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How Should You Own It?

You have decided to make a major purchase – a vacation home, a hi-tech RV, a significant work of art, an airplane, or any number of possible items. An important consideration for many of us should be how do we take ownership of the newly purchased asset? We are not talking about how we pay for it but in what name or entity is the asset going to be held.

Why might we ask this question? One reason to care about title relates to potential creditors and liability. If the asset is owned by you as an individual or, perhaps, by you and your spouse, then your creditors will be able to reach that new asset to satisfy a judgment against you for claims such as personal injury arising from your actions or operation of a motor vehicle or personal liability on a loan you cosigned, or for a variety of other claims. Placing the title for the new asset in a separate entity such as an LLC can provide a level of protection to other assets, particularly where the new asset’s use may result in a significant claim – think about an accident with that jet airplane or RV – against its owner.

A similar approach might well be pursued with the acquisition of a rental property or a business. The distinct identity a particular asset has can also be helpful in the context of personal problems such as a bankruptcy or divorce. The separate title can keep things less confused and make a fair outcome more likely by keeping separate property separate and allowing activities with those assets to stand on their own.

When looking to the future, titling a particular asset to one’s revocable trust can allow that asset to pass as directed by the trust upon the individual’s death, avoiding the publicity and costs of probate where that may be a concern. This is especially useful when the property is located in a state other than that of the owner’s residence and could subject the estate to an ancillary probate thereby.

Though titling new assets to separate entities may seem unduly complicated and perhaps confusing, it may have the opposite effect when and where it matters. You should consult with your attorney about what might work best in your situation when you are ready to buy. 

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