Multifamily Investing Podcast  with Multifamily Attorney Charles Dobens 

Equity Stripping and the Asset Protection Method

blog Feb 14, 2023

Equity stripping is an asset protection method that involves transferring assets from one entity to another. This method can be used to shield certain assets from creditors and tax authorities, thereby protecting them from seizure or liquidation. In this blog, we'll explore both the pros and cons of equity stripping as well as how to effectively protect your assets with the asset protection method.


What is Equity Stripping?

Equity stripping is a strategy for transferring ownership of assets in order to protect them from creditors and tax authorities. Assets are transferred from a company or individual's name into another entity, such as a trust or limited liability company (LLC). This transfer creates a legal barrier between the owner and the asset, making it much more difficult for creditors or tax authorities to gain access to those assets.


The Pros of Equity Stripping

One of the biggest advantages of equity stripping is that it can provide significant asset protection. By transferring ownership of your assets into separate entities, you create an extra layer between yourself and those assets, which makes it more difficult for creditors or tax authorities to gain access to them in case of bankruptcy or other financial issues. Additionally, equity stripping can help you save money on taxes since some types of transfers may be exempt from taxation.


The Cons of Equity Stripping

Although equity stripping can provide significant asset protection, there are also some potential downsides associated with this strategy. For example, it can be very time-consuming and costly to set up multiple entities for each asset you wish to transfer. Furthermore, if not done properly, equity stripping can backfire and end up costing you more money than it saves due to incorrect paperwork or improper compliance with regulations. It’s important that you consult with a qualified attorney before attempting any type of asset transfer through equity stripping.


How To Protect Your Assets With The Asset Protection Method

The best way to protect your assets is by utilizing an effective asset protection plan that meets all applicable laws while also providing maximum security for your assets. An experienced attorney will be able to guide you through the process and ensure that all required steps are taken in order for your plan to be legally compliant while still providing maximum security for your assets. Additionally, they will help you stay up-to-date on any changes in regulations so that your plan remains valid over time.

In conclusion, equity stripping can be a powerful tool for protecting your assets from creditors or tax authorities but there are potential risks associated with this strategy as well. It’s important that you consult with an experienced attorney before attempting any type of asset transfer through equity stripping in order to ensure compliance with applicable laws and maximize security for your valuable investments. With the right planning, however, many business owners have been able to successfully use equity stripping as part of their overall strategy for protecting their wealth and shielding their valuable investments from creditors or tax authorities alike!

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