What's up guys.
Hey, do you own a vacation home?
Are you concerned about asset protection and how you can protect it
not only from your personal creditors, or if you're listing on Airbnb
to make a little extra money off the deal?
Well, this is the video for you, because in this video, I'm going to teach you
how to protect your vacation home from your personal creditors
or from those people who are renting your property on an occasional basis.
All right. Let's get started.
So here's the deal about vacation homes, right?
You buy that home many times, you're getting a loan.
Your treat is a secondary residence.
We have a variable favorable interest rate on it.
So that is a concern when it comes to asset protection that we have is
we want to make sure that if we're doing anything
with the structuring, that a bank won't call our loan due
and possibly force us to refinance it as an investment property.
So that's a major concern.
Another concern with vacation homes is that these assets themselves, you know,
it's an asset we typically hold in our own names
because we view it as a secondary residence.
We don't think about asset protection, but then we're involved in a lawsuit.
Somebody sues us.
And that vacation home we used to have, let's say it was in Texas or Florida
or Hawaii, well, now it's somebody else's vacation property.
So that's a concern.
The other thing is that many times with vacation homes, we look at that
and we say, wait, sit in vacant for seven or eight months out of the year.
Why don't we start making a little money off of this property
to help cover the costs and the maintenance of that that home?
And so you listed on Airbnb or VRBO.
Now you've got tenants that are seeing the property.
So now you have more liability that didn't rolls up on you if somebody gets hurt.
So there's a lot of concerns that we have with vacation properties
that we may not be thinking about, but you should.
And so in this video,
I'm going to walk you through how you go about creating or protecting.
That is a vacation home. Let's go over here.
So as you see, I've got my vacation home up here on the board.
You know, I just pull up my boat, of course, because
maybe it's on the water somewhere nearby.
What do we want to do with protecting this property?
Now, you could go the standard, basic route, which would be to do this,
create a if you already have one, you've got your Wyoming LLC down here.
As you know from my videos, I talk about the anonymity, right?
Whenever we're going to structure something, a property,
an asset, I want to make sure that it's not in my name,
that somebody can't look at the entity and trace it back to me.
So I'm going to start with that Wyoming LLC
as this is
our first option, I got to two strategies for a year on the vacation home,
and then what you're going to do is you're going to create a secondary LLC.
So if this property here was located in Hawaii, I'd create a Hawaii
limited liability company to own that property.
And then I'm going to make the member manager of that
LLC, my Wyoming Limited Liability Company.
So I would put that property into that.
Now, because of the type of property it it is.
All right.
Being in a vacation home, I want to make sure that I'm
preserving all the tax benefits of owning the secondary residence.
So when you're doing this, you want to make sure that this LLC,
if you're going to use the LLC approach
here, like I just showed you, that this is what we call a disregarded,
disregarded entity for tax purposes.
That means you, when you apply for the land,
you let the IRS know that this entity will not file a tax return,
that everything is disregarded
to the owner of that asset, which is going to be you.
Same thing down here, the Wyoming LLC.
This should also be disregarded down here.
All right.
So all of these these two structures here, this will not file a tax return
and neither will this.
Everything flows directly down to your 1040.
So your tax return is going to look the same using this type of structuring.
Walmart increase your tax burden as far
as having someone to file multiple returns to protect the property.
So I like this strategy. It's going to give you the asset protection.
So if anything goes wrong with that property,
if you're renting it out, you're going to be protected.
The other thing is, if somebody sued you personally,
they're not going to see that you own this property because it's not in your name.
The LLC is not in your name, so they're not going to know
that this is an asset they can potentially go after.
Now, what's the drawback to this plan?
Well, the drawback to using this type of structure,
of course, is going to be that when you move that vacation property
that you owned into the LLC, if there's debt on the property right,
you've got a very favorable interest rate on this property that you bought.
Well, there's debt on it.
And a lender discovers the fact that the property is now owned
by an LLC they could elect to accelerate your mortgage
and force you to refinance this at a higher interest rate.
