Why an LLC may not protect you from a Lawsuit

[John Underwood]

I stumbled across this lawsuit while looking for something else.

As I have mentioned before in this forum an LLC that is not 100% property ran can easily be pierced and the owner sued personally.

Here is an example of where an attorney went after someone that thought their LLC would protect them:

18. Upon information and belief, the member(s) of the Defendant have failed to observe any corporate formalities in that: a. b. c. d. e. f. g.

19. The members did not observe corporate formality; The Defendant did not pay dividends; The Defendant was insolvent at the time of its actions; The Defendant’s members siphoned funds from the Defendant for their own personal use; The Defendant’s members comingled funds; There are no corporate records; The corporation(s) were a facade and alter ego of the member(s) of the Defendant. In addition to the eight (8) factors laid out above, failing to pierce the corporate veil in this matter would create an elementary injustice and fundamental unfairness. The member(s) of the Defendant have used the corporate shell as a way to avoid any liability for the serious injuries that were caused to the Plaintiff and others by the reckless action of the Defendant’s member(s) and agents. With this in mind, Plaintiff should have compensation directly from the member(s) if the same cannot be had from the corporate Defendant. To deny this compensation would create an injustice and fundamental unfairness.

20. For the reasons and for other reasons to be proven, the Plaintiff is entitled to pierce the corporate veil and assert individual liability against the member(s) of the Defendant.

[Stetson Oates]

Quote from @Steve K.:

Quote from @Stetson Oates:

Quote from @Steve K.:

Quote from @Calvin Thomas:

Quote from @John Underwood:

I stumbled across this lawsuit while looking for something else.

As I have mentioned before in this forum an LLC that is not 100% property ran can easily be pierced and the owner sued personally.

Here is an example of where an attorney went after someone that thought their LLC would protect them:

18. Upon information and belief, the member(s) of the Defendant have failed to observe any corporate formalities in that: a. b. c. d. e. f. g.

19. The members did not observe corporate formality; The Defendant did not pay dividends; The Defendant was insolvent at the time of its actions; The Defendant’s members siphoned funds from the Defendant for their own personal use; The Defendant’s members comingled funds; There are no corporate records; The corporation(s) were a facade and alter ego of the member(s) of the Defendant. In addition to the eight (8) factors laid out above, failing to pierce the corporate veil in this matter would create an elementary injustice and fundamental unfairness. The member(s) of the Defendant have used the corporate shell as a way to avoid any liability for the serious injuries that were caused to the Plaintiff and others by the reckless action of the Defendant’s member(s) and agents. With this in mind, Plaintiff should have compensation directly from the member(s) if the same cannot be had from the corporate Defendant. To deny this compensation would create an injustice and fundamental unfairness.

20. For the reasons and for other reasons to be proven, the Plaintiff is entitled to pierce the corporate veil and assert individual liability against the member(s) of the Defendant.

It's always best to have multi-member LLC. You have a stronger ability to not allow a court action to pierce the corporate veil. You can have a parent LLC owned by two trusts, 50/50 and you'd have double the protection. Since it's trust ownership, there are some additional benefits. As always, speak to a lawyer. This shouldn't be taken as legal advice. However, this is how I've done it. The Kushner's do it this way, as well as President Trump. So, some food for thought.

Trusts seem to be the preferred method of liability and asset protection among the wealthy. 

Trusts offer no liability protection. LLCs can protect you from outside attacks that have nothing to do with your real estate operation.  For example, a car wreck. You will be sued personally and everything in your personal name is unprotected. The rental insurance doesn’t protect you in this example, driving a car is the most risky thing we all do.

Asset Protection Trusts, Offshore Asset Protection Trusts (Cook Islands, Belize) and Irrevocable Trusts with a spendthrift clause are examples of how trusts can provide asset protection from lawsuits. Google “OJ Simpson asset protection strategy”.

No trust will provide you asset protection. You can do crazy stuff with trusts but hey are really bad at protecting assets. OJs main asset shield was his primary residence in Florida, which has unlimited homestead protection. Thats why he moved to Florida.  If you want to move assets off shore those assets may or may not be subject to collection depending on the country.

[Jacob W.]

As a litigation attorney, and I don't mean this in a snarky way, I'm curious where everyone is getting their opinions on this topic? I mean, a filed lawsuit arguing to pierce a particular LLC is only worth the paper (of course most jurisdictions don't even allow paper filing of civil actions anymore) it's printed on.

[Collin Hays]

Great thread John. It needs to be re-posted once in a while.

[Steve K.]

