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Maximum Asset Protection – Tips and Information

By Kathy Kennebrook (The Marketing Magic Lady)

A Discussion on the Importance of Protecting Your Assets

Throughout your life, no matter who you are or how you earn your living, you need to be concerned about protecting your assets. Your assets may include your home, vehicles, jewelry, boats, artwork, properties and whatever other assets you accumulate along the way.

After all, you work hard for what you have and there are always going to be people out there who want something for nothing. The more money you have the greater a target you become, and you’ll want to protect yourself from frivolous lawsuits.

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In the real estate investing business this is especially true. The real estate business is one of those where you will be piling up assets quickly. If you are holding properties and you have tenants or tenant/buyers in your properties, this can make you an even bigger target for possible lawsuits.

For this reason alone you want to be holding your assets in another entity, such as a land trust in order to keep your name off of public record. The main advantage to purchasing properties in land trusts or other entities is anonymity.

If everything you own is in your own name, it makes it easy for someone who wants to sue you to find out what you have. If a plaintiff’s attorney looks on public record and it appears that you have nothing, you are much less likely to be sued.

If you are holding properties in land trusts, corporations or LLCs this prevents your name from showing up on public records; making it appear that you don’t personally own anything; and that is the whole idea. You want to hide your assets from creditors and predators. There are a lot of people out there who want what you have, but they don’t want to work to get it.

As you begin to grow your real estate business, you need to begin thinking about protecting yourself and your assets along the way. Make sure you begin working with a reliable real estate attorney who can help you grow and protect your business.

Make sure they understand the importance of purchasing properties in land trusts or in entities that do not represent you personally. If they don’t want to do things your way, find someone who will.

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In addition, you want to be thinking about placing other items of value that you own, such as bank accounts, jewelry, vehicles, boats or artwork in property trusts. This will protect these assets from showing up should you be sued for any reason.

You also need to be working with reliable a financial planner and a CPA in your business in order to protect you assets by investing them well with a diverse portfolio. Your CPA will also help you hold on to your assets by finding ways for you to legally pay fewer taxes on the income from your business.

The real estate business is one of those businesses where there are a lot of great tax deductions for you if you structure your business correctly. You also want to think about diversifying your assets so that you don’t have all your “eggs” in one basket. As the markets continue to fluctuate this becomes even more important for protecting your assets.

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Your CPA and your financial planner can also help you structure your assets so that if something happens to you, your assets will be distributed to children, grandchildren, charities or whomever you choose in a way that is fluid with the least amount of taxes and stress.

This way there is no question as to how the distribution of your assets will be handled if something were to happen to you and this can save your family a lot of hassles later on.

Protecting your assets while you are still around to enjoy them is going to be very important to securing a future for you and your family.


For more information on asset protection and all other aspects of real estate investing, visit my website at www.marketingmagiclady.com.


LEARN DIRECTLY FROM KATHY KENNEBROOK AT REALTY411′S VIRTUAL WEEKEND INVESTOR EXPO, CLICK HERE!

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Empire Industries, LLC…Your Partner in Investing Success

By Kevin Davidson

After his job was threatened by the aftermath of 9/11, Steve Rozenberg, co-founder of Empire Industries, LLC realized that obtaining financial freedom through investing in property is a much surer way of building wealth than working for someone else.

“I’m an airline pilot by trade,” said Steve. “I fly for a commercial airline, and so after 9/11 hit, I was on the verge of being out of a job. That’s when I realized that I needed to do something else to earn money because that secure job didn’t look quite as secure as I’d thought.”

“So what I did is, I started learning everything I could about real estate. I started trying to understand it. I read a book a week on real estate and I devoured as much information as I could so I could figure out this new society…this new language that I was engulfed in.”

“Then I started buying some houses. I sold a few houses then ended up buying an apartment complex.  I sold the apartment complex and started buying a bunch of low income property, which is probably my biggest mistake.”

Steve met Pete in 2005 and the two began flipping houses together before switching to a buy and hold strategy. Then, after buying twenty low income houses within a year and a half, the two realized they’d made a mistake.

