LLC stress! Can my revocable living trust own my LLC?

Question

Still trying to figure out how to form an LLC.  I disagree with all of you who say it's simple!  My current roadblock is this:  Everything I own is in my revocable living trust, which avoids probate in the event of my demise, passing my assets to my heirs directly as they are owned by the trust which does not die.  Ok.  SO, here I am forming an LLC, now can the revocable living trust OWN the LLC?  How do I have the trust own the LLC so that the LLC goes to my heirs directly ?  Do I name it or me as its trustee as officer of the LLC?  Gettin dizzy here!

Jonathan James Look · Answer

I highly recommend speaking with a lawyer and companies specifically tailored for asset protection. Money spent on a professional is money well spent, and it will make the next LLC you create that much easier (and possibly cheaper).

I recommend consultations with the following, and some even offer free (short) consults:

- Corporate Direct

- Anderson Business Advisors (I believe if you mention Norada Real Estate or the passive real estate investing podcasts, you could get up to a 60 min free consultation)

- Mark J Kohler / KKOS Lawyers

- Hyre Legal Group

- Royal Legal Solutions

Mike S. · Answer

While you are alive, there is no difference between you and your revocable living trust. Everything you own directly or that the trust owns is considered yours if your are sued. That is why a revocable trust is not providing any asset protection.

The concept of liability protection from a LLC is double:

- it protects the owner from liability arising from inside the LLC (ie if you are sued for a problem due to the property inside your LLC, they can't touch your own asset that are not in the LLC). This protection is the same in every state.

- it protects your LLC asset from a lawsuit against you personally through the charging order that only grants access to any distribution taken out of the LLC to you, but can't access what is still inside that is not distributed. This protection will differ from state to state going from very weak to very strong. There also could be differences depending if the LLC is single or multi member.

If you are in a state that does not give good outside protection, the trick is to create another LLC in a State where the protection is strong, and have this holding LLC own the other LLC in the weak state. You then still have the inside protection, but gain the outside protection from the strong state.

It does not change anything on the asset protection level if the member (ie owner) of the LLC is you personally or your living trust. For estate planning purpose however, you want to have your LLC owned by your living trust to avoid probate as you mentioned.

Scott Smith · Answer

Hey @Brenda Whittaker!

I am an Asset Protection Attorney in Austin, Texas.  Have you ever heard of a Series LLC? Similar to a traditional LLC, they offer limited liability and pass-through taxation. However, in a Series LLC you can file one document with the State and then create as many "Children" LLCs as possible - with each "Child" possessing limited liability from the other "Child" LLCs in the Series.

Combined with our use of Land Trusts and an Agent Trust, our asset protection strategy offers anonymity and ideal estate planning services. You can learn more about the benefits of a Series LLC right here.

I also have a podcast here on BP, if you are interested in learning more.

Jerel Ehlert · Answer

@Rick H. Only a "Trust Company" can be trustee.  This is usually a bank or insurance underwriter.  A plain-vanilla LLC cannot be a trustee.  The reasons are complex, but involve fiduciary duties to the beneficiaries.

Go see a lawyer.  Specifically one that does asset protection or estate planning.

Brenda Whittaker · Answer

I already have the living trust.  THT?  Someone else just told me not to have the trust own the LLC because if the LLC becomes liable for something your entire estate could suffer.  So yay, more conflicting information.  I was also told never to put buy and hold and flips in same LLC.  And never put flips in an LLC at all, but rather an S corp./  So, its all getting pretty blurry.

Rick H. · Answer

here's how to do it:

Have an attorney create your living trust for estate planning purposes. You are both grantor and trustee.

Create an LLC with you as trustee of living trust u/d/t xx/xx/xxxx as owner of LLC

Create a title holding trust for each property with this LLC as trustee of the THT.

Bene of each THT is your own estate planning vehicle, the family living trust.

LLC stress! Can my revocable living trust own my LLC?

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