Quote from @Stetson Oates:

Quote from @Steve K.:

Quote from @Stetson Oates:

Quote from @Steve K.:

Quote from @Calvin Thomas:

Quote from @John Underwood:

I stumbled across this lawsuit while looking for something else.

As I have mentioned before in this forum an LLC that is not 100% property ran can easily be pierced and the owner sued personally.

Here is an example of where an attorney went after someone that thought their LLC would protect them:

18. Upon information and belief, the member(s) of the Defendant have failed to observe any corporate formalities in that: a. b. c. d. e. f. g.

19. The members did not observe corporate formality; The Defendant did not pay dividends; The Defendant was insolvent at the time of its actions; The Defendant’s members siphoned funds from the Defendant for their own personal use; The Defendant’s members comingled funds; There are no corporate records; The corporation(s) were a facade and alter ego of the member(s) of the Defendant. In addition to the eight (8) factors laid out above, failing to pierce the corporate veil in this matter would create an elementary injustice and fundamental unfairness. The member(s) of the Defendant have used the corporate shell as a way to avoid any liability for the serious injuries that were caused to the Plaintiff and others by the reckless action of the Defendant’s member(s) and agents. With this in mind, Plaintiff should have compensation directly from the member(s) if the same cannot be had from the corporate Defendant. To deny this compensation would create an injustice and fundamental unfairness.

20. For the reasons and for other reasons to be proven, the Plaintiff is entitled to pierce the corporate veil and assert individual liability against the member(s) of the Defendant.

It's always best to have multi-member LLC. You have a stronger ability to not allow a court action to pierce the corporate veil. You can have a parent LLC owned by two trusts, 50/50 and you'd have double the protection. Since it's trust ownership, there are some additional benefits. As always, speak to a lawyer. This shouldn't be taken as legal advice. However, this is how I've done it. The Kushner's do it this way, as well as President Trump. So, some food for thought.

Trusts seem to be the preferred method of liability and asset protection among the wealthy. 

Trusts offer no liability protection. LLCs can protect you from outside attacks that have nothing to do with your real estate operation.  For example, a car wreck. You will be sued personally and everything in your personal name is unprotected. The rental insurance doesn’t protect you in this example, driving a car is the most risky thing we all do.

Asset Protection Trusts, Offshore Asset Protection Trusts (Cook Islands, Belize) and Irrevocable Trusts with a spendthrift clause are examples of how trusts can provide asset protection from lawsuits. Google “OJ Simpson asset protection strategy”.

No trust will provide you asset protection. You can do crazy stuff with trusts but hey are really bad at protecting assets. OJs main asset shield was his primary residence in Florida, which has unlimited homestead protection. Thats why he moved to Florida.  If you want to move assets off shore those assets may or may not be subject to collection depending on the country.

 Asset Protection Trusts don't protect assets?  

My understanding is that O.J. used asset protection trusts established in Nevada with spendthrift clauses to protect his assets from creditors...  

[Stetson Oates]

Quote from @Steve K.:

Quote from @Stetson Oates:

Quote from @Steve K.:

Quote from @Stetson Oates:

Quote from @Steve K.:

Quote from @Calvin Thomas:

Quote from @John Underwood:

I stumbled across this lawsuit while looking for something else.

As I have mentioned before in this forum an LLC that is not 100% property ran can easily be pierced and the owner sued personally.

Here is an example of where an attorney went after someone that thought their LLC would protect them:

18. Upon information and belief, the member(s) of the Defendant have failed to observe any corporate formalities in that: a. b. c. d. e. f. g.

19. The members did not observe corporate formality; The Defendant did not pay dividends; The Defendant was insolvent at the time of its actions; The Defendant’s members siphoned funds from the Defendant for their own personal use; The Defendant’s members comingled funds; There are no corporate records; The corporation(s) were a facade and alter ego of the member(s) of the Defendant. In addition to the eight (8) factors laid out above, failing to pierce the corporate veil in this matter would create an elementary injustice and fundamental unfairness. The member(s) of the Defendant have used the corporate shell as a way to avoid any liability for the serious injuries that were caused to the Plaintiff and others by the reckless action of the Defendant’s member(s) and agents. With this in mind, Plaintiff should have compensation directly from the member(s) if the same cannot be had from the corporate Defendant. To deny this compensation would create an injustice and fundamental unfairness.

20. For the reasons and for other reasons to be proven, the Plaintiff is entitled to pierce the corporate veil and assert individual liability against the member(s) of the Defendant.

It's always best to have multi-member LLC. You have a stronger ability to not allow a court action to pierce the corporate veil. You can have a parent LLC owned by two trusts, 50/50 and you'd have double the protection. Since it's trust ownership, there are some additional benefits. As always, speak to a lawyer. This shouldn't be taken as legal advice. However, this is how I've done it. The Kushner's do it this way, as well as President Trump. So, some food for thought.

