Lindon Utah Co. UT how to protect your assets

Asset Protection Lawyer - Selecting the Jurisdiction of a LLC For Maximum Asset Protection

Asset Protection Lawyer

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To safeguard your rental assets and properties there are some simple things that you may consider.

Prepare a strong and sound lease agreement

When there is some problem with the tenants or with your property, the first and foremost thing is to produce the lease agreement in the court of laws. A vital aspect of a lease agreement is to obey the state and local laws. So your chief requirement should be an airtight lease agreement.

Purchase properties in the name of a legal entity

Always try to build a legal entity under the name of which you could purchase property. Also ensure to have a joint ownership of the property. This would help avoid problems related to suing or litigation by others. As when you own a property in your name, it will instantly show up as an asset if someone chooses to sue you and this can call for serious legal problems.

You should also restrict the number of properties that each of your legal entities own as all the other undertaken properties would be susceptible, if even one among them is litigated. Hire reputable providers for proper asset protection services, when you find self-management difficult.

Provide appropriate legal disclosures to the tenants

You must give the tenants the most authentic and legal real estate disclosures while they are signing the agreement. An agreement with loop holes can make your tenants are successful in suing you if they wish to. Remember to check all your local landlord and real estate laws before creating the agreement and if required contact a local real estate lawyer specializing in landlord-tenant law.

Decent property management and tenant screening

Screening tenants is a real tactful and hard job, requires keen investigating knowledge and proper assessment, understanding for scrutinizing both individual and business tenants. The main purpose of this screening is to evaluate the probability of the tenant in fulfilling the terms of the rental agreement and also in taking care of the rental property in question.

Property management is an equally important aspect of property protection. It's always true that a good landlord who responds to his tenants when they call for a problem or concern about their legal assets, are less likely to be sued. So keeping a good rapport with your tenant is very essential. You can even hire property managers instead to help you manage and protect your rental properties in an efficient way.

All of these can prove to be highly time consuming and complex for most of you, so opting for some asset protection services could help greatly in bringing down all the hard work and tension related to managing your rental property.

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Lindon Utah Co. UT contesting a will

Asset Protection Lawyer - A Guide to Asset Protection

protect your money

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These potential scenarios should concern any entrepreneur or investor: You get sued personally and lose; the judgment creditor (the entity that won the suit and was awarded a judgment against you) decides to go after your business and investment assets. Or you have a retail store plus several real estate investments; you get sued for something related to the store and the judgment creditor decides to attach your real estate. You can cry, "Unfair!" all day long and it won't matter if you haven't taken the appropriate asset protection steps.

An asset protection tool you need to understand is the charging order. By definition, a charging order is an order issued by a court to a judgment creditor which essentially compels an entity of which the debtor is a partner or member to direct to the creditor until the judgment is satisfied any distributions that would otherwise have been made to the debtor (from Asset Protection: Concepts & Strategies for Protecting Your Wealth by Jay Adkisson and Christopher M. Riser, McGraw-Hill, 2004).

What this means is that if you have an interest in a Charging Order Protected Entity (COPE) [entities for which creditors are limited to using charging orders as remedies in collecting debt, such as a Limited Partnership (LP), a Limited Liability Company (LLC), and certain others] and a creditor obtains a charging order, the entity is ordered to pay the creditor any money that would have gone to you until the judgment is paid in full. In most states, the creditor has no rights with respect to the ownership or management of the entity and cannot force the entity to make a distribution. The idea is to balance the rights of creditors with those of the non-debtor partners.

Charging orders do not come into play with assets such as stock in a corporation or personal property. But in an entity such as an LLC, legislators have taken steps to prevent creditors from attaching partnership or membership interests and essentially becoming partners or members themselves because such a change in ownership could disrupt the operations of the entity. Where you are not protected by state law, discuss this issue with your attorney because you may be able to create a comparable level of protection through your operating agreement.

How you are protected

As long as the creditor has the charging order, the LLC can simply not make any distributions and the creditor should not receive any money. For example, let's say a visitor to your home slipped on the sidewalk, sued you, and won. As a judgment creditor, he decides to go after all of your assets and gets a charging order against the LLC that owns your real estate investments. He typically can't collect anything until the LLC makes a distribution, and you and the other members of the LLC are perfectly within your rights to decide to not make any distributions for as long as you like. Because of this, creditors with charging orders are often willing to negotiate a settlement to get at least a portion of their money and be done with the situation.

Another issue that often prompts judgment creditors to settle charging orders quickly is the potential for tax liability. If the creditor is entitled to the distribution when it is made, he may also be obligated to pay the taxes. It's possible for the members of the LLC to issue a K-1, which is the tax form used to report a member's share of an LLC's income, potentially making the creditor liable for taxes on profits even though he hasn't received any money.

As of January 2007, there were no known cases where the IRS has held a judgment creditor holding a charging order liable for taxes--but nor are there any cases where the IRS has specifically relieved a judgment creditor of such liability. Until case law becomes definitive on the issue, creditors may be reluctant to take a chance that they could be held liable for taxes on profits they haven't received and may never receive.

The protection offered by charging orders may be circumvented in a number of ways, depending on the state in which the entity operates and your individual circumstances.

Be aware that simply forming a partnership or LLC is not going to automatically protect your assets. Charging order protected entities are some of the strongest and most acceptable asset protection tools available, but to be effective, they must be properly structured and carefully drafted according to your particular requirements and the laws of your state.

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