Yesterday’s “Today Show” featured a video taking you inside the house where Michael Jackson lived at the time of his tragic death. The grim tour was led by the company that will be auctioning off the 600 items of furnishings and personal property that Jackson left behind there. Since Jackson rented that house furnished, most of those items belonged to Jackson’s landlord.
Near the end of the video, the reporter said “The homeowner….wants to remain anonymous.” Perhaps the desire for anonymity is because the proceeds from the auction will be split between the homeowner and the auction house. It doesn’t really matter.
What does matter is this. If the homeowner wanted to remain anonymous, she blew it. How? Because it took me only about two minutes to do a basic, free, public records search to find out who the owner is (to respect what little “privacy” she thinks she has, I won’t divulge her name here). I did that search because when I saw the video, I was curious (as an asset protection lawyer) to see which asset protection strategy she used to attempt to protect her privacy.
It turns out the owner, who is trying to sell the house for over $20 million, didn’t invest the relative pocket change required to protect her privacy (not to mention to guard her personal assets from potential claims of her famous tenant and his countless visitors) by setting up an entity, such as a limited liability company or a limited partnership, to own this multi-million dollar income property.
We meet with investors all the time who are seeking to protect their hard-earned assets and their privacy from creditors’ prying eyes. You don’t need to be a multi-millionaire to appreciate the value of keeping what you own or to afford asset protection. But, as I always say when I teach this topic, the single most important thing you must, must, must remember is this: asset protection is a vaccine, not a cure. You must put your asset protection plan in place BEFORE you’ve got a claim against you. Once you know, or reasonably should know, that a creditor is going to come after you, it’s too late. Virtually anything you do to try to protect your assets at that point may be set aside at that point as a fraudulent transfer.
To drive this crucial point home, let me share with you a true story. I got a call one day from an elderly man and his wife. They were both clearly shaken up. He said he had just accidentally run somebody over in his car. He said he had not killed them, thank goodness. But he was certain the victim would sue him. He asked me what I could do to protect his assets, his life savings. It pained me to be the bearer of even more bad news: there was nothing I could legally do at that point to help him (other than to explain to him the relatively minor asset protection every California resident receives under the state exemption laws). It was too late, under the fraudulent transfer laws, to protect most of his assets from the lawsuit certain to follow.
Don’t wait. Learn from the mistakes of Jackson’s landlord and the unfortunate couple.
Take action before it’s too late.
If you would like to read “10 of the Biggest Mistakes Real Estate Investors Make When Selecting and Forming an Ownership Entity”, click here now. If you would like to discuss this topic further, please contact me at [email protected]