If you title your investments to a limited partnership, can you also encumber the investments to add protection?

Yes, and in some instances you should encumber investments titled to a limited partnership or LLC. Most frequently, we equity-strip real estate and other tangibles. But oftentimes, we encumber investments and other assets as well. One method would be to cross-collateralize real estate loans by pledging your investments (stock, bonds, etc.) as additional collateral. You can also equity-strip publicly-traded shares by borrowing on margin (up to 50 percent of share value). One danger from pledging your investment assets to secure real estate or business loans is that the lender has direct recourse to your investments should you default on your loan. For that reason, you want to collateralize these loans only to ‘cooperative’ lenders. Or you can borrow directly against your investments and safeguard the loan proceeds internationally.

Categories