Equity Stripping, a simple effective way to Protect Assets?

[Michael Galloway]

Hi everyone,

I have seen lots of posts about LLCs, and other disregarded entities for asset protection, in addition posts on Insurance policies etc. But how about NOTES for protection?

If the corporate veil is pierced and the insurance doesn't hold up, this could be one more strategy to protecting your ASSets.

Simple to do -lots of us make notes every day.

cost effective -just recording costs and notary cost

Wanted to share a strategy and see what your thoughts are.

California is litigious. We all know this. What if we were to trade "notes". You make one on my property. I make one on yours. The effect is a zero sum gain.

example you own a free and clear 100k property. i own one too. You put on note on mine. I put one on yours.

The idea is that if there is no equity in the property, then it is not worth pursuing (for litigation purposes)

1) a deterrent for litigation.(no equity = no value to pursue)
2) strategically in court must be paid off if property needed to be liquidated; note holder made whole,

The strategy is to trade notes on free and clear properties with like minded owners. What are your thoughts?

[Ned Carey]

Michael,

As you may know equity stripping using notes is not new. However I like you twist on it, trading notes. However I do see a problem with this, the mortgages need to be perfected - money must actually change hands.

Also a court may see it as "You conspired to strip equity or fraudulently protect assets" Would a court or plaintiff even discover this? Who knows. Whether a court would care might depend on how liberal a state you are in. Maryland courts have stretched the law pretty far to protect the little guy.

I'd be interested in what any attorneys out there think.