The benefits of renting your home from your business

The Benefits of Renting Your Home From Your Business

An asset protection trust is an irrevocable trust that is often created to protect beneficiaries from overly litigious lawsuits. Without holding legal title to any of the assets, each beneficiary has ownership of an equitable interest in the trust’s assets. If you have a sizable estate you wish to protect consider renting your home from your business for tax purposes. Under an asset protection trust, renting your home in such a manner makes the homeowner the renter, while providing considerable protection as well.

Beneficiaries can transfer the transfer title of house and rent from the trust at fair value, thus removing the value of the home from its gross estate. More importantly, the beneficiary becomes a tenant, and not an owner, so their home will not be at risk if a lawsuit is filed.

Protecting Your Assets the Right Way

Renting your home from your business is a dream for many entrepreneurs. But if you don’t protect your home and assets correctly, then you may leave yourself exposed to costly and damaging litigation. If you have significant equity in a personal residence, establishing a legal entity separate from a business, for example, will provide you the protection you need and help you avoid the personal liability of the lawsuit.

An Asset Protection Trust, or APT, legally protects assets from litigation and other claims. Because a Trustee cannot be compelled to transfer the trust property to a creditor of the beneficiary, when a creditor files for access to a beneficiary’s assets, the creditor is limited to the value of the beneficiary’s interest in the trust, as opposed to the total value of the assets. If you’re sitting on substantial equity in your residence or vacation homes and worry about the vulnerability of these assets to litigation risk from your business activities, consider a Nevada Asset Protection Trust (NAPT) to protect your home and property.

It’s a Win/Win

Asset protection trusts offer the strongest protection you can find from creditors, lawsuits, or judgments against your estate, making them a win/win. An APT can even help deter costly litigation before it begins, or favorably influence the outcomes of settlement negotiations as the plaintiff realizes there will probably be no “pay day.”  Moreover, there are additional benefits to Nevada protection trusts. Nevada does not tax the income of trusts, as most states do, and is one of only two states with zero exception creditors. Nevada also allows for directed trusts, which enable the grantor to name an independent financial advisor to manage the funds of the trust. And while most states require three or four years for the statute of limitations on the transfer of assets, Nevada requires only twenty-four months.

Making the transition from owning to renting your home from your business is a complex process. Consider setting up a protective trust when thinking about estate planning for yourself and your family. At Jeffrey M. Verdon Law Group, we understand the value of protecting your assets. For more than 30 years, we’ve designed advanced estate tax planning structures that save on taxes while maximizing access to income. Call today to schedule a consultation.

Posted in Tips (How & Why), Updates.