Trusts and LLC's got nothing to offer! - Posted by Hmm

Real Estate Investing Real Estate Law
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Posted by WAREIA on November 22, 2004 at 16:17:45:

Since my LLC is “a” beneficiary of the Trust and the Charging Order is against my LLC, it doesn’t affect the Trust or the Property at all.

Once the property is sold and my LLC is compensated and then distributed to me, it is up to me to report the proceeds I have recieved from my LLC. The charging order is only applicable to my percentage of interest in the LLC which is only 1%. That doesn’t mean I don’t have some if not all the control of the proceeds remaining.

You need to also remember that the only way I will recieve a charging order against my interest in the LLC is if it is me that is being sued.

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Trusts and LLC’s got nothing to offer! - Posted by Hmm

Posted by Hmm on November 17, 2004 at 24:39:17:

I beg to differ in 4 cases:

  1. For those of us who own a property already, and decide to form an LLC and Land Trust: Any idiot can look up the public records and see that the owner “transferred” to a trust and could figure out with high probabilty that he’s the beneficiary.

  2. Suppose now you buy via your newly formed LLC and Trust,
    YOU STILL SIGN AS THE PERSONAL GUARANTER! Your signature and name shows up in the public records and… AGAIN, any idiot can add one and one to figure out that you are the owner.

  3. If you use your SSN to personally gurantee loans, you don’t really have much protection against any potentially big “dings” on your credit although you have a whole lot of debt.

  4. Suppose you did something but someone sues you and wins. Since you are the beneficiary of your “hidden” assets, you still must legally disclose and will be held liable.

This Trust/LLC is really just a "feel-good " asset protection.

That’s why banks don’t really say anything when you transfer your property into LLC’s and Trusts…BECAUSE THEY KNOW THEY CAN STILL COME AFTER YOU AND THE PROPERTY THAT YOU OWN IN YOUR TRUST/LLC!

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Re: Trusts and LLC’s got nothing to offer! - Posted by Chris

Posted by Chris on November 17, 2004 at 20:32:55:

Ignorence is bliss!
JK

What an LLC, or a C/S corporation is for is LIABILITY protection from YOUR assets. If you form a company and purchase and own Real Estate in your companies name, then your assets(money, properties, vehicles) are titled to your corp. A company is a LEGAL ENTITY. It is treated like a person, in some aspects. It has credit, tax liability, legal responsibilities. Yes YOU can still get sued, but thats because you ticked off someone or got in a accident or didn’t handle a property or tenant honestly and fairly. If someone want’s to sue, it goes like this. The consult a lawyer to tell them they are interested in suing someone. Now lawyers(the blood sucking vampires that they are!!!) are NOT going to help you sue unless the person or co. you want to sue have $$$. And I mean lots of money. The first thing lawyers will do is do their homework and do a private investigation on that person you want to sue. They will find out everything about you: what you own, cars, houses, bank accounts, properties, jobs, kids, etc. Now they will find out what YOU personally own, whatever is titled in YOUR name. Your house you live in is probably in your name. As is your car and bank accounts. If you don’t have very much in your name, then the lawyer will probably say sorry charlie. They don’t waste their time suing billy joe trailer park guy, knowing that even if they win, they won’t get any money. How do you think lawyers get paid. Don’t you notice they all say “You don’t pay unless we win!” Why do you think that is? Because they take their % cut out of the money you get when they win your case. If there’s no money to get, then they know they won’t get paid.
So back to LLC’s. If your a Real Estate Millionaire, and you get sued, then your assets are Protected. Assuming you where smart enough to not listen to hype and bs, you titled ALL your cars, real estate, rentals, your house and put most of your profits in to your Corporate account that you opened in the LLC’s name, then when Betty Whiplash decides to sue you, the lawyer looks up your assets and finds that you have very little to your name, he will pass up the offer. What happens is YOU, in essence are ‘poor’. You personally have few assets. But since you are a Member of the LLC you own, your cash income comes from your LLC bank account. When you get sued, then the courts can only take YOUR assets, because the LLC is a separate ENTITY, like is said earlier. Its like Bill Gates rear ending someon and they sue him, but they can’t sue Microsoft because its not part of him. Its a separate ENTITY. Now I know that they would still get a lot because hes rich, but you get the idea.
Now if you are sued and lose, they can’t take your house, you need a place to live. And your bank account shouldn’t have alot in it. Thats how LLC protect you from liability.
Now your LLC CAN GET SUED. And then you are in trouble if judgement is against you and you owe a lot. But they have to have a good reason to sue the LLC. Your LLC cant drive a car, tick off someone, lie, cheat, steal, assault someone, mistreat tenants(but you can). Get the picture.
I hope this clarifies things a little, no alot. Don’t go by the lack of knowledge of others(no offense to anyone).

