LLC setup and Avoiding The Due on Sales Clause w/ land trust?

[Mike Shemp]

Hi All,

I am looking for any thoughts or guidance on setting up an LLC.

We have a rental property in North Carolina that has a mortgage. We would like to move it into an LLC. We spoke to one asset protection attorney and asked about how to avoid triggering the "due on sales clause" if we moved it. Here is what was suggested:

1. Setup LLC in North Carolina.

2. Setup Wyoming LLC. This is the member/manager of the NC LLC.

3. Change ownership of title to be a land trust via warranty deed. Beneficiary of land trust should be the Wyoming LLC. Changing title to be the land trust should avoid the due on sales clause.

Does anyone have any thoughts on this structure? Does it sound right? Not right? Overkill?

Thanks!

SG

[Marc Winter]

I've dealt with attorneys daily for many years.  Ask yourself a question: if your compensation is based on hours and fees, why take the simpler route?  (I am not bashing all attorneys.)  Is that advice providing more protection for you?

What size is the rental property in NC? If it's over 50 doors, then perhaps you should consider a corporate/LLC structure. If it's a single or double, this is overkill.

Creating an intervivos revocable trust is, in my non-attorney position, the way to go.  The steps are:  create the trust, name the trustee, have the settlors sign a 'deed into trust' (yes, with warrantees) and an affidavit of trustee, outlining the trustee's duties and responsibilities) should be attached to the deed when recorded.

You can name whomever you want as beneficiaries, and basically change them at any time, privately. Beneficiaries do not have to be an LLC or corp, but they can be, if you want to complicate it.

There is no due-on-sale trigger, there is no city/state transfer tax, there is asset protection (at least some privacy), and no liens that may become attached to that property will affect anyone or any other property owned outside of that trust.

Remember the KISS formula:  keep it simple...