You have spent years buying, fixing, refinancing, and holding. Somebody has told you that you need “asset protection,” and your immediate reaction was suspicion. Most of what gets sold under that name sounds like handing your property to a structure you no longer run. That instinct is the right one to bring to the conversation, and it is the exact tension Jason Gaudy, an estate planning attorney at Gaudy Law in Upland, California, says he navigates every week.
What investors actually want from a plan
Gaudy has practiced for 23 years and his firm works with about 30 families a month, many of them business owners and property owners. When he describes the job, control is the word he keeps landing on: helping people plan thoughtfully so they are protected while they still keep control over their assets.
“People want asset protection, but they want to have control,” he says. That is not a contradiction to be talked out of. It is the design constraint.
The other half of his practice is what happens when nobody plans: probate and trust litigation. The families who did the basic work come in once after a death, get their questions answered, and leave. The families who did not are in court.
The revocable living trust is the centerpiece
Start with vocabulary, because the terms get thrown around loosely. A revocable trust is one you can change. Gaudy defines it simply: revoke means you can get rid of it entirely, or you can amend it. You are the one holding the pen.
That is why he says the vast majority of people need a revocable trust rather than an irrevocable one. Life moves. His own example: a trust drafted in 2007, then more children, then kids heading to college, then a move, then a desire to name those kids as trustees eventually. Every one of those changes requires a document you are allowed to touch.
There is an irony most people miss. Every revocable trust becomes irrevocable when you die. His phrase for it is that the document goes “from paper to stone.”
Gaudy is direct about the exotic alternatives. People arrive asking for Nevada trusts, Wyoming structures, irrevocable life insurance trusts. His first question is whether they have the basic framework trust in place, and usually they do not. He notes that with the federal estate tax exemption as high as it now is (around $15 million per person), most estates do not need an insurance trust built to solve an estate tax problem they will never have. For most people the basic revocable living trust does the job, and that is true regardless of how many properties they own. More on that in why almost everyone needs a revocable living trust.
Where the LLC comes in, and why the trust owns it
Here is the piece specific to investors, and the reason a trust alone is not the whole answer.
A revocable trust does not give you asset protection. Gaudy explains why in one line: it does not protect you because you still maintain control. The trust’s job is avoiding probate, not shielding you from a lawsuit.
So the structure he describes for rental and investment property is layered. The LLC owns the properties, runs them, and rents them. The trust owns the LLC. You get the liability protection of the entity, and because the membership interest sits inside the trust, the properties still skip probate when you die.
The liability point is not theoretical. He frames the cost-benefit bluntly: forming an LLC is not game-changing in terms of legal fees, but it can be game-changing if there is a slip and fall on one of your properties, because a correctly set up entity can isolate that liability to the property involved.
One caveat he raises himself: before forming an LLC, talk to your CPA, because there are tax implications. He can create the entity, but sometimes the better move is not to and to carry really good insurance instead.
When does giving up control make sense?
Almost never, in his view, for the people reading this. Gaudy’s line is that unless you are looking at $20 or $30 million plus and you genuinely want to start giving up control of some assets, there is nothing better than the revocable living trust. His office calls it the RLT.
That is the honest version of the pitch. Not a fortress. A document you can rewrite, wrapped around entities that absorb liability, with you still signing the leases. What defeats it is not choosing wrong. It is choosing nothing at all, which is the mistake he sees most.
What this means if you’re planning a 1031 exchange
A 1031 exchange defers the tax; it does not answer the question of who holds the replacement property or what happens to it when you die. Investors who exchange into new rentals often want that property in the same trust-over-LLC structure they already use, and the titling on the replacement side has to be coordinated with the exchange rules: the taxpayer who sold generally has to be the taxpayer who buys. If you are weighing a hands-off replacement instead, our guide to DSTs covers how those interests are held and passed on. Either way, the ownership question is worth settling before you close, not after.
Watch: Estate Planning for Real Estate Investors: Stay Protected & Keep Control with Jason Gaudy, Gaudy Law
Educational only. Not legal, tax, or investment advice. Jason Gaudy is licensed in California; rules vary by state. Consult your own advisors.