Asset Protection Equity Stripping Liens

 

CAPITAL ASSET, INC.

 

since 1990

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How We Protect You Against Liens

 

When someone wins a lawsuit against you, the court awards them a judgment amount. If you do not voluntarily pay that amount in full, the court allows the attacking attorney to file a lien on whatever assets of yours he can find. Once that lien is filed, you have lost the equity/value in that asset and you cannot get the lien off.

 

Top 2 target assets for liens are real estate (including your personal home) and cash (your accounts).

 

So how do you protect your real estate and accounts against liens?

 

Pruntar on your assets filed by attacking attorneys and creditors

 

otect Your Home by Stripping Exposed Equity

 We offer our clients many different asset protection strategies with the use of Nevada Corporations, LLCs and Limited Partnerships. 

The first asset you ought to protect is your primary residence, the place you call home.  Many times the fear of losing one's home forces you into making a legal settlement even if the lawsuit has no merit or is not even legitimate.

Attacking attorneys always conduct an 'asset check' before deciding whether to sue someone.  If there are no visible assets in the potential defendant's name, or the visible assets have no 'attachable value' meaning they can't place a judgment lien on the asset because it shows no equity, they lose their enthusiasm for the case knowing they won't be able to collect anything.   If you own a home (or any piece of real estate) with equity, you're a target for a lawsuit or an audit.

Lawyers know that if they can threaten your home, you will come quickly to the settlement table.

 With any asset protection strategy, timing is everything.  Any strategy must be in place long before you're involved in a lawsuit, dispute, arbitration, or audit.  Every state has some form of the Uniform Fraudulent Transfer Act that limits or prohibits any attempt to conceal assets or otherwise defraud a known creditor.  If you're in the middle of a lawsuit with a trial date set two weeks away, there's only a little we can do for you.  Settle the case and give us a call.  You'll be ready next time.

 Any investment real estate you own can just be transferred directly into a properly-shielded Nevada corporation or LLC, but we advise our clients that they may want to protect the equity, but keep their primary residence in their name for the following reasons:

1.  The only tax break for most people is the mortgage interest deduction associated with their primary residence.  To qualify, the residence must be in your name and you have to live there. Or the residence can to be in the name of a single-member LLC that you own.

2.  You can sell your home every two years and retain $500,000 (for married couple, $250,000 for single person) in capital gains without paying any taxes, so long as the house is titled in your name, or titled in the name of a single-member LLC that you own.

3.  Some states have a generous Homestead Exemption that provides state-sanctioned asset protection for some or all of the equity in your home.  Florida, Texas, Kansas, South Dakota, and Iowa have 100% Homestead Exemptions. Some other states have partial homestead exemption.  Again, the house must be in your name, or the name of your revocable living trust, or perhaps in the name of your single-person LLC to perfect the Exemption. Living trusts have no asset protection.

4.  It's always good to have a decoy.  Give the lawyers and other attackers something to shoot at. . . . let them see your house.  You've got to live somewhere. You can better protect your home via use of a properly prepared lien to capitalize your FLP or LLC using the home equity as collateral with a negatively amortizing note in which some interest accrues and some is paid. 

They can see the home but they can't attach a judgment to it or do anything to get it. The lien legitimately capitalizes your partnership or LLC so they cannot claim fraudulent conveyance.

You can capitalize your Nevada corporation or LLC with the amount of your equity. However if you are sued within 2 years of placing this lien, the attacking attorney may charge fraudulent conveyance because of the timing.

    

 
 

 

 

 

 

 

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     Example of how equity stripping is done

 For instance, if you own a home worth a million dollars with a $500,000 first mortgage with a traditional lender like, say, Bank of America, you can do one of the following:

Form a truly asset-protected, custom Nevada Family Limited Partnership or Nevada LLC  NOT a generic LLC with generic operating agreement or FLP, or one in any state but Nevada, or this strategy will not work for you.

You decide to capitalize it for the amount of equity in your home, but you lack that amount in cash. You give your LP or LLC a negatively amortizing note for the $500,000 amount of equity with a promissory note to pay with consideration included (we do all of this for you as part of preparing the lien documents for you). Your LP or LLC, which you control, as collateral files a trust or mortgage deed on your home. Some of the interest accrues and a small part of it is paid each year to your LLC or LP.  Your home now shows no equity and is completely unattractive to any attacking attorney.

We prepare the complicated paperwork for this lien for you. You should not try to do one yourself. The entity that places the lien must be properly set up for that purpose and the lien paperwork itself is critically important.

We prefer a properly prepared FLP to file the lien, as this type of structure has a valid business reason to file a lien and its liens cannot in any way be charged as fraudulent conveyance of assets.

When it comes to recording encumbrances on real estate, the old English rule applies, "First In Time, First In Right."  The beauty of this means of stripping exposed equity is that anyone recording a lien at a later date will be in a junior position to your encumbrance.  Your equity is protected.

If the encumbrance needs to be removed to refinance, sell, or take out a home equity line of credit on your house, you simply have us  prepare a Reconveyance and Release to be recorded.  The lien is gone.  If after you refinance or obtain your home equity line you want to protect any remaining equity, you simply record a new encumbrance.  

The Equity Stripping strategy can be used with any real property you own, regardless if its titled in your name, the name of a corporation, Trust,  Partnership, or anything else. 

A Federal Judge can seize any asset he can see, including your house.  However, he can't remove a mortgage or deed of trust.  If he forces the sale of your house, both your first mortgage bank and the Nevada LLC or FLP holding the lien (per our example) will be paid before the Judge or anyone else in a junior position.  You can't limit the Judge's seizure powers or prevent lawyers from filing frivolous lawsuits.  You can limit the effects of their actions.

Asset Protection Planning - Asset Protection Planning - Liens

Nevada Corporations - LLCs - Limited Partnerships - Equity Stripping
 
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