“We realized why we shouldn’t have done that. All of a sudden we had a huge waterfall of problems attacking us from all angles so we did what any normal male would do, we turned around and bought another 15 properties to try to fix the problem, which really just ended up being like gasoline on the fire for us. It just ended up making our problems ten times worse!”

The solution they created for their problem became Empire Industries, LLC.

“So to solve the problem we’d gotten ourselves into, we had to create a management company of our own, just to manage our own properties.”

“This is how the management company got started. We started it out of necessity, from the result of making our own mistakes of buying the wrong properties, but also figuring solutions out for that.”

Investor solution

Today, Empire Industries, LLC is the fastest growing single family management company in Texas. They manage about 750 properties in Houston and Dallas, and have a client base that spans the globe. Investors from California to Japan use Empire Industries for their property management needs.

“We’re the number one referred management company by realtors,” said Steve. “We give referral fees to our agents and we make them look good. At the end of the day, what an investor wants is a property that is going to make them money and not give them a headache.”

“Empire Industries is a full service property management company. Our services run the gamut, from helping people find properties to managing their investments, we do it all from an investor’s perspective. Because we’re active investors ourselves, we’re looking at the market from that mindset. We are in the business of helping investors find properties that match their goals.”

“Often, beginning investors fail to see results because they don’t have policies, procedures and structures in place…they run it off of emotions, not a business model.”

“What I always tell people is that when it comes to owning a rental property you own a business. Whether you have one or fifty properties, you run a business. Fair housing, discrimination…all of these laws that dictate what you do as a landlord say that you’re a business and the only one that does not realize they’re a business is the owner.”

Investors choose Empire Industries, LLC because they’re more than a property management company. As active investors, the founders are in “the heat of battle of owning properties.”

“We look at it from an investor’s perspective,” said Steve, “as a partner, not as just a customer/client relationship. This means our goal is to help them be successful and to reach their financial goals, whatever those goals may be.”

Investor education

From hundreds of free videos to free ebooks, investors have access to a huge resource of information…for free…from the team at Empire Industries, LLC.

Ask any savvy investor and they’ll tell you…learning as much as possible about investing in property is key to achieving success.

“Most importantly, have a plan,” said Steve. “If you don’t have a plan and you don’t have goals you need to talk to someone like myself and figure out what your goals are so that when you’re trying to find a deal you can know what that deal is, based on your goals.”

 

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Armor8TM LLC Protection Uses Overlooked Legal Code For Your Benefit

By Garrett Sutton

Holding LLC Certificates in Wyoming for Superior Asset Protection

You want the best protection possible for your assets. You want to use the strongest LLC entity available. But if you live in a weak asset protection state (like California) and set up your LLCs in a strong state (such as Wyoming) which state law applies? In an outside attack where a car wreck victim has won in court and is seeking to collect, the old standard lawyer answer is: It depends.

If you live in California and hold your Wyoming LLC membership interest (your certificate representing ownership) in California, that certificate is your personal property in California. Your Wyoming LLC can then be subject to the jurisdiction of a California court. In such a case California’s weaker laws will apply.

However, with some careful planning and by actually holding the physical Wyoming LLC certificates in Wyoming, the stronger asset protection of Wyoming law can apply. (Please note that we will use California and Wyoming in our discussion but any weak state/strong state scenario will apply.)

A membership interest in an LLC may be held in two ways: (1) as a certificated security; or (2) as an uncertificated security. A certificated certificated security is a declared ownership interest (like a corporation’s stock certificate) represented by a properly prepared and held certificate. An uncertificated security is an ownership that is not represented by a properly prepared certificate. See, UCC 8-102(4), (18).

  1. Uncertificated Security.

Most membership interests in LLCs are held as uncertificated securities. Indeed, a membership interest in an LLC is not a security, unless its terms expressly so provide. See, UCC 8-103(c).

