I thanked him for his time and told my client that we needed to walk away from this whack job and find another place.We submitted an application for his second choice, which went through without incident.

However, I would prefer not to lose my life savings and retirement funds because of one incident...with that being siad, is the thought of everything being taken from me if I don't have a separate entity just a beginners myth?

If she has been a good tenant otherwise, you might think about a renewal that makes the due date the 5th and a discount for the 1st or earlier.If she hasn't been a good tenant, don't use this incident as grounds but don't renew her lease. 

I have always had tenants make direct deposits and this was the only incident in 20 years of landlording (I am small scale) that I had this happen. 

Here's why I think so.1) The domestic disturbance seemed a little over the top for a first-time minor incident between the couple. 

As much as I understand the temptation to require cashiers checks or money orders after an incident, that would actually be an over reaction. 

This is why delaying the LLC formation for 2 or 3 years could be costly in the long term.Using our extreme example of a wrongful death liability that the landlord suffered, if you had five different properties all under separate LLCs, and the accident occurred only at one of the properties, only the assets of the LLC where the incident occurred would be at stake.

After the whole incident happened, I did tell them how I felt and what should change for a better working relationship.

I have heard of incidents like this in where a worker/contractor, either operating as a DBA contractor or as a direct employee, requires that the owner is responsible for providing a working environment that is free from working hazards. 

Also, she provided with her rental history for the last 5 years proving that she was not the person involved with the incident.