LLC's--is this info accurate?

Question

A friend of mine went to one of Robert Kiyosaki's 3-day workshops, & one of the things she shared w/ me from the seminar was this:

"The best information we got was the reason to incorporate, preferably in Nevada.  We were told to first open a C or S Corp. and then an LLC (LLP?). Put your personal residence first
into the C or S Corp and then move it into the LLC.  That way if someone sues you they cannot even locate the house to try to take it.  He also told us to make yourself the beneficiary of the LLC and your attorney the trustee.  That way if you have to go to court, as he did, you can claim the 5th and not give them the information/access to your assets, and your attorney can exercise the attorney/client privelege and cannot be forced to give them the information either.  Our son said that one of his coworkers had done very well with rentals until one of the residents learned of her holdings, sued her and got it all.  She acknowledges that she messed up and should have opened the corporations regardless of the cost as she lost it all.  If you have a corporation that you open in Nevada it is much cheaper and taxed at a lower rate.  You can still do business in CA but you need to know how to do that without having to pay the much higher CA taxes if CA finds out you are doing that."

Is that accurate? Is that the way to protect yourself in the event of a lawsuit when owning property?
Dave.

Ingrid Nagy · Answer

If you have a mortgage on a property transferring the ownership entity usually requires permission of the lender or it can trigger the Note being called in full.  If you own it outright no problem.  If you take title in the name of an LLC a lender normally requires a personal guarantee.

I think there is a bit more to the story than your friend is telling you.  If she had adequate insurance and an umbrella I don't believe she could have lost everything.  Here in NJ no corporation or LLC can be hidden from the public.  It is all public record and the legal name/address of the owner is required or a registered agent who can accept service if you cannot be located.

Dave Toelkes · Answer

Did your friend tell you what to do with the C or S corp that holds title to your primary residence?

Do you become a renter and pay rent to the Corp?

If you transfer title to the Corp, you lose the capital gains exclusion on the sale of the property.  You lose the home mortgage interest and property tax deductions on Schedule A.

A corporation has to have a business intent, too.  What is the business intent to owning your primary residence?  If done solely for "asset protection", then a judgment creditor can void the transfer as a fraudulent transfer.  Sounds like the corporate veil is easily pierced with this setup.

I have doubts about the effectiveness of this recommendation.  Suggest you consult your own attorney before following this advice.