FAPTs: About Equity Stripping

12:01 pm Uncategorized

Real property assets should have at least two layers of protection. First, property should be placed into an asset protected structured that features charging order protection. Second, the property should be debt financed so that little equity in the asset remains for creditors.

The combination of the property being in an asset protected structure and having no, or very little, equity, acts to deter creditors from attempting to pierce the protective structure in the first place, since there would be no equity left for even a successful creditor.

It normally does not make much sense from a business standpoint to place a residence in an entity structure. Therefore, the client can utilize the home equity line of credit technique to substantially encumber the residence and make it more unattractive to creditors. There are other planning steps that can be taken, but one has to be very judicious in dealing with the protection of residences.

Establishing a FAPT requires sophisticated and competent advisors because of the increased legal and tax complexities involved.  For more information on California asset protection, contact our California estate planning law firm.

Contact us today and let our Newport Beach law firm help you with all your financial planning needs.

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