A Legal Hack for Keeping Your Real Estate Assets Secure

Asset Protection With a Friendly Lien: Shielding Your Property the Smart Way

A friendly lien is a legal strategy where an investor places a voluntary lien on their own property—often through a trusted entity they control, like an LLC or family member. The goal? To make the property less attractive to lawsuits or creditors by giving the appearance that it’s already encumbered with debt. If someone sues you, they’ll see that the property is tied up in liens, making it less of a jackpot for legal action.

Pros & Cons of a Friendly Lien

✅ Pros:

• Deters lawsuits – Predatory lawyers target assets with clear equity. A friendly lien makes your property look leveraged.

• Protects against frivolous claims – If someone sues, they may settle for less or drop the case if they see little to gain.

• Retains control – Since the lienholder is an entity you control, you’re not actually losing access to your asset.

❌ Cons:

• Not foolproof – Courts can see through deceptive asset protection tactics, especially if the lien isn’t backed by a real loan.

• Limits refinancing/sale – If you need to sell or get a loan, you’ll have to resolve the lien first, adding extra steps.

• Could trigger legal scrutiny – If done improperly, a court may see this as fraud or an attempt to deceive creditors.

Used correctly, a friendly lien is a strategic layer of defense, but it’s not a magic shield against all legal threats. Always consult with an asset protection attorney before implementing this strategy to ensure compliance with state laws and avoid potential pitfalls. Remember, your first line of defense is proper insurance. Next is proper entity formation. This method is a decent third place move and could be important if the situation requires you to retain ownership in your personal name of a high equity property. Click here for a couple of examples.