Understand I am only in the middle of my research stage but I am curious about the liability issues relating to tax lien purchases. It would only make up a small percentage of my real estate investment portfolio.
While I am still researching/learning what to set up as, LLC, Corp, etc… I am curious about whether tax liens can be bought at auction through a legal enity for asset/liability protection purposes?
Let me know if I need to clarify this question some more.
Transfers made to an entity with the intent to shield assets from liability are fraudulent. There won’t be any protection.
BLL - Are you referring to “fradulent transfer?” Isn’t that the case only if the transfer to an entity occurs after a lawsuit or intent of litigation has been determined? In other words, if an incident has occured and you know that you’re about to get sued and THEN try to transfer assets out of your name, entities and the transfer are disregarded by the court.
OP is asking if he can buy tax liens under a corporation. As long as there isn’t a litigation already tied to the property, the entity should be able to buy and sell the lien. If a lawsuit is initiated AFTER purchase, the individual buyer (and his personal assets) should still be shielded as the true owner of the lien is the corporation originally?
The fraudulent transfer law applies regardless of pending litigation or any type of liability. It even applies to future, unknown creditors. A creditor need only prove the intent of the transfer was to make it harder for a creditor to collect a judgment and the transfer is fraudulent.
I see. Ok, so just don’t transfer at all. Set up a corporation to be an investment business that buys and sells tax liens. Your reason is to invest in a tax advantaged way - which is through a corporation.
If the aim is to protect one’s personal assets from liabilities you may incur from operating a business or being a crazy driver, then put personal assets in a family partnership, domestic trust or offshore trust. Or just don’t own any personal assets worth suing for?
You can transfer as long as the entity has a valid business purpose.
The entity must have a business purpose. Putting personal assets into a business entity is considered a sham. Trusts are good for estate planning, but only irrevocable trusts offer creditor protection. Domestic AP trusts are valid only in a few states and there is very little case law. As to foreign ones, no judge has ever refused a repatriation request since the Anderson case. Those trusts will work if you don’t mind spending 6 years in jail.
That is the way to do it. Maintain control without ownership.
Am I to understand correctly if I bought tax liens under my own name, it would be considered a personal asset?
It sounds like it makes sense to purchase thru a legimate business entity with a legimate purpose such as real estate investments as long as it was set up correctly. This would create a degree of separation from personal assets and business assets right?
If I invested capital in my business, is that considered putting personal assets into a business?
Yes
Even after all that, you are personally responsible for whatever you do in the name of the business.
It depends. What will you get in exchange for the capital?
Would purchasing tax liens be considered fair exhcange for the capital?
I’m not sure what you are asking. When someone puts capital into a business, it is either an investment as an owner or a loan.