Placing a Lien on your own property as asset protection?
I’m trying to get a better understanding of this. You buy a property mainly cash or all cash but you don’t want it to appear as if the property is free and clear. I was seeing somewhere that you could create a company and issue debt between you and the company making it appear as though there is a lien on the property by x company. They also said that a lawyer, in a lawsuit, could challenge the lien if they find out that your company/you are the one that issued the lien. Can a judge go around it? Any way to keep them from doing so? What if that company was a legitimate business? 

What if you get a low leverage loan? Sub 50% ltv? How would a lender feel about a lien that you’re placing on your own property (making it clear that they have priority lien)?
[{"id": "iuz47ut", "text": "Why don\u2019t you just put it in a trust?", "replies": [], "depth": 1}, {"id": "iuz6vjx", "text": "Who is the they in this situation? Are you trying to hide equity from a spouse, worried about someone suing you because of an injury occurring on the property? The building has asbestos and you hid it from your tenants? You need to file for bankruptcy and hope the property doesn\u2019t get taken? \n\nBasically, anything that you do for fraudulent purposes can be legally unwound. There are better ways to protect your real estate assets than this.", "replies": [{"id": "iuz7miq", "text": "Assuming no fraudulent reasons. Just for any lawsuits that may come up", "replies": [{"id": "iuz8qae", "text": "This is kind of like burning the house down to get rid of mice as there are lots of simpler more legal ways to do it. Unless the debt is a bonafide debt, which doesn\u2019t sound like it is in your hypothetical, filing the lien is a criminal offense in a lot of states. Set up an llc, trust or other entity; make sure they\u2019re properly set up and maintained and buy some insurance with umbrella coverage and your good in the vast majority of situations", "replies": [], "depth": 3}, {"id": "iuz8rxs", "text": "Appropriate insurance works better. The note owned by the holding company is an asset of the owner, so you\u2019ve not really achieved anything. The holder of the property and the note are related entities no matter how you structure it.", "replies": [], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "iuzbf2w", "text": "I totally understand your concern here.  In our ever increasing crazy world or sue happy people any additional protection works.  That said, as a real estate investor I personally just go with good insurance policies with a healthy umbrella policy.", "replies": [{"id": "iuzds9a", "text": "Exactly, litigious society. I understand the prop. Insurance for prop related lawsuits, but what if lawsuit isn\u2019t prop related", "replies": [{"id": "iuzhkw0", "text": "Get a liability policy for the business. And an umbrella", "replies": [], "depth": 3}, {"id": "iv193df", "text": "I have about 100 units in upstate NY divided over a few properties.  So we are talking small apartment complexes.  I\u2019m always concerned about slip-n-falls and contractors accidentally hurting residents.  More recently I have become concerned about fraudulent claims as I read about people going around trying to get landlords into trouble.  (Threatening lawsuit just to get a small settlement)\n\nI also worry about things like l, what if I hit my neighbors kid with my car and the lawsuit has nothing to do with being a landlord.  I have some substantial equity built up over the past couple decades.  \n\nSo\u2026I purchase good policies for the properties, I purchase good policies for my management company (that only manages my properties) and then I have a personal umbrella that covers everything both personal AND business related.", "replies": [], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "iuzeizv", "text": "You\u2019re inventing a crazy solution for something that isn\u2019t a problem.", "replies": [], "depth": 1}, {"id": "iuzgr31", "text": "If you have a first TD read your loan docs. Most lenders put covenants that don\u2019t allow 2nd TDs", "replies": [], "depth": 1}, {"id": "iuzovve", "text": "We\u2019ve done this. You basically have to use arms length terms. Actual payments. \n\nDefinitely can appear like a normal debt", "replies": [], "depth": 1}, {"id": "iuzplm7", "text": "This is what liability insurance is for.  Get some on the property and then get some on yourself. Talk to an experienced agent, there's a wide world of policies and options out there. \n\nLenders don't like 2nd liens, even if it's in 2nd position it complicates things if foreclosure is required.  If you want to borrow their money you play by their rules.", "replies": [{"id": "iv1kqie", "text": "Got it. As for second lien, I figured they\u2019d be more amendable or maybe more receptive if lower leverage point and explained that it wasn\u2019t mezz or anything of that sort", "replies": [], "depth": 2}], "depth": 1}, {"id": "iv02w15", "text": "Creating a lien between properties you own won\u2019t be dismissed simply because you own both properties. However, the terms must be somewhat reasonable to pass scrutiny. \n\nWhere your idea might fall apart: \n\nIt seems as if you\u2019re trying to create a lien retrospectively after completing the transaction. The set up works nicely if it\u2019s done during the purchase and financing set-up. If you bought A in all cash. And you use B to put a lien on A, that means B has to provide cash to A. Without a cash transfer it\u2019s essentially invalid and offers no downside protection. \n\nRetrospectively, it could work if you can track down down the funding sources and setup the paperwork accordingly. The act of creating a lien doesn\u2019t offer much security since you\u2019d have the debt on your book anyways. So any litigation that leads to liquidation, the debt payoff would be a factor as well. The lien serves more to inform the public and keep track of security for lien holders and title.", "replies": [], "depth": 1}, {"id": "iv17tg7", "text": "This seems overly complicated when good insurance will protect you. A mediocre lawyer will just go after insurance. If the damages are sexy enough, a good lawyer will see through the lien ruse.", "replies": [], "depth": 1}, {"id": "iv1bpwr", "text": "Like someone else said, an irrevocable trust would be better. \n\nAs for your your lien theory here, it won\u2019t be a senior lien, as tax and other municipal liens likely take foreclosure repayment priority.", "replies": [{"id": "iv1kid1", "text": "I just meant making it clear that lender has priority lien over your lien", "replies": [], "depth": 2}], "depth": 1}, {"id": "iyt1be7", "text": "I did something very similar in that I used a friend\u2019s llc to put mortgages on a few properties that I had paid off. I wonder what you decided to do and how it is working out", "replies": [], "depth": 1}, {"id": "j111pzp", "text": "My understanding is that it's not a legit loan unless someone is reporting interest payments. So say your friend puts a lien on your property for $200k, then 2 years later you get sued. You show the judge the contract and even a $200k paper trail that you deposited into your bank. Well, that could have been your own money you deposited. It could also have been a gift. Which is why your friend should have been reporting interest on his taxes for the last two years to make the loan valid. I am not an expert, but I looked into it myself and this makes a lot of sense.", "replies": [], "depth": 1}]