One downside to holding an LLC as an uncertificated security is that it usually is considered by the courts to be a “general intangible.” The courts see the LLC ownership as accompanying the owner of the uncertificated security. A court has jurisdiction over an individual if they live in the court’s district. Personal jurisdiction means the court has the ability to assert orders against the individual. Thus, if a court in California has personal jurisdiction over a judgement debtor (someone who lost in court and for purposes of example we will call “Bob”), then the court in California also may have in rem (property) jurisdiction over Bob’s Wyoming LLC. This is true even though his LLC was formed in Wyoming. Bob’s LLC membership interest is deemed to be “intangible personal property” that accompanies him in California. In this way, an uncertificated security representing a Wyoming LLC membership interest can be subject to California’s weak laws. When Bob is served in a California collection case, a California court not only acquires personal jurisdiction over Bob but all of his California holdings as well, including uncertificated securities even if his LLCs were formed in Wyoming.

Neither Bob nor you wants this result. Let’s consider a better alternative.

  1. Certificated Security

There are distinct advantages to holding a membership interest in an LLC as a certificated security.

One definite advantage is that Bob’s interest in a certificated security may be reached by a judgment creditor only by actual seizure of the security certificate by the officer making the attachment or levy. See, UCC 8-112 (a). Thus, in dealing with certificated securities, possession of the securities is the vital matter. Placing them in a Wyoming safety deposit box, a service we provide, puts the certificates out of the easy reach of a California (or other state) court.

Furthermore, the local law of the jurisdiction in which a security certificate is located at the time of delivery governs whether an adverse claim can be asserted against a person to whom the security certificate is delivered. See, UCC 8-110 (c). Delivery of a certificated security occurs when the purchaser acquires possession of the security certificate. See, 8-301 (a)(1).

Therefore, if Bob acquires possession of a security certificate in Wyoming, then delivery of the security certificate occurs in Wyoming. As such, the law of Wyoming (the jurisdiction in which the security certificate was located at the time of delivery) governs whether an adverse claim can be asserted against Bob. In this way, even if Bob is served with process in California, the California court may apply only those stronger remedies against Bob’s Wyoming LLC membership interest that exist in Wyoming, and not those weaker remedies that exist in California.

Thus, if a charging order against Bob’s LLC membership interest is the exclusive remedy in Wyoming, a California court must apply Wyoming’s superior law to the case.

Our firm has developed a method for certificating LLC securities in Wyoming to be governed by article 8 of the UCC so that Wyoming law applies. We call it “Armor 8”. We add specific jurisdictional Article 8 language to the Operating Agreement and the membership certificates. We hold the membership certificates in a safe deposit box at a Wyoming bank. Your certificates are physically located in Wyoming and governed by Wyoming law. We have not had a case challenging this procedure and can make no guarantees as to how any one court would rule. But by taking the extra steps here you are in a much better position to argue the applicability of Wyoming law, to your greater protection.

The cost of our Armor 8 service is very affordable. The setup fee is $95 and annual holding fee for 1 to 7 certificates is $75. To get your certificate out of the Wyoming safe deposit box and returned to you (for reissue or any other reason) the fee is $50. To place the certificates back in the safe deposit box the fee is also $50.

If you start a new Wyoming LLC and want our special ‘Article 8’ language included in your Operating Agreement and on your membership certificate there is no extra cost if you are using our certificate service.

If you want to amend your Operating Agreement and LLC membership certificates to include the Article 8 language so you can start using our service the minimum fee is $295. Prices may be higher due to the complexity of the Operating Agreement and the number of certificates to be reissued.

Now you can better protect your LLC by keeping ownership certificates in Wyoming. Call Corporate Direct at 1-800-600-1760 to get started with your Armor8TM protection.


 

Garrett Sutton

Garrett Sutton is an attorney, speaker and best selling author. As part of Robert Kiyosaki’s Rich Dad’s Advisor group he has written six books which have been translated into 11 languages. Garrett focuses on corporate and asset protection law and speaks to audiences on the importance of asset protection. His advice is pertinent, timely and valuable.

Garrett received his Juris Doctor Law Degree in 1978 from Hastings College of the Law, the University of California’s law school in San Francisco. He received a B.S. in Business Administration from the University of California, Berkeley, in 1975. He is licensed to practice in Nevada and California.

