If you are an estate owner, it is always best that you protect it from creditors. Although it is a very challenging process to go through. And this is because your real estate asset cannot be moved. Unlike cash, stocks, and bonds that can be moved to foreign jurisdictions, real estate properties cannot be moved.
So you may be asking yourself, how can I effectively protect my real estate from creditors? The answer to this question is in this article. We will be laying emphasis on the 4 steps to take to ensure your estate is safe from creditors.
Steps:
Passing It Down To the Next Generation
One of the most effective ways of protecting your estate from creditors is to transfer it to your children or other family members. This is usually done out of trust. When you do this, you place your real estate asset out of the reach of creditors.
The major downside of this strategy is that you will lose total control of your property. Transferring your real estate to your children or family members makes it subject to their claims.
Change the Level of Ownership
Operating as a sole proprietorship isn’t your best choice for asset protection. This is because there will be multiple tax-planning considerations. As a sole proprietorship, you should know that your personal assets are exposed to a potential lawsuit.
However, one of the best asset protection strategies you can employ is transferring the title to an LLC or partnership structure. Once the LLC and partnership structure worked effectively, your estate property cannot be accessible to creditors.
Get a Qualified Personal Residence Trust
If you have a Qualified Personal Residence Trust (QPRT) in place as the owner, you will be allowed to transfer the estate to an irrevocable trust. When you do this, your estate will be out of the reach of creditors. With the QPRT, you still have the right to live in your property, and at the end of the term, you can transfer the ownership of your property to your children.
Many people employ this strategy because the amount of estate tax to be paid during the trust period will be reduced.
Start Planning Early
One mistake a lot of homeowners make is late planning. Once you start accumulating wealth, ensuring your home is safe from creditors is the next thing you need to do. What’s the essence of having wealth that will be eventually possessed by your creditors? To prevent this from happening, you have to start making the right arrangements.
Wrapping Up
The process of keeping your estate safe from creditors is not an easy one. But, with the right legal guidance, you can simply make life easier for yourself. For this reason, we highly recommend that you work with the Law Offices of R. Grace Rodriguez. We are very passionate about asset and real estate protection. Let’s shield you from the reach of creditors and give you the joy of being a permanent homeowner.