Trusts seem to be the preferred method of liability and asset protection among the wealthy. 

Trusts offer no liability protection. LLCs can protect you from outside attacks that have nothing to do with your real estate operation.  For example, a car wreck. You will be sued personally and everything in your personal name is unprotected. The rental insurance doesn’t protect you in this example, driving a car is the most risky thing we all do.

Asset Protection Trusts, Offshore Asset Protection Trusts (Cook Islands, Belize) and Irrevocable Trusts with a spendthrift clause are examples of how trusts can provide asset protection from lawsuits. Google “OJ Simpson asset protection strategy”.

No trust will provide you asset protection. You can do crazy stuff with trusts but hey are really bad at protecting assets. OJs main asset shield was his primary residence in Florida, which has unlimited homestead protection. Thats why he moved to Florida.  If you want to move assets off shore those assets may or may not be subject to collection depending on the country.

 Asset Protection Trusts don't protect assets?  

My understanding is that O.J. used asset protection trusts established in Nevada with spendthrift clauses to protect his assets from creditors...  

 I'm not an OJ expert.  I invest in real estate.  If I murdered 2 people Id assume any asset I had could be venerable.

[Steve K.]

Quote from @Stetson Oates:

Quote from @Steve K.:

Quote from @Stetson Oates:

Quote from @Steve K.:

Quote from @Stetson Oates:

Quote from @Steve K.:

Quote from @Calvin Thomas:

Quote from @John Underwood:

I stumbled across this lawsuit while looking for something else.

As I have mentioned before in this forum an LLC that is not 100% property ran can easily be pierced and the owner sued personally.

Here is an example of where an attorney went after someone that thought their LLC would protect them:

18. Upon information and belief, the member(s) of the Defendant have failed to observe any corporate formalities in that: a. b. c. d. e. f. g.

19. The members did not observe corporate formality; The Defendant did not pay dividends; The Defendant was insolvent at the time of its actions; The Defendant’s members siphoned funds from the Defendant for their own personal use; The Defendant’s members comingled funds; There are no corporate records; The corporation(s) were a facade and alter ego of the member(s) of the Defendant. In addition to the eight (8) factors laid out above, failing to pierce the corporate veil in this matter would create an elementary injustice and fundamental unfairness. The member(s) of the Defendant have used the corporate shell as a way to avoid any liability for the serious injuries that were caused to the Plaintiff and others by the reckless action of the Defendant’s member(s) and agents. With this in mind, Plaintiff should have compensation directly from the member(s) if the same cannot be had from the corporate Defendant. To deny this compensation would create an injustice and fundamental unfairness.

20. For the reasons and for other reasons to be proven, the Plaintiff is entitled to pierce the corporate veil and assert individual liability against the member(s) of the Defendant.

It's always best to have multi-member LLC. You have a stronger ability to not allow a court action to pierce the corporate veil. You can have a parent LLC owned by two trusts, 50/50 and you'd have double the protection. Since it's trust ownership, there are some additional benefits. As always, speak to a lawyer. This shouldn't be taken as legal advice. However, this is how I've done it. The Kushner's do it this way, as well as President Trump. So, some food for thought.

Trusts seem to be the preferred method of liability and asset protection among the wealthy. 

Trusts offer no liability protection. LLCs can protect you from outside attacks that have nothing to do with your real estate operation.  For example, a car wreck. You will be sued personally and everything in your personal name is unprotected. The rental insurance doesn’t protect you in this example, driving a car is the most risky thing we all do.

Asset Protection Trusts, Offshore Asset Protection Trusts (Cook Islands, Belize) and Irrevocable Trusts with a spendthrift clause are examples of how trusts can provide asset protection from lawsuits. Google “OJ Simpson asset protection strategy”.

No trust will provide you asset protection. You can do crazy stuff with trusts but hey are really bad at protecting assets. OJs main asset shield was his primary residence in Florida, which has unlimited homestead protection. Thats why he moved to Florida.  If you want to move assets off shore those assets may or may not be subject to collection depending on the country.

 Asset Protection Trusts don't protect assets?  

My understanding is that O.J. used asset protection trusts established in Nevada with spendthrift clauses to protect his assets from creditors...  

 I'm not an OJ expert.  I invest in real estate.  If I murdered 2 people Id assume any asset I had could be venerable.