Website: http://www.corporatedirect.com/

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Should You Foreclose After a Charging Order?

By Garrett Sutton

The charging order is a key to LLC asset protection. If you are sued in a car wreck and the victim wants to get at your assets, the charging order (n many states, including Wyoming and Nevada) is the victim’s only relief. It provides for a lien on distributions, meaning the victim can only get what is distributed to you from the LLC.

But in some states (including California and Utah), if not enough money is forthcoming to pay off the claim, the victim can foreclose on your LLC interest. To do so, they go back to court and argue that the charging order is not enough. They aren’t satisfied with distributions. They want the LLC interest itself.

IS IT A GOOD IDEA TO FORECLOSE ON AN LLC INTEREST?

If a judgment creditor (the car wreck victim) successfully forecloses upon the LLC membership interest of a judgment debtor, then the judgment creditor acquires a permanent (as opposed to a temporary) right to receive all distributions made by the LLC to the judgment debtor, including any liquidating distributions when the LLC is dissolved. In other words, prior to foreclosure, the judgment creditor has only a temporary right to receive distributions until the judgment is satisfied. After a foreclosure, however, the judgment creditor has a permanent right to receive all distributions irrespective of whether the judgment is satisfied.

With a single member (one owner) LLC, this may be a suitable outcome. You get it all. But in a multiple owner LLC, you should definitely think twice about foreclosing. Consider that:

  1. There are cogent tax reasons why a judgment creditor should not foreclose upon the membership interest of an LLC member. If a judgment creditor only has a charging order against the membership interest of an LLC member, then for tax purposes, the judgment creditor is merely the holder of a lien, and does not receive a K-1Form from the LLC. See, Revenue Ruling 77-137 and IRS General Counsel Memorandum 36960 (1977). On the other hand, if the judgment creditor elects to foreclose upon the membership interest of an LLC member, the judgment creditor becomes a transferee of a transferrable interest, and, as such, is potentially liable for the distributive share of the LLC member. Thus, as a transferee of a transferrable interest, the judgment creditor who forecloses upon the membership interest of an LLC member runs the risk that income from the LLC may be passed through to the judgment creditor on a Form K-1 from the LLC (on which taxes must be paid), irrespective of whether the LLC distributes any cash to the judgment creditor to pay the taxes.
  2. A judgment creditor generally stands to gain very little by foreclosing. The judgment creditor already has a charging order against the interest of the LLC member. If the LLC is making distributions to the judgment creditor, then the judgment creditor will have little incentive to foreclose. On the other hand, if the LLC is not making distributions to the judgment creditor, then an auction of the interest of the LLC member will not draw much interest, and will incur attorney’s fees and costs.
  3. If the underlying purpose of obtaining the charging order was to prevent the LLC member from obtaining distributions, then there is little need to foreclose upon the interest of the LLC member, because the charging order will already serve much the same purpose.

Even in the minority of states where a judgment creditor can ask the court to foreclose upon the LLC membership interest of a judgment debtor member of the LLC, the judgment creditor should think twice before doing so, at least with multiple member LLCs, because there is very little to gain, and much to lose, by doing so.


 

Garrett Sutton

Garrett Sutton is an attorney, speaker and best selling author. As part of Robert Kiyosaki’s Rich Dad’s Advisor group he has written six books which have been translated into 11 languages. Garrett focuses on corporate and asset protection law and speaks to audiences on the importance of asset protection. His advice is pertinent, timely and valuable.

Garrett received his Juris Doctor Law Degree in 1978 from Hastings College of the Law, the University of California’s law school in San Francisco. He received a B.S. in Business Administration from the University of California, Berkeley, in 1975. He is licensed to practice in Nevada and California.