PS dont sue me!

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Re: Trusts and LLC’s got nothing to offer! - Posted by Maria

Posted by Maria on November 17, 2004 at 10:25:16:

How about the same scenario except that the beneficiary is the LLC. It is true that your name will be listed in the public record as a member of the LLC, but you will not have to disclose that you are the beneficiary of a trust because you wouldn’t be. If asked , you would have to disclose being a member of the LLC. But if you are the trustee of the Land Trust, you can not be forced to identify the true owner, the LLC, and as trustee, you are not liable for the actions of the owner. My lawyer said by doing this it creates a situation of going round and round, most likely with someone who works on a contingency basis. His thought is that the reward if any would take a lot of time and effort. The judgement cannot attach to the property because it is in a land trust and it can’t attach to the trustee because you are not liable. If it attaches to the LLC or the actual Land Trust then you might be required to make small monthly payments on the judgement. Why couldn’t you just switch the beneficial interest to someone else temporarily since all it takes is a signature and notice to the IRS. This is just a what if scenario, not saying it would work.

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Re: Trusts and LLC’s got nothing to offer! - Posted by Ben (OH)

Posted by Ben (OH) on November 17, 2004 at 08:44:57:

In your first example you as the owner on the deed can opt another beneficiary beside yourself.

#2. Your trust purchases the property. The trustee signs all docs. You are only on title if you are the trustee. There are ways to purchase with borrowed funds and your name is not on record.

#3. Your SS# does not guarantee loans, you as the borrower is the guarantor. If you borrow you are dinged if you don’t make the payments–type of ownership is irrelevant.

#4. You must legally disclose if you are ordered by the court to do so–and you reveal only that which is in your name as beneficiary.

The secret to much of this is to “control” property, not necesarily to own it.

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Re: Trusts and LLC’s got nothing to offer! - Posted by jasonrei

Posted by jasonrei on November 17, 2004 at 08:01:52:

I don’t think many here would argue, in those 4 cases.

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Re: Trusts and LLC’s got nothing to offer! - Posted by Maria

Posted by Maria on November 18, 2004 at 08:03:02:

Chris is making the most important point of all. It’s not about everything being hidden, it’s about legal protection if you do get sued to minimize your losses. An hour or so spent with a good asset protection lawyer is money well spent. It is vital for the success of any investor to have the best legal advice, tax advice and financial planning available. This is not an area to skimp on. My lawyer runs the title company I use for my closings, he answers most of my questions for free because he gets repeat business and referrals from me.

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Re: Trusts and LLC’s got nothing to offer! - Posted by Chris

Posted by Chris on November 17, 2004 at 20:57:13:

I just thought of another way of looking at it. I only told on side of the story.
The reason most people form the LLC’s, corps. etc. Because if you own real estate and do business with your company, then people will have to sue your company if the reason they believe you wronged then was because of a business dealing or something that your corp. owned. That way they sue the LLC, not you. And you don’t loose all you money and house and car and your family is put out on the street. THAT is the reason most people form a CO. besides the tax benefits. Because THEY Personally dont want to get sued. But what I said before is still true. You can have your assets in your name, and risk getting sued, loose everything, all because we are human and have emotions and make mistakes and make others mad. Or you can put your assets in a corporation/LLC and they will be better protected from legal action when YOU get sued. I guess you could say its more likely that you get sued than your LLC. Just because it’s harder for your LLC to wrong someone, because you control it and you have to do some action using your LLC name to cause damages to another person.
Im no lawyer, butt my degree is in Business most of the legalities involving lawsuits, contracts, real estate and corporations I covered in a Business Law class.
Just as much as I know about the subject.

