If you’re a doctor or other professional and own a practice this is probably one of your riskiest assets. What about your office building? How about real estate? If your office building or real estate have equity or are completely paid for, these are considered valuable assets. Not a good idea to mix these with your practice which is a very risky asset.
What we do for our clients is create a limited liability company and separate valuable assets such as your office building if is completely paid off. Your practice will pay rent to your limited liability company so it’s still a deductible expense. The limited liability company will pay the mortgage if there is one and also the expenses depending on the kind of lease you signed with yourself, the firm you practice, and your limited liability company.
How Do You Protect Your Primary Residence?
This is often some of our clients’ biggest assets, after all it is your primary residence. Consider homestead laws where if you live in certain states your house is protected. For example, if you live in Florida your house is completely protected. If you live in Texas your house is also protected. Effective January 2021, the homestead exemption in California was increased to between $300,000 – $600,000 depending on where you live which was long overdue given California’s high home prices. Most states are like California and provide only limited homestead protections.
So What Happens If You Live In A State With Weak Homestead Protection?
It’s important to understand where you should hold your home. Your primary residence will either go in your name, your family limited partnership or your asset protection trust. For most cases, your primary residence will go in your asset protection trust, but it can be put in your individual name. The trust is essentially where you want your primary residence. This gives you all the benefits of primary residence ownership, tax benefits, tax-free capital gain, and the home interest mortgage deduction. It protects the home while maintaining all the benefits of a primary residence. If you are not in a great homestead state, that’s the place you want to be.
Have questions about protecting risky assets and your primary residence? Call Now To Schedule A Consultation! (714) 594-6322.
We would be happy to discuss your individual situation and how we might help you better protect your assets.
Call Now To Schedule A Consultation!