So now this is going to be considered investment property.
So if you're concerned about that because you don't own
your property outright, you've got a great mortgage on it,
then you may not want to use this strategy right here
that would bring me to my next strategy.
So rather than using a limited liability company,
what I would look
at doing instead with this property
is set it up with a land trust.
So now we're going to switch, we're going to use a trust.
So I'd create a land trust here
to own the property, because with the land trust,
when a lender looks at that, that title to that property,
they're not going to see a business entity there.
So it's not going to cause them
concern that you want to accelerate your note using the trust.
They're going to assume that you set this up
for estate planning purposes,
which is what we want them to assume, because they're not going to be able
to see a copy of this trust agreement because they're not recorded anywhere.
If you're not familiar with the land trust,
just search the term land trust on my channel
and you'll find ample videos on land trust and how they work and operate.
Now we set up a land trust for our vacation home.
Then what are we going to do to give us asset protection?
Because the land trust by itself does not provide asset protection.
Well, in that case, what you want to do is you
want to make the beneficiary of that land trust your Wyoming
limited liability company.
Yeah.
So we're still keeping that in play
because that Wyoming LLC is going to help protect us.
That means if somebody were to sue us personally,
they can't get to our vacation property, or if the worst thing happened
and somebody slipped and fell because of the very bad stuff in the inn,
they bring a claim,
they sue the trust which brings them to the LLC, which protects you.
Now if you're thinking, well, Clint, I maybe I have to vacation homes,
does that mean I can create two land trusts,
one for each vacation home,
and put both of them into the same LLC?
No, that is not what I'm telling you to do with this type of strategy.
It's One Land Trust to One LLC.
If you put both properties into the same limited liability company,
then you've put two properties in that LLC.
If one goes down, they both can go down.
So we want to keep those things separate.
We'd create a separate LLC over here, Wyoming LLC for this structure.
You may be wondering this, Hey, if I'm using a land trust
for my vacation home, does this LLC need to be a state specific LLC?
Again, the answer that's going to be no, because that LLC is not doing business
in that state.
It's the land trust that holds title to the property.
So the benefit of going to the land
trust route is you still get the asset protection,
but you also get a lender acceleration and protection for that particular property.
So I really like this.
Now the last thing I want to leave
with you when you're setting up the land trust as well for this type of structure,
you're going to want anonymity here.
So to get anonymity, you have to choose a trustee for your land trust,
which is not going to be you.
It's either has to be a separate LLC that you set up or what
we often do is myself or one of the other attorneys in our firm
will serve as what we call a nominee trustee.
So title gets taken in the name of a nominee trustee, for example,
Clint Coons, trustee of the Waikiki Trust.
And then the nominee resigns and you become the new trustee
or what we call successor trustee of that that trust.
And that information is not on the public record.
It's all in your private documents
with the trustees deed, of course, which transfers the trustee ship to you.
So you have complete control.
So you get the anonymity,
you get the asset protection, and you get the protection from lenders.
Great, great strategy.
If you're if you have a vacation home.
Hey, guys, if you like that strategy about protecting your vacation home,
I got a lot of videos on my channel
of protecting other types of real estate investments.
Be sure to check it out.
And if you want to learn more about asset protection for real estate investors,
I'd love to invite you to my tax and asset protection event.
I teach this via Zoom every other weekend on this event.
I'll be going through land trust like I just showed you limited
liability companies how to put them together.
Corporations talking about specific real estate strategies
and how these entities apply.
And then we'll delve into the tax side of investing as well.
My partner, Toby Mathis, will come on and he'll teach you multiple strategies
to put more money back into your pocket as a small business owner
or a real estate investor.
And more importantly,
you're going to get your questions answered
because I got attorneys and CPAs that join me on there that are sitting there
banging out questions or answers to questions that come in.
We typically answer at least 12 to 1400 questions every time we run this event.
And it's absolutely free.
Sounds interesting.
Check out the link below in the show notes and register for it and I hope to see
you there.