We can use Lance Armstrong as an example of how trusts can be used to protect assets from creditors instead of OJ if you prefer? I am not an expert on either of them, or trusts, or asset protection, but they do seem to provide examples of how trusts (with spendthrift clauses protecting retirement funds in both examples I believe) can be used to protect assets. I have noticed that wealthy people tend to use trusts more than LLC's, and I'm guessing there's a reason for that. But I honestly don't know much about it or have any trusts set up myself personally, nor am I any kind of lawyer obviously. If you care to elaborate on your comment "trusts don't provide asset protection", I'm all ears and I mean that sincerely, I'm always ready to learn more. Why are they called Asset Protection Trusts if they don't protect assets?

[Don Konipol]

Quote from @Steve K.:

Quote from @Stetson Oates:

Quote from @Steve K.:

Quote from @Stetson Oates:

Quote from @Steve K.:

Quote from @Stetson Oates:

Quote from @Steve K.:

Quote from @Calvin Thomas:

Quote from @John Underwood:

I stumbled across this lawsuit while looking for something else.

As I have mentioned before in this forum an LLC that is not 100% property ran can easily be pierced and the owner sued personally.

Here is an example of where an attorney went after someone that thought their LLC would protect them:

18. Upon information and belief, the member(s) of the Defendant have failed to observe any corporate formalities in that: a. b. c. d. e. f. g.

19. The members did not observe corporate formality; The Defendant did not pay dividends; The Defendant was insolvent at the time of its actions; The Defendant’s members siphoned funds from the Defendant for their own personal use; The Defendant’s members comingled funds; There are no corporate records; The corporation(s) were a facade and alter ego of the member(s) of the Defendant. In addition to the eight (8) factors laid out above, failing to pierce the corporate veil in this matter would create an elementary injustice and fundamental unfairness. The member(s) of the Defendant have used the corporate shell as a way to avoid any liability for the serious injuries that were caused to the Plaintiff and others by the reckless action of the Defendant’s member(s) and agents. With this in mind, Plaintiff should have compensation directly from the member(s) if the same cannot be had from the corporate Defendant. To deny this compensation would create an injustice and fundamental unfairness.

20. For the reasons and for other reasons to be proven, the Plaintiff is entitled to pierce the corporate veil and assert individual liability against the member(s) of the Defendant.

It's always best to have multi-member LLC. You have a stronger ability to not allow a court action to pierce the corporate veil. You can have a parent LLC owned by two trusts, 50/50 and you'd have double the protection. Since it's trust ownership, there are some additional benefits. As always, speak to a lawyer. This shouldn't be taken as legal advice. However, this is how I've done it. The Kushner's do it this way, as well as President Trump. So, some food for thought.

Trusts seem to be the preferred method of liability and asset protection among the wealthy. 

Trusts offer no liability protection. LLCs can protect you from outside attacks that have nothing to do with your real estate operation.  For example, a car wreck. You will be sued personally and everything in your personal name is unprotected. The rental insurance doesn’t protect you in this example, driving a car is the most risky thing we all do.

Asset Protection Trusts, Offshore Asset Protection Trusts (Cook Islands, Belize) and Irrevocable Trusts with a spendthrift clause are examples of how trusts can provide asset protection from lawsuits. Google “OJ Simpson asset protection strategy”.

No trust will provide you asset protection. You can do crazy stuff with trusts but hey are really bad at protecting assets. OJs main asset shield was his primary residence in Florida, which has unlimited homestead protection. Thats why he moved to Florida.  If you want to move assets off shore those assets may or may not be subject to collection depending on the country.

 Asset Protection Trusts don't protect assets?  

My understanding is that O.J. used asset protection trusts established in Nevada with spendthrift clauses to protect his assets from creditors...  

 I'm not an OJ expert.  I invest in real estate.  If I murdered 2 people Id assume any asset I had could be venerable.

We can use Lance Armstrong as an example of how trusts can be used to protect assets from creditors instead of OJ if you prefer? I am not an expert on either of them, or trusts, or asset protection, but they do seem to provide examples of how trusts (with spendthrift clauses protecting retirement funds in both examples I believe) can be used to protect assets. I have noticed that wealthy people tend to use trusts more than LLC's, and I'm guessing there's a reason for that. But I honestly don't know much about it or have any trusts set up myself personally, nor am I any kind of lawyer obviously. If you care to elaborate on your comment "trusts don't provide asset protection", I'm all ears and I mean that sincerely, I'm always ready to learn more. Why are they called Asset Protection Trusts if they don't protect assets?

