There have been varying philosophies on having credit and paying interest while also funding investment accounts as well as some strong opinions on both sides of the fence.

For some time now I have been of the belief that not all debt is bad, certainly debt that you can use to produce an income stream greater than the rate being paid is an example but I offer an invitation to discuss the strategies, benefits and downsides of having large amounts of cash while owing large amounts of money from a wealth building, asset protection estate planning perception.

For example you have a paid off house worth $250,000 some will say that it is better to have a paid off house than have a mortgage but is that really true?

Lets say you take a HELOC on it for $200,000 you then deposit this $200,000 in a bank paying slightly below what your interest rate is ( remember RE interest is deductible)

So now you appear to owe $200, 000 but you also now have the ability to take advantage of low or no interest balance transfers and reduce the HELOC balance effectively getting a better return than other liquid investment accounts, when the offer ends you can shift the money back to the HELOC.

Not new, not a revelation, but remember that the $200,000 sitting in the bank could also be used for wealth building; for example when you go to buy a rental property and your asset sheet shows $200K liquid or you want better terms access to private banking etc… despite the fact that you owe $200K is there an oggle factor that just greases lending wheels and potentially results in access to more capital.

The second part is what are the best methods to protect and grow those assets?

Should your attorney set up a land trust?
Is a family LLC an option ?
Obviously this offers larger gains when the numbers are higher but can it be adapted when the numbers involved are more moderate with equal success?
Other thoughts, structures, philosophies?

It depends. I noted in an earlier thread that we made the deliberate decision to buy a house with a mortgage 2.5 years ago rather than paying cash. The interest rate is 4.675% and we have enough other deductions that there are tax savings on the mortgage interest. Our investments are doing a lot better than that. But, it's a 15-year mortgage and the plan is that when I retire it will be paid off. I can see a philosophy of choosing to accumulate savings rather than paying off debt under some circumstances. It helps if, as you mentioned, the debt is on an appreciating asset. I also think it makes sense to have an emergency fund.

It makes less sense to save when you're paying 25% annual interest on your debts but even then I'd be in favor of keeping enough aside for an emergency fund. Land trusts and family LLCs? That sounds pretty fancy. Our assets are in blue-chip mutual funds, 60% stocks, 40% fixed-income, with low portfolio turnover. I'm happy with that.