
of these tactics are available in the November,
1994 issue of APS. More information on tenancy by the entireties is
available on the internet at http://www.protectyou.com. This is a web site
sponsored by Howard D. Rosen, Esq. For more information on qualified
personal residence trusts, ask for a free article on that subject by Gideon Rothschild, Esq.
It seems that the preferred method of protecting the
equity in rental or commercial real estate is to put the real estate
title into a family limited partnership, limited liability company or
sub chapter S corporation.. Borrowing out the equity and putting the
cash into a more protected form (like a homestead or life insurance
contract) is another device that is often suggested. Another option is
to transfer ownership of the real estate to a trust in which children
are irrevocable beneficiaries.
Further details about protecting your real estate from future
lawsuits are available in our subscriber's
web site.
