The best way property investors can protect their assets from being seized in a lawsuit.
Step number one. Don’t get sued. That’s sort of the bottom line. Don’t get sued.
And there are some real ways that you can avoid this. But sometimes it’s going to
happen, and sometimes you’re going to have to deal with it. And if you’re in business
long enough, you’re going to get sued eventually. But, you can do everything that you can to
keep from being sued and I find the best way to avoid being sued is to act honorably in
a transaction. Be ethical in your dealings with people. Put yourself in control of the
deal using the Zero Down Structure hierarchy that I teach. Use the right structure for
the right deal. Don’t cheat people. Don’t rip people off. And if you screw something
up, apologize. And if you didn’t screw something up, but somebody’s angry with you, apologize
for that, too. Remember that every time you get angry, you might as well just reach back
into your pocket and pulling out cash because it’s going to cost you money.
So, the best way to avoid a lawsuit is to stay on good terms with the people that you
work with. Unfortunately, that’s not always possible, and sometimes you’re going to
run into a problem and you’re going to have to deal with that problem. If that happens,
make sure you get proper representation. Make sure you get an attorney who is going to look
out for your interests and watches out for you and walks you through the process. It’s
going to be expensive, it’s going to be painful, but it’s probably something that
you’re going to need to do. One thing to keep in mind is if you don’t
have any assets to protect, it’s not really a big deal. You can’t get blood from a rock.
But if you start having assets to protect then you need to start thinking about ways
to protect those assets. One of the things that you can do is to set up retirement accounts.
Retirement accounts are harder to access in a lawsuit than any other type of investment
that you have. So set up a Roth IRA. I’ve done other videos about this and it really
helps to have an IRA. Let’s take O. J. Simpson as an example.
O. J. Simpson is probably guilty of killing his wife. But he got acquitted in a court
of law. Then, he got sued in civil court and he lost that case. So, he had a lot of money
that could have been take by his victim’s family, but they couldn’t attach his retirement
account where he had most of his money. So he was protected because he had a retirement
account and even though he had a huge judgment against him, he was still protected.
Now, I don’t recommend that you go out and kill your wife, but you can put your money
into a retirement account and it’ll give you some protection.
You can also set up multiple limited liability corporations. Never put more money into a
corporation than you can lose. So, you want to split up your assets depending on how much
you’ve got. You want to split up your assets so that some money is always protected. It
makes it harder for them to get to you if they have to go through an LLC first. And
if you’ve got your assets, let’s say you have three houses in one LLC. And one house,
you get sued because somebody hurt themselves at one of your houses and your insurance didn’t
cover it and they decide they’re going to come after you.
They might be able to win. And if they win, you might lose that house. And you might lose
the other two houses that are in that LLC. But if you have nine houses and you’ve got
three houses here and three houses here and three houses here, they’re not going to
be able to attach these other properties in most situations, if they have to go after
that particular LLC that owns that property. So, it’s good to break up your assets into
multiple LLCs so that it’s harder to go after you and be able to get the judgments
against you. Another thing you might try is, in your personal
residence you might have a home equity line against that property. So, let’s say you’ve
been able to pay off that property. It still makes sense for you to have a home equity
line against that property so in case there is a lawsuit or there’s a problem, you could
go out there and you could pull some of that cash out of that property and at least you’d
have a reserve to work with to pay your attorneys, to live on, and you know, instead of having
to go through a refinance. Because if you have to go through a refinance at that time
to try to get that money, it’s going to be harder for you to do that because you’re
going to have a judgment, or you’re going to have a pending lawsuit on your record and
it’s going to be less likely that you’re going to be able to get financing in that
situation. So, go out and you have a HELOC that’s in
place before anything happens. That way you’ll be prepared to be able to protect yourself
when that time comes. One of the things I learned when everything
went under for me back in 1991 is that I tried to pay all the bills and I tried to be responsible
for all the business bills that I had during that time. And I didn’t save enough money
out for my family and for my own protection. So, what I suggest is protect yourself and
your family first whenever you get into difficult times and then look out for the people that
you have other obligations to. I know this sounds a little bad, but I think that it’s
really important to make sure you protect yourself so that you can continue to move
forward. And hopefully then you can come back and you can protect the people that you have
other responsibilities to after you get back on your feet again. So, keep that in mind.
So, that’s the basics of asset protection. It’s not that hard to set up these types
of structures. So, if you have, for example, a Roth IRA and it’s got an LLC that it owns,
and then that LLC owns multiple LLCs. And then you’ve got another LLC that you own
personally. And it can own multiple LLCs as well. And that makes it possible for you to
be able to have money outside your Roth IRA. And then if you have a separate business where
you’re just flipping properties and you’re not holding properties, maybe have a separate
LLC for this. Now, you don’t need all this stuff if you
don’t have any assets to protect. Again, don’t worry about setting all this stuff
up until you start building your portfolio. But once you start building your portfolio
where you’ve got three, five, ten, twenty properties, that’s when you really need
to start thinking about how am I going to protect these properties? How am I going to
keep from losing these properties in a lawsuit if worst case scenario, a lawsuit arises?
So, make sure you cover your butt and take care of those things.
All right. I hope that helps. If you like this video, subscribe, go to my website JoeCrumpBlog.com
and sign up for my free newsletter and think about getting into my mentor program. I’ve
got a six-month personal mentor program. I’ll work with you personally. You can go to ZeroDownInvesting.com
and get all the details. It’s like going to college for a semester. And about that
expensive. All right. I hope that helps.