We often discuss strategies for acquiring properties, but we don’t spend a lot of time talking about protecting your assets. Day-to-day liability is important, and so is long-term planning. Eventually, we all stop being a landlord and our properties go to the next person in line. Having a plan for this is something few people have in mind but everyone needs.
Our Strategic Partner Pam Maass Garrett of Law Mother specializes in estate planning and asset protection, especially for real estate owners. In fact, she is someone I trust with my own estate planning. She joined me to talk about the 5 most common questions she gets from clients.
- Listen to the podcast “#365: 5 Most Common Questions about Estate Planning and Asset Protection” on the Denver Real Estate Investing Podcast
- Watch the YouTube video (at the bottom).
- Read the blog post. Note, the blog is an executive summary. Get the in-depth breakdown from the podcast or video.
How I Know Pam
I first came across some of Pam’s ads on Facebook, and it planted the seed that I needed to get on top of my own estate planning. Later, we met in person at a real estate event and got to talking. She helped me with my estate planning, and I was so impressed with her comprehensiveness that I had her do my mother-in-law’s estate planning, as well. Now, I recommend her to our clients.
She was on our first episode about asset protection, and I’m excited to make a lot more content with her about these topics.
What Sets Pam Apart from Other Estate Planning Specialists
One of the reasons Pam is so passionate about estate planning and asset protection is that she went through a bad probate process in her own family. After that experience, she wanted to ensure others don’t have to go through what she did.
A lot of real estate investors know they want to leave their property to their heirs and that a trust is generally the best way to do it. If the assets aren’t transferred properly, though, it can create many headaches for the people you’re trying to provide for.
Many estate planners treat the process as a one-time transaction and don’t provide any follow up. Pam knows that ongoing support is necessary to ensure that plans succeed, so she structures her business accordingly. She charges her clients a flat fee so clients don’t hesitate to call with questions. In general, she recommends her clients check in every three years. For business owners whose assets are more complicated, she launched a membership plan that allows for yearly check-ins.
Five Most Common Questions about Estate Planning and Asset Protection
1. Do I Need Anything More than a Simple Will?
Many people think a will is enough to transfer their assets to their heirs, but they don’t understand all of the ramifications. If you own real estate, a simple will is not going to be an effective mechanism to pass on your assets.
Typically, wills go through probate because they include instructions to a judge on how to transfer assets from one name to the next. Probate is essentially a lawsuit against yourself for the benefit of your creditors.
Instead, it’s better to have a living trust and transfer your assets into it while you’re still alive. This way, there is no probate because everything is already assigned to the trust.
An unfortunate example of inadequate estate planning is a woman in Texas who owned both real estate and a retirement account. When she initially put her will together, her house and the account were worth the same, so she left one to her son and the other to her daughter.
By the time she died, the retirement account was mostly empty and the property had doubled in appreciation. Her children ended up fighting each other in court, which cost a significant portion of the inheritance. Sadly, this court battle could have been avoided if she’d transferred the assets into a trust and continually updated her estate planning.
2. Should I Put My Real Estate in My Name, an LLC, or a Trust?
The number one mistake people make is creating a Limited Liability Corporation (LLC) online for their real estate and thinking they’re covered once they transfer their property into it. The reality is that an LLC alone is not enough; the property will still go through probate without a trust.
LLCs provide better day-to-day liability protection than putting real estate in your personal name because LLCs allow owners to separate personal and business assets. However, this can give people a false sense of security that they’ve done everything necessary to protect their assets for their heirs. Many plans fail when it’s time to transfer the assets to the heirs because they aren’t assigned properly.
3. If I Own Real Estate in Multiple States, What Happens to It When I Die?
Without a trust, your real estate will go through probate. If you own property in multiple states, the property will go through probate in each state. The probate process becomes even more complicated because multiple states are involved. The time and money it will take to transfer the assets increases substantially.
4. How Do I Protect My Real Estate for My Kids?
Many real estate investors have the end goal of providing valuable assets to their kids once they move on. Pam says the answer is the same regardless of the age of their children. Ultimately, you want a living trust and your LLCs assigned to that trust. This provides the most asset protection in the long run for your heirs and even their heirs.
Pam has seen firsthand the ramification of inadequate asset protection. A colleague of hers inherited property and money from her parents when they died, with the assets being passed to her via a will. When the colleague and her husband divorced, she was forced to sell the property and give her ex-spouse half of the proceeds because the real estate was considered community property. If her parents had put their assets in a trust, they would have been protected. She would have been able to hold onto assets for herself and her children.
5. What are the Common Pitfalls in Insurance Coverage for Real Estate?
While Pam doesn’t sell insurance, she has experience litigating claims for both insurance companies and injured plaintiffs. It’s vital to check your policy and see what exclusions are listed. Often, people don’t realize that things like slip and falls or dog bites are excluded in these policies. As landlords, they’re on the hook if something happens.
If you have an existing estate plan and you are unsure if it will pass the sniff test, Pam provides a self audit checklist available here.
Connect with Pam and Law Mother
We’re excited to bring Pam on as a Strategic Partner and create more content about asset protection and estate planning. Be on the lookout for our upcoming legal miniseries!
She recently wrote a book, Legally Ever After that you can download for free at LawMother.com/freebook; use code: Investor. The book is the culmination of a lot of parents asking her how to get started with their estate planning and feeling overwhelmed by the idea.
She created a six-step plan to ensure readers are protecting their children’s future. It’s written in the theme of Cinderella, who suffered when her parents died. Your heirs don’t need a prince or fairy godmother to save them, just a comprehensive estate plan. If you have questions for Pam regarding an estate plan, then first review her podcast How to Protect Your Family Through Estate Planning and Wealth Preservation. It’ll make your call with Law Mother very productive. Don’t forget to grab your “Golden Ticket!” Then schedule a call with her and her team or call 720-706-0036.
5 Most Common Questions about Estate Planning and Asset Protection
Podcast: Play in new window | Download (Duration: 25:03 — 28.7MB)
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