Insurance is your first line of defense and you must have the proper amount of insurance. However, insurance is not the end-all to keep you away from harm. Your insurance may not cover a liability or you may not have enough insurance. There is zero correlation between the amount of insurance you have and the amount of a lawsuit against you. I don’t know where it came from, but there is a myth out there that a living trust provides asset protection. Let me be clear on this. Your revocable living trust provides ZERO asset protection. It is not an asset protection tool.
Limited Liability Company. When an LLC owns the property and there is a judgment, it’s against the LLC and not you personally. This is a big difference. An LLC guards you from “inside” liability and “outside” liability. An inside liability pertains to the activities that are connected to the property, such as a tenant issue, a worker getting injured on the property, or a dog biting someone on the property. An outside liability is when an event happens away from the property like a car accident. Someone coming after you for an injury due to a car accident can look at your assets such as property to satisfy a judgment. So the LLC has two-way protection. Think of it as a protective box around your property.
A better way to own investment property is in a
P A G E 7 |
Powered by FlippingBook