Proper Configuration for Series LLC with Land Trust

[Keith Meyer]

BP Nation,

I'm looking for some help on how to properly configure a Series LLC for asset protection with Land Trusts for anonymity. My understanding is that this is the best modern method for holding a portfolio of investment properties. You get great protection, only have to pay to manage/file taxes for one LLC, etc. This topic is touched upon in other BP forum posts, but the logic seems to often go in circles, so I'd like to see if we can get a clean rundown of the process.

I live in California and currently own a rental SFH in New Mexico. I am actively working to add additional properties.

My summary understanding of the Series LLC / Land Trust process is:

1. Buy property in your name in order to get the best loan terms
2. Create a Series LLC
3. Create a Land Trust for each individual property. Deed property from your name to that Trust. Assign a "child" of the parent Series LLC as the beneficiary of that Trust. (Not sure if you would then list the Trust as the member of the LLC?)
4. Repeat for each property you add to your portfolio

My questions are the following:

• Is this process correct? Trying to clarify top-level and property-level ownership structure
• What is the most cost effective way to create and file the Trust and LLC docs? Is this something relatively straightforward which can be done through Rocketlawyer, etc.?
• What is the best way to handle assignment of a Trustee for the Trust, and a Registered Agent for the LLC? I'm looking for advice in terms of cost effectiveness as well as preservation of anonymity
• Living in California, with out of state rental properties, which state would it make sense to file the Series LLC and Trust in? Can I file the parent Series LLC in Delaware, then file the individual Trusts/child LLC's in their respective states?

This article shows a few diagrams which help to clarify the process. https://royallegalsolutions.com/series-llc-structure-anonymous-trusts

However I'm still a little stuck on how to sequence this process as well as where and how to file. I know this is a confusing issue many RE investors have been running in to lately, so hopefully we can clarify together on this forum.

Thank you all very much in advance for the assistance!

[Peter M.]

You need a lawyer. I am not a lawyer but I will give my opinion anyway for what it is worth. (Some of this may apply only to Texas)

1) Do not do this through rocket lawyer or legal zoom. Use a real lawyer. You may be very smart but unless you are a lawyer you will miss things. I am going through the LLC process now, I think of myself as a smart guy. There is no way I would have been able to draw up these documents or trust a fill in the blank document from one of those websites. Plus if you use a lawyer, they will sometimes be your registered agent for free. Or you pay them yearly but it is still cheaper than one of those registered agent services.

2) Your theory seems expensive since you set up land Trusts each time. Are you doing this for asset protection? Unless you are paying people to do everything you will not get total anonymity. You will get title problems later if you are successful in maintaining full anonymity. You signature will have to be on things. Plus when you advertise, rent out units, and generally do business you will eventually have to do it face to face unless you are Howard Hughes. 

3) Set up one trust that you either trustor, trustee, or beneficiary. You will need one other person because the same person cannot be all 3. I think you could set up another LLC to be one of those for you but don't quote me. The Trust owns an LLC(let's call it RE King LLC). RE King owns a series LLC where you can put all your properties to hold them. One of the series is your management company(lets call it Series A) that does all business. The other series just hold properties silently. Series A pays RE King for doing all of its business (it could be a dollar a month if you wanted it to be but it should be most of the profits). This way Series A takes all the liability, your money sits in RE King and since it doesn't do anything besides collect money, it's virtually impenetrable. Same with the other series that actually own the property. The trust owns everything ie you. You get sued, they can only go after Series A which has no assets. If you personally get sued, they can only get the trust, which only has your exempt assets(this depends on your state). They can't touch RE King without piercing the veil.

You only have to set up 2 LLCs (or 3 if you dont trust another single soul on the planet) and one trust. Cheaper and just as if not more effective than doing a new trust every time. A lawyer who sees that set up would only take the case with a big ole fat retainer. 

As to your last question, I would set up the LLCs in a state that you don't have to pay a yearly fee like Texas. Or better yet 2 states without a fee to make a plaintiff cough up more dough ahead of time. 

My 2 cents