Asset Protection for Real Estate Investors: What You Need to Know
As a real estate investor, your properties aren’t just assets, they’re your income and your future. Protecting them is crucial. This is especially true since you're in a profession where, sorry to say it, lawsuits are more common. Like anyone who’s built substantial wealth, it’s a smart move to shield your properties and assets from lawsuits, creditors, and former tenants or spouses who might try to stake a claim. Whether your goal is to keep your funds safe, prevent tax traps, or make sure no one can interfere with your income streams, a rock-solid plan that covers all the bases can help you maintain control of what you’ve built, and you can do that through a trust.
Asset Protection for Real Estate Investors
If we’ve got your attention, you might be wondering:
What’s involved with trust planning?
Can I still be in control of my assets?
And how does a trust impact my taxes?
These are common questions we hear from clients. We’ll dive in below, but first, let’s cover some background details.
There are two general types of trusts we typically recommend to clients: a grantor trust or an asset protection trust (which we commonly call a Wyoming trust; more on that below).
A grantor trust can be revocable (where you’d retain full, direct control over the trust and its assets, but without protection) or irrevocable, also known as a Medicaid trust, where you still have control, but also protects you from having to spend down money should you need long-term care as you age. (For instance, let’s say you’re still receiving rent payments from properties you’ve owned for years: if you need long-term elder care through Medicaid, you won’t be forced to sell those properties in order to qualify.)
The Wyoming trust is a domestic asset protection trust (as opposed to an off-shore trust), that allows you to maintain control of your assets through a third party. That way (knock on wood) if you get hit with a lawsuit from someone slipping and falling on your property, you can ensure that you won’t lose that property.
Why do we call it a Wyoming trust? Well, Wyoming is our favorite state to set up trusts where after a certain amount of time, usually four years, if you get sued it’s nearly impossible for someone to take what’s in that protected trust.
This is because, with an asset protection trust, you assign a point-person to manage your assets, which means that you can still indirectly control what happens to your hard-earned investments and properties through a designated individual.
Any chance a trust can save me money on taxes?
For a grantor trust, the answer is typically no during lifetime, and if they’re done wrong, they can actually cost you extra tax. So, the key is to get the right protection, using the right lawyer, so you avoid a tax trap.
But if you’re on the wealthier side, the right trust plan will help you avoid tax upon death. In NYS, your assets may be tax-exempt if your net worth upon death is less than approximately $8M.
Here’s an example: Let’s say “Joe Investor” has a few pieces of real estate and his net worth is over $8M; he’s not near retirement age or seeking any sort of long-term care, and his estimated numbers show his business continuing to scale over the next few years. He’ll definitely want trust planning that doesn’t increase his taxes, protects his business, avoids unnecessary estate taxes, and ensures a safety net for his family in the future.
Please note: This takes a sophisticated level of planning—mistakes can be costly to you and your business or beneficiaries, so we highly recommend you work with an experienced law team. Reach out and we can walk you through it.
Want to learn more?
Join us on June 26 for a discussion and Q&A on Protecting Your Real Estate Investments with Trusts at Delancey’s in Goshen, co-presented by Austin F. DuBois (founder of DuBois Law Group PLLC) and Pete Berman (Commercial Real Estate Agent with KW Commercial and The Ruby Group).
The event is free to attend, but we ask that you RSVP so that we can give a head count. (Apps and a drink on us!)
WHEN: June 26, 2025; 5:30-7:30 pm
WHERE: Delancey’s – 40 Park Place, Goshen, NY
RSVP: https://duboiselderlaw.com/rsvp-event/
Can’t attend? Contact us any time to set up a consultation to learn more about how trusts can work for you, or reach out to us if you have any other planning questions; an attorney can guide you to find the best options.