While some young and wealthy people spend their wealth recklessly, others make prudent investments, such as buying a home. However, homeownership comes with some risks that a buyer should consider, such as loss of privacy or liability for personal injuries that occur on the property.
For example, Sandra Bullock and Keanu Reeves are just two of many celebrities who experienced home invasions by their stalkers. While most young and wealthy people may not have to worry about stalkers invading their homes, they should consider how easily accessible their personal information can be. A quick name search using online databases will yield information including home addresses, phone numbers, and values of all properties listed under the inquired identity. As such, it is important for wealthy individuals to consider whether they want these types of information to be easily available to curious acquaintances, co-workers, or strangers.
Another issue to consider is homeowner liability. Paula Abdul paid $900,000 in settlement to a production team member who injured herself on Ms. Abdul’s driveway. Although all homeowners are at risk for homeowner liability, a wealthy buyer may be more at risk for lawsuits as a plaintiff may seek to benefit from the buyer’s deep pockets.
Forming a limited liability company (LLC) to purchase real estate is an estate planning tool that provides significant privacy and asset protection. An LLC provides anonymity, making it more difficult for others to connect an individual buyer to the home. Additionally, purchasing a home under an LLC will limit one’s liability in lawsuits relating to the home. In a lawsuit against the owner of the property, the assets subject to liability will be limited to the assets in the LLC (as the legal owner is the LLC), and one’s personal assets cannot be reached.
Purchasing a home requires a lot of due diligence. For first-time buyers, inexperience can lead to oversight, one of which is the failure to consider forming an LLC. Given its simple and effective nature, it is advisable for future homeowners to further look into the benefits of an LLC before signing their paperwork.