Asset Protection Strategies for Real Estate | How to Protect Your Assets From Creditors and Lawsuits

In this episode of Daily Wisdom, Attorney Chris Berry discusses how to protect your assets from Creditors, Lawsuits, and Long-term care costs.

Estate Attorney and Advisor Chris Berry of Castle Wealth Group answers questions on retirement and estate planning every Wednesday at 1pm. Register via this link or give our office a call at 844-885-4200.

Castle Wealth Group and Christopher Berry help families with estate planning, elder law, retirement planning, and tax planning from their offices in Brighton, Ann Arbor, Livonia, Bloomfield Hills, and Novi.

Castle Wealth Group helps families with their legal, financial, and tax planning for their retirement and legacy.

With the use of legal structures like revocable living trusts, Castle Trusts (asset protection trusts), Chris Berry and Castle Wealth Group can help your family plan, protect, and preserve what is important through their Retirement and Legacy Blueprint Process.


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Episode Transcript

Protecting Your Assets

Hi, this is Chris Berry with Castle Wealth Group. And today we’re going to talk about asset protection strategies for real estate. If you like this information, please make sure to like the video, subscribe, and turn on notifications so you know when more videos are coming,

Christopher Berry is a leading estate attorney and advisor in the area of retirement and legacy planning. He has been featured in publications, such as Forbes, Kiplinger’s, Crain’s Detroit and more. He’s the host of the weekly radio show and podcast The Chris Berry Show. He’s a national thought leader as it relates to retirement and legacy planning and as author of the Amazon best selling book, The Caregiver’s Legal Guide.

So today we’re going to talk about asset protection, and asset protection can take many different forms, but specifically we’re going to talk about asset protection strategies for real estate. And one big difference we need to highlight is the difference between your primary residence versus second, third, fourth rentals, et cetera, other pieces of real estate, because the rules around a primary residence are different than the rules around any other piece of real estate. As it relates to taxes, as it relates to long-term care cost protection, Medicaid spend down, as it relates to asset protection. For example, your primary residence, if you own it as a married couple can be protected if one of you were to be sued. That’s called tenancy by the entireties. It’s a special type of asset protection the state of Michigan has given, and if you’re in a different state you have to double check with your state.

But the state of Michigan has given to married couples where if one spouse is sued, the home remains protected. Now, if both spouses are sued for whatever reason the home is not protected. And also for Medicaid or nursing home spend down, they can place a lien on the home. It’s called a state recovery. Even if you hold it as a married couple. So we still need to take into account asset protection strategies for the primary piece of real estate. And we’ll get back to that. Now let’s talk about other pieces of real estate, whether it’s a rental, whether it’s that property up North, whether it’s that property you have on a Lake, that Lake house. A lot of my clients are concerned about the liability that this can raise. And so we can look at it from an insurance standpoint, you could have renter’s insurance, you could have umbrella policies, both of those make a lot of sense, but understand those are just sandbags you’re building against potential liability.



If that lawsuit goes over and above the sandbags you’ve built up, then they can come after your real estate as well as your personal assets unless we build in some protection. And that’s where legal entities come into play. And we have two main types of legal entities that we use in the asset protection world. One would be business structures, typically LLCs, which are limited liability companies. And the other is asset protection trusts, things like a castle trust or a mini castle trust. So a lot of times with second, third, fourth pieces of real estate with rental properties, we’re setting up LLCs, limited liability companies, where we move or deed the property into that LLC. Now that’s like a box or container. It’s limited the liability to whatever’s inside of that container. And if you have a lot of smaller value pieces of real estate, for example I had a client buy a lot of property up in Flint when the Flint water crisis happened.

Each of those properties were 10, 15, 30, 40, 50 grand at the most. So we put a lot of these pieces of real estate into the LLC. And then once it gets to a certain value, then we started another LLC because we don’t want one slip and fall on one of those properties to take down everything. But because the value was so small we’re comfortable putting a few of these properties into one container, one box. Now I also have clients that have a half million dollar, million dollar property on a Lake or a property North. And so in that situation, if it is a second property, we still want to limit liability, but we might only put that one piece of real estate inside of that LLC, limited liability company. And then we have to deed the property to the LLC. We have to get a tax ID number.


Importance of Trust

And then if we have a trust, we need to assign that LLC to the trust. Also as of 2021, now we also have to have operating agreements for these properties, so they don’t uncap them from property taxes. So it’s more than just setting up an LLC and deeding the property into the LLC. There’s more that goes into it to make sure that we’re not uncapping these for property tax purposes, et cetera. But we are using LLCs as a way for those second, third, fourth pieces of real estate to build in that asset protection. Now, what about that primary residence? For example, what if you have an orchard, let’s say, on your primary residence and you have a lot of people coming through? Or what if you have that Lake house and you’re concerned about liability, someone having a slip and fall hitting their head on the dock and now they might go after you? Well, we can’t put your primary residence into an LLC because that’s going to uncap it from property taxes. You’re not going to get that homestead exemption anymore. So that’s problematic.

So instead with your primary residence, we would either put that into a Castle Trust. Or if we have a lot of assets, maybe we set up one trust for your liquid assets and one trust for your primary residence, like a mini castle trust if you will. So now if there’s a slip and fall, all they could potentially go after would be that primary residence, which is in the trust, the rest of your assets could be segregated and protected. So understand there’s different strategies. There’s no magic wand, but a lot of this is using a combination of insurance, as well as legal entities to build in the necessary asset protection to give you peace of mind. So this has been Chris Berry with Castle Wealth Group. Hopefully you found this information helpful. Have any questions, feel free to reach out to our office and make sure to subscribe to our YouTube channel. Thank you so much.

Castle Wealth Group has clients across the nation and helps families plan, protect, and preserve what is important by creating a retirement and legacy blueprint.



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