Real wealth matrix

[Chris C.]

Been looking at a structure which will be optimal for having a portfolio of rental properties, financial investments, and all the other general life stuff, which will assist in asset protection, as well as tax liability etc.

Thoughts on this?

[Zachary Jensen]

The idea of using real estate professional status and then protecting those assets in an LLC which is owned by some other more fancy asset protection structure is nothing new. Lots of us on BP have been doing it for our clients for years!

[Kory Reynolds]

Simple answer, yes these are all normal things to utilize.

However, as to how they are used - that will depend entirely on where you are going and what you are trying to accomplish.

For tax purposes, given it is generally a bad idea to use an S-Corp or C-Corp for holding real estate, any other tax structure will have absolutely no difference from one another - IE an LLC taxed as a partnership, an LLC wholly owned by you and disregarded for tax purposes, owning directly, or owning through a revocable trust - all of these have the exact same tax result at the end of the day.

[Chris C.]

@Kory Reynolds and @Zachary Jensen,

That all makes sense. What would you say the cost would be to setup and maintain this type of structure?

[Zachary Jensen]

Quote from @Chris C.:

@Kory Reynolds and @Zachary Jensen,

That all makes sense. What would you say the cost would be to setup and maintain this type of structure?

 Dependings widely based on where your starting, I would say anywhere from 1k to 10k per year. Could be even more potentially if you get really advanced. Once you get to that advanced stage someone like @Kory Reynolds Can help you when your there ;) 

[Kory Reynolds]

It's a bottomless hole of fees! It will all depend on volume. A single LLC and a single revocable trust won't cost much. 100 LLCs and 10 trusts will cost a lot.

A simple revocable trust in many states won't cost you anything after it is set up.  To set up such a trust, including getting assets transferred in where appropriate.  

A single member LLC can be cheap to set up - a few hundred bucks between state registrations and a legal zoom operating agreement. You might end up paying a few hundred dollars a year to the state you set it up in, and the state you are actually doing business in.
Operating agreements by a real attorney are also not cheap - that can easily be several thousand dollars per LLC. Some states are expensive to have to register in - CA will run ya $800/year if you do business there. TX is only $300 or so of fees in the first year of the LLC, but then requires an annual report that someone needs to file.  My home state of NH is $102, every year, until you dissolve the LLC. My neighboring state of MA is $500/year per LLC.

Then it all depends on volume - more entities and trusts, more fees.

But...first and foremost...start investing (if that is your plan), get good insurance, and then only add in complexity as needed. The anonymity isn't near as big a deal as people make it out to be. I have yet to hear of a circumstance where a lawsuit wasn't pursued just because they could immediately find the beneficial owner. In the end...they know that the LLC likely carries some form of liability insurance as a condition of their mortgage, thus will have some decent funds to pay out. And they also know that there is likely equity in the property.

Speak to your own attorney about this, but don't add complexity for complexity sake.