LLCs and trusts have totally different functions when it comes to asset protection. The function of an LLC, or a corporation, is to limit the liability of an act of that entity to that entity and not have liability for the person(s) owning that entity. The purpose of "asset protection" trusts is to place assets beyond the reach of creditors who have claims against the individual who has "settled" that trust.
Some potential liabilities can not be limited by use of remote entities.  So people vulnerable to lawsuits, such as medical doctors in “high risk” specialties, might consider placing assets in a trust.  The trust must be beyond the control of the person who is placing the assets in the trust, so giving up legal title, control, etc. is necessary.  Control goes to the trustee and ultimate ownership to a beneficiary, neither of which can be the person who owned the assets.  “Sham” trusts are almost always attacked in court by creditors, mostly successfully.

Because trust laws in the U.S., as well as most countries require the settlor to give up control and benefit of the asset in question for the “asset protection” aspect to be legally effective, some countries (usually very small countries) have laws for trusts that theoretically allow some control (or at least input) of the assets by the settlor while still maintaining the asset protection feature.  A second layer of protection is that these trusts need to be litigated in the country the trust is set up in. Theoretically, at least.

Since the U.S. courts routinely find these foreign asset protection trusts to be a sham, and transfers to these trusts fraudulent transfers, the assets in the trust themselves need to be beyond the reach of the U.S. courts system. So any asset that can be attached by a U.S. court; bank accounts (even most foreign bank accounts), stocks, bonds, real estate can be taken once the trust is declared as a sham or the transfer of assets to the trust is found to be fraudulent.

Further, once this has occurred the defendant will be required to testify under oath about the assets in the trust.  Refusal to do so will result in contempt of court findings.  There are cases of people spending 5+ years in prison all the while refusing to divulge information related to assets in a trust.  The court could also rule that the defendant needs to remove the assets from the trust and make them available for forfeiture.  Failure to comply with a court order can have severe consequences. 

These trusts should not be confused with living trusts which purpose is to transfer assets upon death without going through probate. 

[Nathan Gesner]

If I've said it once, I've said it a thousand times.

[Don Konipol]

Quote from @Nathan Gesner:

If I've said it once, I've said it a thousand times.

Nathan, while what you state works 90%, when you reach a certain level you become a TARGET for predatory attorneys and professional plaintiffs. Back 25 years ago I was named in two lawsuits solely because the plaintiff attorneys found out I was raising capital for a new investment fund, and they knew it would be cheaper for me to pay them off then to have to disclose the lawsuit in the Private Placement Memorandum.  They told my attorney that they were trying to obtain “seed” capital (from me) to finance the lawsuit against their true targets.  Fortunately, my attorney had previously filed and successfully pursued lawsuits for frivolous actions and once these attorneys became cognizant that we would file such against THEM personally they withdrew the suits against myself. 
So that everyone understands how I was named in the suit, it went like this.  I has been investing as a passive investor in a few limited partnerships.  A guy I met at an investor club and became friendly with asked me about it.  I introduced him to the sponsors, and he proceeded to invest his money and some other money he managed with the sponsors. I did not receive any fee or commission or compensation for the introduction.
The deal went south, and the investor retained an attorney to sue the sponsors.  My name was mentioned as having been the source of information.  While the plaintiffs attorney determined I of course had no liability, they found out I was raising capital for an investment fund from the plaintiff investor.  His attorney to.d him they should file against me with the intent to squeeze “seed capital” from me because I would pay to avoid disclosure problems in the capital raise.  

So, you can see where believing that doing everything honest and ethical and being a “good” landlord would not always save you from being named in a lawsuit. 

[Dan Schwartz]

@John Underwood you've stumbled across a complaint, not a judgement.

"Upon information and belief".... the court will require "evidence."

You have the case number; what was the outcome of the suit? Was the LLC member held personally liable?

[Dan Schwartz]

@Don Konipol I don't think Nathan was suggesting that honesty and ethics will prevent being named in a lawsuit.  

But I do agree that both will go a long way towards a positive personal outcome...as was true in your case above.

[John Underwood]

Quote from @Dan Schwartz:

@John Underwood you've stumbled across a complaint, not a judgement.

"Upon information and belief".... the court will require "evidence."

You have the case number; what was the outcome of the suit? Was the LLC member held personally liable?

Think its still pending.

[Jay Hinrichs]

Quote from @Don Konipol:

Quote from @Nathan Gesner:

If I've said it once, I've said it a thousand times.

