Own Rental Property? Here’s How Proactive Estate Planning Can Help
A comprehensive estate plan needs to address all your assets. This plan may be straight forward for most people as they only include the most common items, such as personal property, their residence, and financial accounts. Other assets, such as retirement funds, life insurance, and annuities, do not necessarily require inclusion in the living trust. This all is contingent on the classification of account.
However, your estate plan will be specialized if you own rental property as it has specific unique considerations.
Estate Plan and Rental Property
If you are a landlord of a residential or commercial property, you are highly likely to have lawsuits. For instance, when a guest or tenant is injured, you may end up in the courtroom. Other events that can result in lawsuits include a claim under the landlord-tenant act and a lease dispute. Therefore, you should have a proactive estate plan specific to your rental property to minimize such risks.
How Do I Protect My Assets?
As a landlord, you should purchase adequate insurance coverage to protect your assets. If your insurance policy is insufficient to cover the damages that the court awards, your personal assets will be targeted.
How do I Protect My Personal Assets?
You should own property through a business entity such as a limited liability company to protect your personal assets against seizure by the prevailing party. You should treat the LLC as a real business rather than just filing paperwork. Therefore, you have to ensure that it meets all the legal requirements, including reports, bank accounts, filings, and other formalities to benefit from the liability protection of a limited liability company.
At this point, you have to consider who can manage your assets if you can no longer manage them. This is where the Mattar Firm comes in to Establish a business succession plan a part of your estate plan.
Who Manages Your Assets?
You should consider the trustee to manage the living trust as the trustee has the responsibility of managing your own property to benefit your beneficiaries. The trustee’s duties may vary depending on your assets and terms. Even if you can be financially successful through the income from your rental property, some institutions or people may liquidate the assets and invest those funds. Therefore, you should ensure that your wealth remains in the rental property by using an LLC and the proper asset protection trust to organize your rental property holdings and task the trustee only to collect the net income.
Getting Started
When you acquire a rental property, you should ensure that your estate plan takes it into account. Proactive estate planning will ensure that you and your beneficiaries reap the maximum benefits with the most protection. For more information about rental property or estate planning in general, do not hesitate to contact The Mattar Firm today for your consultation. Our experienced estate-planning attorneys are always happy and willing to help you out.