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What’s your cost of using an LLC ? - Posted by a

Posted by a on November 23, 2004 at 24:23:55:

how much do you spend to set up LLC?

do you set one up for each and every property you own?

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Re: Trusts and LLC’s got nothing to offer! - Posted by John Katitus

Posted by John Katitus on November 19, 2004 at 24:52:22:

Not sure what you are notifying the IRS about. They wouldn’t know until tax returns were filed, and then good luck with them figuring it out.

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What are the TAX BENEFITS of LLC/Trusts? - Posted by JC

Posted by JC on November 23, 2004 at 24:26:07:

Are there any tax benefits or deductions
or any kind of cost-savings
that result directly from using an LLC or a Trust?

I’ve heard that if I put my personal residence into a trust/LLC , even though i can’t personally deduct the interest from my return my LLC can deduct it so it is a wash. is this true?

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best way to protect existing property? - Posted by KAA

Posted by KAA on November 17, 2004 at 11:36:18:

For those of us who already purchased property in our own name, what would be the best way to protect and stay anonymous(sort of)?

Considering that anybody browsing the public records can figure out what we’re doing throug a paper trail,
are there any ways to overcome this problem effectively?

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Re: What’s your cost of using an LLC ? - Posted by Maria-Fl

Posted by Maria-Fl on November 23, 2004 at 09:50:04:

I think it was about $125.00 to set up, after you get the tax id number, then you open a bank account. I have 1 LLC and separate Land Trusts for each investment properties.

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Re: Trusts and LLC’s got nothing to offer! - Posted by Maria

Posted by Maria on November 19, 2004 at 08:13:48:

The law says you must file form 56, Notice Concerning Fiduciary Relationship. If you change the beneficial interest on the Land Trust, you must file again to let them know. Maybe that is why you had a problem with your tax return. My lawyer set up my first Land Trust and wrote down the steps and put the forms on a floppy for my future use.

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Re: What are the TAX BENEFITS of LLC/Trusts? - Posted by Ben (OH)

Posted by Ben (OH) on November 23, 2004 at 07:47:04:

I can’t answer that question. I depend on my accountant to get the answer. As for personal residence it is a risk. Why take the chance the IRS will audit and open up a can of worms. There are plenty of deductions in real estate, play it by the rules. If you are looking for tax breaks then by all means get a self-directed IRA.

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Have same problem… - Posted by randyOH

Posted by randyOH on November 17, 2004 at 13:06:57:

I have the same problem. I have everything in my (and wife) name. I have a $5 mil umbrella policy. I do not use trusts or LLCs.

I manage the properties myself. My theory is that anything that goes wrong will be my personal responsibility anyway. I don’t see how trusts and LLCs will protect anyone who manages his own properties. Even if you have a property manager, he will just say he was doing what you told him to do.

You don’t get sued just because you own the property. You get sued because you are responsible for the damange that was done.

The only way I see an LLC protecting you is if you are a completely inactive investor. If you are actively running the business, you are going to get sued regardless of who owns the property.

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Re: Have same problem… - Posted by John Katitus

Posted by John Katitus on November 19, 2004 at 24:48:33:

You have your opinion because you don’t fully understand Trust’s and LLC’s. When you get sued, you can only lose the property that is owned by the Trust or the LLC. That is why you set up individual Trust’s and LLC’s. In Ohio, it’s free to set up a Trust, so each of my properties is in it’s own Land Trust. When I get sued, they can only get one property. When you get sued, you can lose everything.

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Re: Have same problem… - Posted by WAREIA

Posted by WAREIA on November 21, 2004 at 18:27:05:

If you have a properly setup Land Trust you can’t lose the property in any law suit, including to the IRS. The key word here is properly.

A Land Trust protects the property, an LLC protects the individual. The best beneficiary of a Land Trust is an LLC. If both are set up properly and legally, a creditor can only recieve a charging order against you and not a lien or judgment against the property or the LLC.

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Okay… - Posted by randyOH

Posted by randyOH on November 21, 2004 at 19:41:14:

Tell me this: what can you do with your properties when there is a charging order against your LLC?