Nathan, while what you state works 90%, when you reach a certain level you become a TARGET for predatory attorneys and professional plaintiffs. Back 25 years ago I was named in two lawsuits solely because the plaintiff attorneys found out I was raising capital for a new investment fund, and they knew it would be cheaper for me to pay them off then to have to disclose the lawsuit in the Private Placement Memorandum.  They told my attorney that they were trying to obtain “seed” capital (from me) to finance the lawsuit against their true targets.  Fortunately, my attorney had previously filed and successfully pursued lawsuits for frivolous actions and once these attorneys became cognizant that we would file such against THEM personally they withdrew the suits against myself. 
So that everyone understands how I was named in the suit, it went like this.  I has been investing as a passive investor in a few limited partnerships.  A guy I met at an investor club and became friendly with asked me about it.  I introduced him to the sponsors, and he proceeded to invest his money and some other money he managed with the sponsors. I did not receive any fee or commission or compensation for the introduction.
The deal went south, and the investor retained an attorney to sue the sponsors.  My name was mentioned as having been the source of information.  While the plaintiffs attorney determined I of course had no liability, they found out I was raising capital for an investment fund from the plaintiff investor.  His attorney to.d him they should file against me with the intent to squeeze “seed capital” from me because I would pay to avoid disclosure problems in the capital raise.  

So, you can see where believing that doing everything honest and ethical and being a “good” landlord would not always save you from being named in a lawsuit. 

Don ,  you speak from experience and most folks on this site have ZERO experience with litigation.  I too got caught up with a very Rich Taiwanese investor and a RE developer in the states.. I was just the RE Broker on the townhouse project had nothing to do with the deal between the investor and the developer ( they had 4 or 5 other deals going at the time) But on this one the Investor sued and he sued ALL of us.. including most of the subs that worked on the project the developers staff  Myself  The guy who put the pilings in for the Peir in the lake the landscapers the janitorial folks I mean everyone.. Sole purpose to get small settlement from each to release to fund the litigation.  I refused to settle and the Investor would never come for depo and the law firm got a massive sanction  against them. So at the end it was me and the developer.. Now to be fair at the time my Dads RE attorney represented me and never charged me he was like and uncle to me and taught me a lot about how to do Real estate.  the law firm appealed the sanction and that went all the way to the 9th circuit and they still lost.. So there i am in my late 20s and named in a 9th circuit case :)

[Nathan Gesner]

Quote from @Don Konipol:

Consider the audience.

99% of BP visitors are small-time investors who will never face lawsuits from investors with deep pockets. Their most common threat is a security deposit dispute. Their most significant risk is an injury lawsuit that will either be dismissed or settled out of court by their insurance provider for well below the liability limits.

If a mom-and-pop investor obeys the law and treats their tenants honestly, they'll never have to worry about asset protection beyond ordinary insurance and a small reserve.

[Collin Hays]

Quote from @Steve K.:

My understanding is that O.J. used asset protection trusts established in Nevada with spendthrift clauses to protect his assets from creditors...  

It must not have protected his Ford Bronco. There is one here that looks identical to it.

[Collin Hays]

Quote from @Nathan Gesner:

Quote from @Don Konipol:

Consider the audience.

99% of BP visitors are small-time investors who will never face lawsuits from investors with deep pockets. Their most common threat is a security deposit dispute. Their most significant risk is an injury lawsuit that will either be dismissed or settled out of court by their insurance provider for well below the liability limits.

If a mom-and-pop investor obeys the law and treats their tenants honestly, they'll never have to worry about asset protection beyond ordinary insurance and a small reserve.

 This.  Just keep an umbrella policy and quit paying big money for all of the attorney offerings.  Umbrella is super cheap and will do the job.

[Steve K.]

Quote from @Collin Hays:

Quote from @Steve K.:

My understanding is that O.J. used asset protection trusts established in Nevada with spendthrift clauses to protect his assets from creditors...  

It must not have protected his Ford Bronco. There is one here that looks identical to it.

"The Bronco ridden in by Simpson... now sits in a crime museum in Tennessee, parked near a Volkswagen Beetle that was driven by serial killer Ted Bundy." It is for sale for $1.5M if you want to buy it! OJ owned an identical one to the one involved in the "chase", which was actually owned by his friend. OJ's was taken as evidence because it had blood stains in it, then destroyed after the trial. Another interesting fact: Ford Bronco sales surged 24% after the famous "chase". 

[Don Konipol]

Quote from @Nathan Gesner:

Quote from @Don Konipol:

Consider the audience.

99% of BP visitors are small-time investors who will never face lawsuits from investors with deep pockets. Their most common threat is a security deposit dispute. Their most significant risk is an injury lawsuit that will either be dismissed or settled out of court by their insurance provider for well below the liability limits.

If a mom-and-pop investor obeys the law and treats their tenants honestly, they'll never have to worry about asset protection beyond ordinary insurance and a small reserve.

