Summary

This episode of the First Responder Financial Freedom Podcast features hosts Mike, Tyler, and Aaron Foster interviewing Diana Khan, a premier lawyer specializing in real estate law and estate planning, based in Baltimore, Maryland. Diana owns a vertically integrated business portfolio including a law firm, title company, real estate brokerage, property management, and contracting company. The conversation revolves around estate planning, asset protection, trusts vs. wills, LLCs, landlord-tenant law, and the importance of legal preparedness for first responders and real estate investors.

Key Topics Covered

1. Diana Khan’s Professional Background and Services

• Diana is a one-stop-shop for legal and business services related to real estate investing.

• She helps investors and small business owners set up legal structures for asset protection and wealth building.

• Her law firm is her main focus, providing services in estate planning, LLC formation, and contracts.

• She integrates her multiple businesses to support investors through all stages of real estate transactions and business operations.

2. Importance of Estate Planning for First Responders and Investors

• Diana recommends everyone over 18 have estate planning regardless of wealth or age.

• Many first responders lack basic estate planning documents like wills or trusts.

• Free or low-cost will services (e.g., Wills for Heroes) have diminished since COVID-19, leaving a gap in access.

3. Wills vs. Trusts – Simplified Explanation

• Using a backpack analogy:

  • All your assets fit inside a “bag” (backpack).

  • With a will, the bag is dropped at the courthouse upon death; the court pays debts and taxes before distributing assets to heirs — a process called probate which can be lengthy and public.

  • With a trust, you create a separate bag that belongs to your heirs but you carry it while alive. Assets transferred into the trust avoid probate, are private, and provide liability and asset protection.

• Trusts can specify conditions on how and when heirs receive assets (e.g., staged distributions for education, home purchase).

• Trusts can help protect assets from lawsuits and creditors because the assets are legally owned by the trust, not the individual.

• Trusts also assist with Medicare/Medicaid qualification due to how assets are treated, but must be established at least 5 years prior to benefit from this (look-back period).

4. Combining LLCs and Trusts for Asset Protection

• Diana advises using both LLCs and trusts for optimal legal protection.

• LLCs offer business liability protection but are vulnerable to piercing of the corporate veil especially in smaller single-member LLCs.

• Trusts protect personal assets beyond the LLC.

• Proper operating agreements are crucial to maintain LLC protections and avoid veil piercing.

• Trust ownership can hold LLC interests, combining business and personal asset protections.

5. Legal Challenges in Real Estate Investing

• Diana handles landlord-tenant disputes, collections, evictions, and contract breaches.

• Collections through attorneys are more effective than through collection companies due to legal enforcement like wage garnishment and bank account holds.

• Evictions can be complicated by legal protections and bankruptcy filings by tenants, especially in jurisdictions like Baltimore and Prince George’s County.

• Professional tenants sometimes exploit loopholes, including suing landlords for improper security deposit handling.

• Diana emphasizes a “pay to stay” philosophy: tenants must pay rent to maintain tenancy.

6. Differences in Legal and Tax Environment by State

• Some states are more business-friendly and landlord-friendly, affecting litigation outcomes and tenant protections.

• Example: In Maryland, LLC owners must be represented by an attorney in court, increasing costs and settlement likelihood.

• First responders and investors should consider these state differences when choosing where to invest and form entities.

7. Privacy and Security Concerns

• Trusts provide privacy by keeping probate records and asset inventories out of the public domain.

• Public probate exposes families to scams, harassment, or unwanted solicitations.

• Public figures and investors face risks from skip tracing and online data mining.

• Diana shares personal experiences of threats and stresses the importance of privacy.

8. Personal Story – The Importance of Power of Attorney and Estate Planning

• Diana shares a deeply personal experience when her mother became critically ill and incapacitated.

• The absence of proper power of attorney caused delays and difficulty in medical decision-making.

• She had to act decisively, even bending rules, to protect her mother’s health and interests.

• This experience reinforced her dedication to educating others about advanced directives, powers of attorney, and trusts.

• She highlights the emotional and financial burdens families face without proper planning.

9. Types of Trusts and Choosing the Right One

• Most people need a revocable trust which allows control and flexibility during life.

• Irrevocable trusts are used for Medicaid planning or business partnerships, where terms cannot be altered later.

• Specialized trusts exist (Special Needs Trust, Charitable Trust, Generation-Skipping Trust, etc.) but require professional guidance.

• Laypeople should consult attorneys rather than relying on informal advice.

10. Practical Advice for First Responders and Investors

• Get your legal structures in order early, especially operating agreements and estate plans.

• Don’t wait until a crisis to seek legal help.

• Use trusted professionals like Diana to navigate complexities.

• Understand that legal documents protect your family, legacy, and investments.

• Prepare for end-of-life care, burial wishes, and financial management through advanced directives and trusts.