Do You Own Rental Property? How Proactive, Comprehensive Estate Planning Can Help
A comprehensive estate plan should address all of your assets. For most people, an estate plan must include three common categories: (1) your home; (2) financial accounts, like your checking and savings account; and (3) personal property. Other types of assets - such as life insurance, retirement funds, and annuities - should also be considered as part of your estate plan.
If you own rental property, however, your estate plan will be more complicated because there are some unique considerations.
Rental Property & Estate Plans
It is no surprise that one of the risks of being a landlord of commercial or residential property is the threat of lawsuits. An injured guest or tenant, a claim under the landlord-tenant act, or a lease dispute can all end up in the courtroom. However, a well thought out rental property plan and estate plan can hedge against this risk.
Protecting Your Assets
A prudent landlord purchases adequate insurance coverage as the first line of defense. Sometimes, however, the insurance policy’s limit is not sufficient to cover damage awarded by a court. When this happens, the next place the prevailing party looks to for satisfaction of judgment is the property owner’s personal assets, which leads us to the next layer of protection.
Using a Business Entity as Protection
Owning property through a business entity, like a limited liability company (LLC), can protect personal assets against seizure. That being said, merely filing