Yeah, Nathan, for the investor with limited assets you may be correct.  However, good asset protection planning starts before one has significant assets to protect.  While I don’t suggest that the smaller type investor purchase and utilize “exotic” vehicles like foreign asset protection trusts, family limited partnerships with outside controls, or Byzantine or convoluted maze of ownership entities, the more simple strategies of using Series LLCs, self directed retirement plans, and paying off their home mortgage to the extent of the Federal BK homestead exemptions can insure that a plaintiff attorney never even considers going after them.  If an investor can create a Texas Series LLC for $350 and place each investment property inside a separate series at a cost of $27 filing fee, why not take this step to ensure that the problem of one property can’t flow through to the other properties? 

[Jay Hinrichs]

Quote from @Nathan Gesner:

Quote from @Don Konipol:

Consider the audience.

99% of BP visitors are small-time investors who will never face lawsuits from investors with deep pockets. Their most common threat is a security deposit dispute. Their most significant risk is an injury lawsuit that will either be dismissed or settled out of court by their insurance provider for well below the liability limits.

If a mom-and-pop investor obeys the law and treats their tenants honestly, they'll never have to worry about asset protection beyond ordinary insurance and a small reserve.

Nathan keep in mind not everyone is a landlord most litigation in RE is between partners and investors suing GPs etc etc.  As for liablity for a mom and pop landlord I agree do the best you can and have proper insurance..

[John Underwood]

Quote from @Collin Hays:

Quote from @Steve K.:

My understanding is that O.J. used asset protection trusts established in Nevada with spendthrift clauses to protect his assets from creditors...  

It must not have protected his Ford Bronco. There is one here that looks identical to it.

 So Ford just made the one?

[Collin Hays]

Quote from @John Underwood:

Quote from @Collin Hays:

Quote from @Steve K.:

My understanding is that O.J. used asset protection trusts established in Nevada with spendthrift clauses to protect his assets from creditors...  

It must not have protected his Ford Bronco. There is one here that looks identical to it.

 So Ford just made the one?

 Yes, custom for OJ.

[Don Konipol]

Quote from @Jay Hinrichs:

Quote from @Nathan Gesner:

Quote from @Don Konipol:

Consider the audience.

99% of BP visitors are small-time investors who will never face lawsuits from investors with deep pockets. Their most common threat is a security deposit dispute. Their most significant risk is an injury lawsuit that will either be dismissed or settled out of court by their insurance provider for well below the liability limits.

If a mom-and-pop investor obeys the law and treats their tenants honestly, they'll never have to worry about asset protection beyond ordinary insurance and a small reserve.

Nathan keep in mind not everyone is a landlord most litigation in RE is between partners and investors suing GPs etc etc.  As for liablity for a mom and pop landlord I agree do the best you can and have proper insurance..

Insurance is the FIRST line of defense.  Certainly, LIABILITY insurance and should be regarded as important as fire and casualty.  But, here’s a situation in which having my properties in SEPARATE series of an LLC saved me enormous time, aggravation and money.

in 2012 I purchased 5 individual high rise condos in different buildings in Phoenix, AZ.  I took title to each in a separate series of my LLC, which is the same as per entity protection as having each in a separate LLC but with the organizational and accounting costs of having a single LLC.

In the case of each I carried hazard and liability insurance for the INTERIOR of the condo while the HOA carried insurance for the “common” areas, including structural.

This particular condo was on the second floor, with retail and office space directly below.  Over a weekend during which my tenant was not home, the condo became flooded and water went through the flooring and flooded the office below.  The major damage was to 35 computer stations and various other electronic equipment, as well as buildouts, furnishings, etc. The damage claim was in excess of $800,000. 
My insurance company determined that they were not responsible because the problem originated it form INSIDE the wall which was the responsibility of the condo association.  The condo association insurance determined they weren’t responsible because either (1) my tenant was negligent or (2) the problem originated from a connection just inside my apartment.  The attorney representing the owners of the office downstairs were threatening to sue me.

So, I engaged my attorney to deal with the issue.  While he wasn’t successful getting the insurance companies to accept liability (initially), he pointed out to the plaintiffs attorney that (1) the owner of the condo was an LLC, not me personally, and that’ll business concerning the condo was done in the name of the LLC, and (2) the only asset of the Series of that LLC was the condo itself, so that the legal entity owned only that single asset.  Further, I as a matter of course, place a “friendly” lien on all properties I buy for cash, so there was little equity in the condo.  Now, probably after a long and drawn out court battle, a plaintiff can probably get the lien removed as a “sham”, but a cursory examination by the typical plaintiffs attorney would probably not produce that conclusion.  So as a result of my “asset protection” procedures, the end result was that instead of being sued personally and having to spend the time, money and emotional stress of both defending my self AND suing the insurance companies and condo association, the plaintiffs accepted an ASSIGNMENT of proceeds and signed a form releasing me and my LLC from liability in exchange for the right to go after the insurance companies themselves. 

