LLC and Land Trust

[Chad Hurin]

Hi, old account but new activity & first BP forum post.

I've been looking up Asset protection with LLC & Land Trust (listen to podcast 109). I had a few questions after I 'think' i understand the process. Link below.

Is the process: buy mortgaged property. Deed title to land trust (123 Maple Trust) with friend/family the trustee and you(investor) as grantor and beneficiary (for time being). Then set up LLC with Land Trust name or any other generic name?(123 Maple LLC)? Switch you and newly formed LLC as beneficiary? Is this the concept for keep anonymity and protection by not having your real name on the trust or LLC?

Questions

• If not, where did i go wrong?
  
  • Can the Land Trust set up an LLC

• If the above strategy is correct, how would one try to sue property owner with this strategy?
  • Read something(link below) about dissolving the trust if being sued? whats this about?
• Is freind/family(trustee) in danger of litigation?

Wow, this is all over the place. Any info would be great or links to resources. 

Thank you BP.

http://www.biggerpockets.com/renewsblog/2009/03/11...

[Bill Gulley]

A beneficiary can also be the trustee.

My opinion is much like Ned's most is pure guru and attorney bunk selling a product when it is not needed at all.

Anything done intentionally, torts or illegal, you will not skate scot free because of trust or LLC.

If you think tripling your accounting tasks is worth hiding from the general public, so be it, I don't.

You will not be hiding if some matter is brought to court, unless you want to go to jail. The attorney will simply request disclosures (or he'll search) and the judge will say, spill the beans, who is in this entity.

You can have issues if your entity is seen as some ploy or sham entity, using a trust as a business entity may have other ramifications, an LLC can be exposed through the back door, go to the manager, he is liable, then his assets can be gone after, his interest in the LLC is an asset and then go after everything held by the LLC, a Series LLC may limit assets to the cell holding that member's interests.

You also have liability exposures inside the entities, additional beneficiaries or other members can attack from the inside. Know who you partner with.

This can be an attorney's dream, the operating agreement will be more involved, a trust can be a member of an LLC or an LLC may be in trust, any corporate ego can be an affiliate, subsidiary or controlling entity of another.

You will have accounting requirements under a trust, under "trust accounting requirements" your CPA will love you, assets held in trust must be valued annually and your appraiser may love you too. Need to be up on escrow accounting too, comingling of funds, disbursements and transfers can spoil your perceived limited liability.

You also need to keep entities solvent, they must be reasonably funded as to the scope and purpose of business conducted or expected, that can be significant for a real estate operation.

Many have a false sense of security operating behind an entity, financial and legal compliance does not change at all based on any structure of an entity. A trustee or manager can be personally liable for their conduct or an officer or director or an executive director even in non-profits.

You are not liable unless you intentionally did something or you are negligent, bot of these aspects are limited or eliminated by good management. In the event you are liable, insurance kicks in to protect you from digging into your other assets. So, management and insurance is your best route.

Having multiple beneficiaries who are unrelated would be scary to me, I would never have investors in a trust lending operation, any one who does should spend a bit more with a good trust attorney as to pitfalls and expenses of infighting with a trust.

Trusts certainly have a place when assets are sizable, if you really don't have assets to protect in an estate planning world, you're probably chasing your tail.

LLCs should be formed for business management reasons, for better administration of a business venture, not as a fortress for you to hide in.

See a good attorney who is aware of your personal and business position and who doesn't push asset protection as a specialty as they usually have a shelf product to meet any need. While there are common basic aspects of trust documents, there is still personal and business aspects that need careful attention. :)