Worst:
– No coverage, held in your name.
Bad:
- Relying on insurance. This is the most basic level of protection and it is not very effective, but it is still better than nothing. Insurance companies have many exclusions and they may not cover everything, but they can help to pay for some of the costs of a lawsuit.
Good:
- Using one LLC for all of your rental properties. This is better than relying on insurance because it protects your personal assets from liability. However, if someone sues you and wins, they could take all of your rental properties.
Better:
- Using a separate LLC for each rental property. This is the best level of protection because it isolates each property from the others. If someone sues you and wins, they can only take the LLC that owns the property that was involved in the lawsuit.
Best:
- Using a combination of LLC and land trust to protect your rental properties. These are more complex legal structures that can provide even more protection than a traditional LLC alone.
Here are some of the key things to keep in mind when choosing an asset protection strategy for your rental properties:
- Your risk tolerance: If you are not very worried about being sued, you may not need the best level of protection. However, if you are worried about being sued, you should use the best level of protection that you can afford.
- Your state laws: The laws governing asset protection vary from state to state. You should consult with an attorney in your state to make sure that you are using the best asset protection strategy for your situation.
- Your budget: The cost of asset protection can vary depending on the type of protection that you choose. You should make sure that you can afford the cost of the protection that you choose.
