The main reason people go into real estate investing is the same reason people fail to protect their assets in real estate investing – money. What you don’t do now can be held against you later in a court of law.
“There’s an assumption out there that it’s going to be extremely expensive,” says Bud Lethbridge, managing member of Utah-based asset protection program Veil Corporate. “People also think it’s going to be complicated paperwork and an accounting nightmare and even if they know they should do it, they don’t know what to do.”
Organizations like Veil Corporate walk investors through the ins and outs of setting up an entity, protecting their assets, developing a tax strategy and doing comprehensive estate planning.
When investors get educated about protecting their assets, all of a sudden, what previously seemed expensive and complex becomes do-able. They find that the costs, which are actually simple and minimal, are worth the benefits.
The Pros of Protection
“We live in a super litigious society,” Bud says. “People are just suing everybody left and right. The problem you see in the courts today is that there are bogus lawsuits that are won. You would think reason would prevail in the courts, but reason doesn’t always prevail. We have to make sure we’re protected.”
Peace of mind and financial safety are the two main reasons people establish an entity, but the side benefits are good and plenty. “The way the structure comes together can provide some great tax write-offs,” Bud says. “It’s a huge side benefit and another important reason to dig in.” Tax benefits are a significant bonus of entity establishment, but not the only bonus. Proper asset protection will protect all that investors own – cars, paintings, jewelry, stocks, bonds and other items of value.
“Many people don’t realize that personal property would be vulnerable in a lawsuit,” says Blair Jackson, partner at Invictus Law, PC. Establishing an entity is also a great way to transfer or share ownership with family members, to build credibility and to separate your personal life and personal assets from your business life and business assets for tax and profit-tracking purposes.
One of the most important things people need to know from the start is that protecting yourself in the beginning is infinitely more effective than trying to protect yourself later on. “Most people think about asset protection when it’s too late,” says Carl Thurgood from Veil Corporate. “If you’re already being sued, it’s too late. Put yourself in a protected position beforehand.”
Entities created after properties have already been purchased might not be recognized in court if a 1-3 year “seasoning period” has not yet passed since the property was protected. But if investors have purchased properties within already established entities, there is no seasoning period of vulnerability to endure. Protecting before purchasing means protecting completely.
Legal Brief : Recent Legal Developments
You Should Know About
The law is one slow-mover. Things change, but they don’t change quickly, and because of that, most people fail to pay attention to what’s happening in the system. But Blair Jackson, partner at Invictus Law, PC, says there are a few recent developments in the legal world real estate investors should have on their radar.
1. Nevada has historically been one of the most popular states for setting up business entities because of its favorable laws. Investors considering making Nevada the home for their business holdings should know the state now requires businesses to have a state-level license, a change that has significantly increased the cost of setting up and maintaining business entities in Nevada. Home-based business exemptions to the licensing requirement also now apply only to Nevada residents. Despite these changes, Nevada’s policy of no state-level business taxation and its easy-to use renewal system still make it a good place to do business.
2. In some states, the single-member LLC is gradually losing its asset protection value. More and more, courts are disregarding the legitimacy of those entities. Many real estate investors are finding different vehicles for protecting their assets. Legal counsels and education programs can help investors find the best option to fit their individual needs.
Bud Lethbridge’s entrepreneurial success spans almost four decades with companies in Real Estate, Software and the Legal and Financial Service Industries. Today, he is the nation’s leading expert on asset protection. Bud is a high demand speaker and seminar facilitator who has spoken to over one million people throughout the US and in 13 countries of the world. Through his company, Veil Corporate, he helps doctors, dentists, and many high net-worth individuals, however, the company specializes in Real Estate Investors. Hundreds of RE Professionals from around the world seek the assistance of Mr. Lethbridge and Veil Corporate each year, in securing assets using unique strategies not found anywhere else. You will be engaged as you learn principles of Asset Protection that most lawyers and accountants don’t execute or even understand.
Be sure to attend this 4:30 p.m. seminar at the Million Dollar Trade Show at the Los Angeles Convention Center on Wednesday, October 17th. You may even win an iPad or a 5-day cruise for two.