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Updated over 3 years ago,

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2
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Brandy Stanford
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2
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WhatWouldYouDo if you were setting up a Trust & LLC for children?

Brandy Stanford
Posted

Hello! What would you do if you were setting up a Trust for your children and LLC? I want to make sure I have my head wrapped around this well, so that I set things up correctly for my children's future. Here's the story, say I inherit $50,000-$80,000 cash from my mother's passing and I want own properties to rent and pass these properties on to my two children. We already have our needs met, so I plan to use the cash flow on quality-of-life experiences of doing fun things with my children on the weekends.
This is the order in which I think I need to set things up.

  1. 1. Create a Living Trust-
    Name myself as Trustee and Beneficiary and my two children as Beneficiaries
    Name Aunt D as Successor Trustee to handle if I die or incapacitated

  2. 2. Create LLC-
    Name the owner of the LLC me or the Living Trust?

  3. 3. Create a Will-
    Make all personal arrangements of children, husband, personal property, homestead etc. but Name Aunt D the Trustee of Living Trust again in the Will

  4. 4. Go to a Bank/Credit Union create business bank account in LLC name
    Which bank or credit Union do you recommend in Texas? Do you recommend a large national bank or a small local one, or credit union? Should I start with one that I might be trying to get a loan from in the future?

  5. 5. Deposit check from inheritance
    Should this check be made out to my personal name, the Living Trust or the LLC?

  6. 6. Buy single-family home in my personal name with a minimum $200 a month cash flow

  7. 7. Run the business through the LLC and pay myself the $200 a month cash flow as an owners draw and file that income on my personal taxes. OR should I have the $200 a month go to the Trust first and then I receive a $200 distribution from the trust? I'm not sure the correct way to do this and will I be taxed more one way or another?
  8. 8. Should I not have any money tied to the Living Trust at all and the Living Trust only owns the property?

  9. 9.After final refinancing after a BRRR transfer property Title to the Living Trust because lenders are forbidden by federal law to invoke a due-on-sale clause when property is transferred to a Living Trust


“Many mortgages contain a clause that allows the bank to call ("accelerate") the loan -- that is, demand that you pay the whole thing off immediately -- if you transfer the mortgaged property. Fortunately, in most instances, lenders are forbidden by federal law to invoke a due-on-sale clause when property is transferred into a living trust. The lender can't call the loan if the borrower is a trust beneficiary and the transfer is "unrelated to occupancy" of the premises. (Garn-St. Germain Depository Institutions Act of 1982 (96 Stat. 1505).)

https://www.nolo.com/technical-support-main/nolo-living-trust-transferring-real-estate-into-your-trust.html

  1. My thinking is if I set it up this way, is that if I die early and a new wife appears in our family that may not have my children's best interest at heart, she won't be able to get the money through my husband because he is not involved in the Living Trust or the LLC. It would go straight to the children with Aunt D as Trustee until they are 25. If we were to get divorced, I don't think he would go after it because it's all set up for the children and it's a part-time job for me, so I don't think a judge would rule that I have to give my husband half of my part-time job income.
    Any holes or mistakes you see in this? Please do tell!! Sorry for the ignorance I am trying to learn. Thank you in advance for any feedback!

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