I had to renew my insurance policy through another insurance company. My agent is telling me that insurance companies are no longer offering liability as part of a single policy if the house is deeded to a trust or a corporation/LLC. That means I will have to have another liability policy separate from the dwelling!
This will definitely increase the cost of the insurance.
If I decide to NOT get the liability insurance and keep the property under a trust, do you know if my personal assets will be at risk if I am the beneficiary of the trust?
Assuming you are the trustee or direct the trustee, you are personally responsible and all your personal assets are available to pay any judgment arising from your liability. The same applies if you run a corp or LLC. The matter of insurance is irrelevant to liability.
If my personal assets are at risk whether the property is under a corporation or it’s not, how do I protect my personal assets from someone suing me getting hurt in my property?
I thought that if the property is under a corporation, the liability is limited to the corporation and the corporation’s assets, not my personal assets…
Limited liability applies to investors who do not actively engage in operating the business. You are personally responsible for your own actions that cause injury, even if you act on behalf of the company. You can even be held responsible for the bad acts of your employees or agents, including workmen who do work on your properties.
Get a homestead for your personal residence and put liquid assets into exempt vehicles like life insurance or annuities to protect them. You can also protect assets by not owning them or putting liens on them. There are many ways to protect assets. Sit with a qualified planner to determine what is best for you.
RobL, you might want to call around to some different insurance agents. I was told by a couple of agents that as long as only one property is in the LLC, and I am the only member of the LLC, insurance won’t be a problem. The issue seems to be more about getting an umbrella policy over mulitple LLCs, which the insurance co.s don’t want to do because they don’t write an umbrella covering properties owned by different owners.
BLL, wouldn’t this be rather unlikely though? Especially if it’s work where a permit was pulled and the work approved by the county agency. Or are you talking about unlicensed workers & handymen?
You have a better chance of winning if the work in question was permitted, inspected, and done by professionals, but it doesn’t remove your responsibility.
I have a question about this. Doesn’t the LLC protect you from attack on your personal assets? I thought that going after personal assets of an LLC owner had to show justification to pierce the corporate veil? Is this only if there are shareholders?
sellinbama,
What BLL is referring to is that you can still be sued as an individual if you were the one managing the property, doing the work hands-on, for negligence. But I believe you can file some kind of motion or petition in court you can file to try to have yourself (as an individual) removed from the lawsuit, and only the LLC will be sued if motion is approved.
What I’m not clear on is how they could sue you as an individual if your worker does something wrong, especially if it’s a licensed person. I’m no lawyer, but I don’t see what the difference is between having a worker do something and having a PM company do it (I believe using a PM relieves you of liability).
You are personally responsible for whatever you do, regardless if you act on your own behalf or on behalf of an LLC. If you caused an injury, you are personally responsible. If you cause an injury while acting on behalf of the LCC, then both you and the LLC are responsible.
LLC limited liability provides a shield for members who take no active part in the management and operation of the LLC.
Piercing the veil is only need if the creditor cannot sue the owners personally.
That only works if your actions did not result in the injury and you were not responsible for the person who caused the injury. That is a very high standard for the typical RE investor.
It’s very simple. You are responsible for what your employees and agents do while acting on your behalf. A PM or license does not relieve you of liability. Nothing relieves you of your legal responsibility. You may get a 3rd part to indemnify you, but that does nothing to limit your liability. You are always legally responsible for your legal obligations.