Website: http://www.corporatedirect.com/

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Taking Title

By Garrett Sutton, Esq.

houseTitle to real estate sounds grand. As you think of titles let your mind wander back again to medieval England when titles such as Baron and Duke meant you were part of the nobility and peerage system. And not coincidentally, if you had such a title you also owned land. As our legal systems evolved, real estate title–the means by which you owned valuable property rights – remained ever so important. Because title conveyed power (and with power came corruption and fraud), a system to accurately record the chain of title developed. Over time you had to defend your title with the proper paperwork. The ‘checking system’ that evolved means that there are two steps for the transfer of title.The first step is the granting of a deed whereby the grantor transfers the property to the grantee. An investigation of the sequence of deeds to establish an accurate chain of title is then performed. If the grantor actually has clear title, according to the public records, a policy of title insurance may be issued and the property transferred. (Please note that property can be transferred without title insurance but that most banks won’t take the risk in making a loan without it.)A noticeable break in the chain of title means that the buyer–even though they believe they are the rightful owner–can be subject to the possible claims of others contesting the title. It can also mean that the property is now very difficult to sell, because future potential purchasers don’t want any doubts about clear title.

Accordingly, title insurance is important. Before insuring you against the risk of future claimants, a title company is going to check the public records to see if there are any troubling gaps in the chain of title. If gaps exist they won’t issue a title insurance policy. If they won’t issue a policy you won’t buy the property. It is that simple. Follow their lead. Transferring Title

The specter of title insurance affects the way you will transfer title to property.

There are two ways to transfer title:

1. a grant Deed. this deed (or ‘Warranty Deed’) implies or warrants that:

a. The Grantor (the person granting the property) has not transferred the property before, and that absolute ownership (‘free and clear’ title) is conveyed.

b. Unless the Grantee (the person receiving the property) agrees otherwise, the property is free from any liens or encumbrances against it.

c. Any after-acquired title (ownership that goes to a Grantor later) is also conveyed to the Grantee.

2. a quit Claim. this much weaker deed only:

a. Transfers whatever present right, title or interest the transferor may have. (If the transferor doesn’t have any rights, neither do you.)

b. No warranties are made as to any liens or encumbrances. (So if there are undisclosed mortgages against the property it’s not the transferor’s problem – as it is in a grant deed. Instead, it is now your problem.)

c. No after acquired title is transferred.While often advocated by promoters as the easiest means for transfer, the quit claim deed is not your best choice. First, know that in many bank involved ReO (real estate owned) transactions the ReO lender selling a foreclosed property will only use a Quit Claim deed.

Why is this?

It is because the lender has no idea what happened on the property prior to foreclosure. During the boom documents were not properly kept or transferred, the banking industry’s MeRS electronic recording system failed to keep up with it all, and many documents were just plain lost. This is no way to maintain a good chain of title on the nation’s real estate.

It was so bad in 2009 that a large national title company announced it would no longer issue title policies to two large national banks. These lenders’ records were just not trustworthy, and the title company was not going to take the risk. Know that for years to come there are going to be title issues arising from the real estate collapse in 2008.

It is for this reason that sellers (mainly banks) of foreclosure properties are using quit claim deeds. They don’t know what happened and they aren’t about to warrant or guarantee that they have a clean title to convey to you. The quit claim deed they use instead says, “We don’t know what we’ve got but whatever we’ve got we’re giving to you.”

What is offensive is the lengths that some of these lenders will go to get you to bite on a quit claim deed. They will tell you that it grants you full rights to the property. It doesn’t, because neither you nor the bank really knows what those rights are.

To further get themselves off the hook after taking your money for the property these banks will bury the fact that they don’t warrant good title in an Addendum at the end of a sixty page contract. They want you to waive any rights you may have in the matter. They may or may not know that the title is so defective that the property will be severely devalued. But they want you to release them from any future problems and sign off that everything is okay. There have been reported cases where the Addendum is intentionally withheld and only provided to you at the closing. (You know, at that last meeting at the title office where you are expected to sign 47 documents without reading them.) Accordingly, please be very careful and have your own attorney review such transactions.

