Most investors who buy rental property with a partner focus on the obvious questions: who owns what percentage, who manages the property, and who gets the income. What few consider is what happens when a partner’s financial or legal troubles attach directly to the shared asset, potentially costing both owners the property itself.
Randy Hughes, a full-time real estate investor since 1969 and founder of Land Trusts Made Simple, has spent decades watching co-investors lose properties, get frozen out of deals, and face IRS liens, not because of anything they did, but because their name appeared on the same deed as someone who got into trouble.
“Everything that happens to your partner is going to happen to you, whether you like it or not,” Hughes says.
Your Name on the Title
When two names appear on a deed, the connection between those owners extends far beyond the partnership agreement. County property records are public. In most jurisdictions, anyone can look up who owns a property, what it’s assessed for, and what debt was placed on it at the time of purchase. That visibility alone creates risk: tenants, attorneys, and potential litigants can all identify owners through a simple search.
But there’s deeper problem. When a court issues a judgment against one person, it attaches to everything in that person’s name. If your name is on a deed alongside theirs, the property falls within that net regardless of your separate finances.
The same applies to IRS liens. If a co-owner is hit with a federal tax lien, it can attach to any property where their name appears – including the one you bought together. Your share is not automatically protected just because you paid for it separately.
Divorce, bankruptcy, and business disputes create similar exposure. Any proceeding that targets your partner’s assets can pull jointly-held property into a legal process you have no control over.
Once Bitten
Hughes experienced this risk firsthand – though in his case, preparation saved him. He once co-invested in a property but held it in a land trust rather than putting both names on the deed. His business partner later defaulted on obligations to a bank, which pursued the partner for $3.2 million.
“Because I was smart enough not to have my name on the title, nothing happened to me,” Hughes says.
Had both names appeared on the deed, the judgment could have attached to the property itself, blocking any ability to sell or refinance, and potentially costing Hughes his entire investment despite having no involvement in his partner’s bank dispute.
Alternative Tactics
The structure Hughes recommends places each property into its own separate land trust, with an LLC as the beneficiary. The investor’s name does not appear on the deed. The trust holds the title. The LLC holds the interest in the trust.
This arrangement accomplishes three things. It removes the owner’s name from public records, making it harder for litigants to connect a person to a specific property. It isolates a property from any others, so a legal problem affecting one cannot spread to the rest of the portfolio. And for co-investors specifically, it protects each party from the other’s outside financial troubles, because the property belongs to the trust rather than to either person directly.
The trust agreement also explicitly documents each person’s ownership interest, rather than relying on assumptions about whose name appears on a deed.
“I teach everyone to put every property into a separate trust,” Hughes says. “They’re all insulated from each other.”
It is worth noting that land trusts are one of several approaches to asset protection. LLCs, series LLCs, and other entity structures are also used by investors, depending on their state’s laws and specific circumstances. The right structure depends on individual needs, and what works in one state may not carry the same legal weight in another.
For Current Co-Owners
If you currently co-own a rental property with a spouse, family member, or business partner, and both names are on the deed, you are exposed to each other’s financial lives in ways that typically become apparent only when something goes wrong.
The restructuring process is not inherently complex, but it needs to happen before a problem arises. Once a judgment, lien, or legal proceeding is already in motion, moving assets into a trust can be challenged as a fraudulent transfer. “Asset protection is something you have to do before you need it,” Hughes says.
Whether you work with an attorney or pursue a self-directed approach, the key step is the same: evaluate whether your current title structure exposes you to risks that have nothing to do with your own financial decisions, and act before those risks materialize.
About the Expert: Randy Hughes is a full-time real estate investor based in Illinois. He has been investing in real estate since 1969 and is the founder of Land Trusts Made Simple and Land Trust University.
This article is based on information provided by the expert source cited above. It is intended for general informational purposes only and does not constitute legal, financial, or real estate advice. Readers should conduct their own research and consult qualified professionals before making any real estate or financial decisions.