By Lee R. Phillips

Today I will answer additional inquiries from people who are researching better ways to handle asset protection and estate planning matters. I hope everyone can learn from the things others are facing, and see options to explore with your own trusted advisors.

Q. My parents and I just purchased a condo as joint tenants. We are each 1/3 owners in the property and all 3 of our names are on the real estate deed. The property is my permanent residence only. If the property is put into my father’s living trust (I am a secondary trustee, after my parents and the primary beneficiary) can a creditor place a lien or force the sale of this property (while in the trust) if the possible future judgment is only against myself (an individual)?? Thanks!! Brian W.

A. In my book, Guaranteed Millionaire I have a line that reads “Kids are like yogurt, you never know when they are going to go bad.”  The line is intended to make the reader laugh, but it drives home the point that the more names that are on your deed the greater the likelihood that the property will be subject to a creditor.  The answer is “Yes, when any one of you listed on the deed has a creditor, that creditor can force the sale of the property. If you take your name off the deed and make the sole “owner” your parent’s trust, then the property would not be subject to future creditors you may have.  However, at that point it is not your house any more.  It is your parent’s piece of property.  If they let you live there for free, the IRS will impute a reasonable rent to their income.  Additionally, you can’t take advantage of the tax advantages home ownership gives you.  They can’t take advantage of those either, because it is not their personal residence.  The house will still be subject to their creditors, even though it is in the trust.  The trust doesn’t protect property from creditors.  It prevents probate.  The house will be included in your parents’ estate for estate tax calculations.  You have lost total control over the house.  (Actually, you have no control now, because your parents have to approve a sale or whatever.)  If you are taking your name off the deed to avoid current creditors, they can undo the transaction, because it is a fraudulent conveyance.  Why are your parents on your deed as joint tenants in the first place?  If you need them to get a loan, they should simply guarantee the loan and not go on the deed.

Q. “What would a living trust cost?  I don’t have a lot, but what I have, I would like to see taken care of.” Jamie M.

A. The cost of a living trust depends on a number of factors.  Where you live makes a difference because attorneys in larger cities or on either coast usually charge more.  Who you retain makes a difference just because different attorneys bill at different rates.  The amount of property you own and how complicated your situation is also helps determine the cost, because if you have a complicated situation it will take more time and attorneys bill by the hour.  Don’t be afraid to ask the cost and try and work the price down.   In my home study course, Accumulation and Preservation of Wealth, I teach you how to go in and bargain with attorneys to get the best price possible.  For a uncomplicated estate, single individual (you didn’t say you were married) with an non-taxable estate, I would estimate between $1,000 and $1,500 for the trust, pour-over wills, and durable power of attorney, with the preparation of deeds to transfer real property into the trust.  You need my book, Guaranteed Millionaire, to learn how to use the trust.  Once you get the papers, you have to use them or the trust doesn’t do you any good.  Most people who get a trust waste their money, because they never learn to use the trust.  Good luck, Lee

Q. I have a checking account with $50,000 and the account is in my trust name (Craig P separate property trust). My question is: If I am personally sued, can the plaintiff force the liquidation of this account if they win and are awarded monetary damages? I am trying to figure out if a trust gives me asset protection. Craig P

A. It depends on a number of factors. For instance, is your trust revocable or irrevocable?  If you have a living revocable trust (which is probably what you have) then your checking account would be subject to your creditors.  Revocable trusts don’t give any asset protection.  A couple can get some “asset protection” in common law states (not community property states) by setting up the trust with a his and hers section, in which case the account could be protected from your creditors if it is held in your wife’s trust.  I describe different ways to structure your trust for asset protection in my home study course, Accumulation and Preservation of Wealth. Without seeing your document, it is difficult to answer your question.  You can also learn a lot about trusts in my book, Guaranteed Millionaire. Lee