The second reason a quit claim deed is not preferred is because the quit claim deed severs an express or implied warranty of title. (Remember, you are just granting whatever you may own which may be something, or nothing.) As such, the title insurance doesn’t follow. While this may not seem like a big deal, let’s consider an example.

garrettYou buy a property in your name. Part of your closing costs includes a policy of title insurance. Several years later you want to transfer title to an LLC for asset protection. Your friend says a quit claim deed is the easiest and quickest way to go. You file the quit claim deed and now the property is titled in the name of your LLC. Later, you learn that the boundaries weren’t properly surveyed. You seek recourse from the title company since they insured the boundaries were correct. But you now learn that by quit claiming the property into your LLC you have unwittingly cancelled your title insurance policy. The boundary issue is no longer insured.

The way to avoid this problem is to use a grant deed or a warranty deed. A title insurance policy isn’t extinguished in such a transfer. As well, a grant deed is just as easy to prepare as is a quit claim deed. But in either case, remember that easy isn’t always best. If you are not an expert at title transfers, I would have a lawyer or title company handle them.

For more information on this and other title matters, please read my book Loopholes of Real Estate or visit: www.CorporateDirect.com

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Why do We Seek Security? (And how a Land Trust can help us find it)

By Randy Hughes,

“Mr. Land Trust”

We all want it, we all need it, and we all look for it in every aspect of our lives…security. We seek security in our relationships, in our personal lives and in our financial lives. But why? What is it about feeling “secure” that makes this emotion the base of all human needs?

Have you ever been out late at night on the streets and found yourself in fear for your life? Or, maybe you have experienced the fear of foreclosure, lawsuits, judgments, liens or financial doom? Sure, we have all felt fear in one form or another, but facing your fears and taking action to reduce or avoid fear is what a mature person does. As a parent, I know it is my job to protect my family from all threats (personal or financial).

Security is the opposite of fear. Our primal instincts teach us to fear the unknown and protect what we have. Because the loss of what we have (or will have) makes us feel insecure. Nobody likes to feel insecure. As real estate investors we think differently than the average citizen. We take on more risk to ourselves and our family for the possibility of a brighter future. Risk and security are opposites. Yet, as investors, we try to balance these two concepts to yield maximum results with minimum loss.

Finding security in your financial life will help you find security in your personal life (how many divorces result from bankruptcy or money problems?). Personal security and financial security are intertwined.

So, what does “finding security” have to do with using a Land Trust to hold title to your investment property? A lot. When you hold title to investment real estate in a Land Trust you do not own the real estate…you own the Trust.

Not holding title to your real estate in your personal name keeps you out of the public records (your Trustee’s name is in the public records instead). Ninety percent of the information gathered about you (and often used against you) is mined through the public records in your town. Always ask yourself before signing any document, “Is this going to be recorded?” And, if it is, try to find another way to proceed.

Should you use an LLC to hold title to your investment property? Absolutely NOT! Yes, I use LLC’s and they are good asset protection devices (as long as they are formed in the right state…which is not necessarily the state YOU live in or your property is located in), but LLC’s are registered with the State and are easily tracked. Putting more than one property into any entity (LLC, Corporation or Land Trust) will create a nexus for a lawsuit. Most (smart) real estate investors will title each of their properties in the name of a separate Land Trust and then make the beneficiary of the Land Trusts their LLC.

Imagine how secure you would feel if you went to bed tonight knowing that you did not “own” any real estate. There are NO benefits to owning real estate in your own personal name…only risks. If you use a Land Trust you will still receive all the same tax benefits, etc. So, if you are feeling insecure and doubtful about owning investment real estate please consider a Land Trust. To reduce the risk of owning real estate and increase your feelings of security, use a Land Trust. You (and your family) will be glad you did.

It is difficult to convey all of the benefits of using a Land Trust in a short article like this. I have been using (and writing about) Land Trusts for the last 37 years.

If you would like to learn more about how to create your own Land Trusts, for FREE training go to: www.landtrustwebinar.com/411 or email me at: randy@mrlandtrust.net for my FREE booklet, “50 Reasons to Use a Land Trust” or contact me the old fashioned way by calling 866-696-7347 (I actually answer my  own  phone!)  Randy  Hughes,  aka, Mr. Land Trust™