A rare occurrence? Sure.   But the more property you buy the higher the likelihood of being involved in a situation where asset protection above basic liability insurance can SAVE YOUR A_ _ !

All this asset protection in a Texas Series LLC for a $300 filing fee.  Texas even provides a pdf fill in the blanks form.  

[Stetson Oates]

Quote from @Don Konipol:

Quote from @Jay Hinrichs:

Quote from @Nathan Gesner:

Quote from @Don Konipol:

Consider the audience.

99% of BP visitors are small-time investors who will never face lawsuits from investors with deep pockets. Their most common threat is a security deposit dispute. Their most significant risk is an injury lawsuit that will either be dismissed or settled out of court by their insurance provider for well below the liability limits.

If a mom-and-pop investor obeys the law and treats their tenants honestly, they'll never have to worry about asset protection beyond ordinary insurance and a small reserve.

Nathan keep in mind not everyone is a landlord most litigation in RE is between partners and investors suing GPs etc etc.  As for liablity for a mom and pop landlord I agree do the best you can and have proper insurance..

Insurance is the FIRST line of defense.  Certainly, LIABILITY insurance and should be regarded as important as fire and casualty.  But, here’s a situation in which having my properties in SEPARATE series of an LLC saved me enormous time, aggravation and money.

in 2012 I purchased 5 individual high rise condos in different buildings in Phoenix, AZ.  I took title to each in a separate series of my LLC, which is the same as per entity protection as having each in a separate LLC but with the organizational and accounting costs of having a single LLC.

In the case of each I carried hazard and liability insurance for the INTERIOR of the condo while the HOA carried insurance for the “common” areas, including structural.

This particular condo was on the second floor, with retail and office space directly below.  Over a weekend during which my tenant was not home, the condo became flooded and water went through the flooring and flooded the office below.  The major damage was to 35 computer stations and various other electronic equipment, as well as buildouts, furnishings, etc. The damage claim was in excess of $800,000. 
My insurance company determined that they were not responsible because the problem originated it form INSIDE the wall which was the responsibility of the condo association.  The condo association insurance determined they weren’t responsible because either (1) my tenant was negligent or (2) the problem originated from a connection just inside my apartment.  The attorney representing the owners of the office downstairs were threatening to sue me.

So, I engaged my attorney to deal with the issue.  While he wasn’t successful getting the insurance companies to accept liability (initially), he pointed out to the plaintiffs attorney that (1) the owner of the condo was an LLC, not me personally, and that’ll business concerning the condo was done in the name of the LLC, and (2) the only asset of the Series of that LLC was the condo itself, so that the legal entity owned only that single asset.  Further, I as a matter of course, place a “friendly” lien on all properties I buy for cash, so there was little equity in the condo.  Now, probably after a long and drawn out court battle, a plaintiff can probably get the lien removed as a “sham”, but a cursory examination by the typical plaintiffs attorney would probably not produce that conclusion.  So as a result of my “asset protection” procedures, the end result was that instead of being sued personally and having to spend the time, money and emotional stress of both defending my self AND suing the insurance companies and condo association, the plaintiffs accepted an ASSIGNMENT of proceeds and signed a form releasing me and my LLC from liability in exchange for the right to go after the insurance companies themselves. 

A rare occurrence? Sure.   But the more property you buy the higher the likelihood of being involved in a situation where asset protection above basic liability insurance can SAVE YOUR A_ _ !

All this asset protection in a Texas Series LLC for a $300 filing fee.  Texas even provides a pdf fill in the blanks form.  

Browsing the forums, I have been a little surprised by the amount of folks who think insurance is there to help you.  This is a great example of how insurance only wants your money and, in fact, are your enemy in many cases. Denying your claim is their goal, they do not want to help you. Having asset protection when coverage is denied is essential. 

[Nathan Gesner]

ALL: I asked in another forum, but it's not getting any traction.

We talk about two options: LLC or umbrella insurance. Does anyone have a personal experience where they were sued for such an amount that umbrella insurance kicked in?

[John Underwood]

Quote from @Nathan Gesner:

ALL: I asked in another forum, but it's not getting any traction.

We talk about two options: LLC or umbrella insurance. Does anyone have a personal experience where they were sued for such an amount that umbrella insurance kicked in?

Great question. I'd be curious to know this as well.