Nursing Home Care & the Effect on LLC Investments?

[Daniel Dietz]

Hello all,

We are working on developing our partnership structure and thought I would get some general feedback here before we sit down with our tax and legal people.

The partners ages range from 50-70 years old. All in good health now be we are planning on holding these for the long term, so we are 'looking ahead' to different potential scenarios.

Let's assume each of the four of us own 25% of an LLC. (We are actually planning on two, one using SDIRA funds and one outside of SDIRAs using 'cash funds'). Let's also assume that the LLC owns 1 million in multiple real estate properties with a loans of 500K, which yields a cash flow strean of 60K per year, not counting loan pay down or appreciation. They still have a spouse at home also.

If 'partner A' needs nursing home care in 10 years and depletes their personal funds in paying for it over a couple of years, and then the state pays for it. 

How is the investment in the LLC looked at? Would the LLC have to liquidate their portion? If so, I assume just enough to pay out 25% of partner A's equity, not the value overall? Or, would just 25% of the yearly taxable profits be able to be claimed?

Thanks, Dan Dietz