Q. How can a home be protected from unsecured debts that become judgments? Anthony P

A. A personal residence is very hard, if not impossible, to protect from personal judgments.  You could move the property into an LLC (limited liability company), but then it isn’t your personal residence any more, and you don’t get the tax benefits that come with a personal residence.  My new course, Maximizing Your LLCs Money Making and Asset Protection Potential, goes through how an LLC could help in your case.  You are probably stuck with your judgments, unless you take immediate action with the LLC like I teach you to do.  You’ll have to call to get the course, because it is brand new and not on the net for sale or anywhere else.  800-806-1998

Q. How can I keep from paying a high inheritance tax on property left to loved ones? James Y

A. Technically, as of this date, Feb. 2010, there is no Federal Estate (inheritance) tax.  However, both the Senate and House committee chairs have said it will be reinstated retroactively to January 1, 2010.  There are several legal vehicles that you can put in place to help avoid paying a high inheritance tax.  Which tool you use will depend on your circumstances and what you need to accomplish. There are LLCs, Family Limited Partnerships, Insurance Trusts, and Living Revocable Trusts.  The basic vehicle that an attorney usually always starts with is the Living Revocable Trust.  Get my book, Guaranteed Millionaire, to get started.  It will explain the whole estate tax issue in an easy and fun way, but also in great detail.

Q. Should I create a trust for my personal assets and also form an LLC for my business? (currently just a sole proprietor) Lydia B.

A. A living trust is the way you manage your personal assets.  It is a great idea. A trust is one of the fastest, easiest ways to quickly pass your personal assets at your death.  It can also help you mange your affairs and give some asset protection while you are living, provided you get the right type of trust and structure it correctly.  Many attorneys will set you up with a Testamentary Trust and then you will miss a lot of benefits a trust can offer. Also, a trust must be properly maintained to give you the benefits you want. I go through all of this information in my book, Guaranteed Millionaire, so you can control your attorney and get the trust protection you deserve.

As for the LLC, yes even sole proprietors should use an LLC to run their business.  LLCs offer you a lot of liability protection, provided they are correctly structured and maintained, and it is foolish not to take advantage of this protection.  You might want to consider getting my new course, Maximizing Your LLCs Money Making and Asset Protection Potential.  I go through everything you need to know so you can form and maintain your own LLC.  They are really neat tools.  Most people who use them never even begin to approach the asset protection potential and the tax savings potential they offer.  You’ll have to call to order the course, because it is new enough that it isn’t on the net or Amazon or any place else, yet.  800-806-1998

You should set up your LLC so that your living trust is the Member (owner) of the LLC.  That way your family won’t have to probate the LLC when you die. Best of luck, Lee

Q. Can I set up a revocable living trust and fund it only with my real estate assets, not any other assets? Marlene V.

A. Yes, you can set up and use a trust for almost any purpose, including holding only your real property. I don’t know what you are trying to accomplish with the trust, so it is hard for me to advise you. If you are trying to get liability and asset protection you may be better off to hold your real estate investments in a different entity, say maybe an LLC. Trusts generally (unless they are irrevocable trusts) will NOT give you any asset protection.  Note that a personal residence is different than investment property. You probably shouldn’t put your personal residence in an LLC.  The reason you do not usually hold your personal residence in an LLC is that you will lose the tax benefits you enjoy with your personal residence.  Investment real estate holdings do not have those benefits, so they work well in an LLC.   Most people get a living trust to avoid probate.  Beware that only those properties held in the trust avoid probate.  You can learn all about the trusts and their uses in my book, Guaranteed Millionaire, which is a fun read.

Q. What is the best way for a physician to protect his house from a lawsuit?

A. A personal residence is one of the hardest things to protect.  If you live in a common law state (not a community property state) then you can move the residence into your spouse’s name (if you have a spouse).  Ideally, you would put the house in the spouse’s living trust, so that you don’t have to probate the property if the spouse dies.  If there is an imminent critical threat, you could put the house in an LLC and get some protection, but don’t do that unless you have to.  You lose the tax benefits of the personal residence when it goes in an LLC.  My book, Guaranteed Millionaire, is a great read, and it really will walk you through all the trust possibilities.  You should note that the trust doesn’t give you any asset protection.  It is moving it to the spouse that gives the protection. Eric M