Protecting assets with Land Trusts in Local LLC /Wyoming LLC

Tax, SDIRAs & Cost Segregation
7yFollow

Protecting assets with Land Trusts in Local LLC /Wyoming LLC

Michael Aschenbrenner
Member since 2018 · 4 posts · 0 votes

Ok, been doing my homework ... I am not a lawyer. If someone sees any problems with this, let me know.

Let's see if this makes sense. I'm looking for the ultimate in external and internal protection of my assets in AZ with the least hassle and total anonymity. 

AZ does not offer Series LLC's yet or that might have been an option as well.

Unfortunately, AZ releases the owner and address of LLC's to anyone that asks. (Not good if someone sues me personally.) Since I own the AZ LLC, it is listed on my assets, and anyone suing me can find out the resources of the LLC and attempt to access those resources in a lawsuit. That is, unless my AZ LLC is "owned / managed" by another LLC in a state that does not release that information. Wyoming, Delaware ... Thus I need (2) LLC's for external property protection. One to do business in AZ and another for anonymity and asset protection. Am I making sense so far?

1.) To keep my name off all assets, and yet offer ease of movement into and out of the LLC's for selling assets, I set up a trust to purchase each individual property (And another for every other thing my wife and I own, cars, clothes, Jewelry, guns, cats ...) All Assets of value go into a "Grantor Trust" w/ all individual properties in their own trust. With the trustee being my local AZ LLC.

a.) The individual trusts isolate liability from the "other" trusts, if I am not mistaken, so each properties internal liabilities (Example law suits not covered by insurance) are limited to that individual property. 

b.) Plus they are easy to move into and out of my AZ LLC (Which I need to be able to do business in AZ.) to put back into personal name for easier sales of properties. The Trust is listed as owner of each property.

b.) Liability for each property is limited to that particular trust. If I am correct.

c.) Bankers are used to letting trusts own property for lien purposes. LLC's, not so much.

Does this make sense? Am I overthinking things ... again? All of the forms to create these things are available online. LLC's are legally considered persons and can possess things like trusts.

I would need a bank account for each LLC and a person to act as local trustee in the Wyoming, where I am thinking about having the out of state LLC.

Questions, problems, legal issues ...? Anyone who has done something similar?

0Reply
76 views

Most Popular Reply

Scott SmithPro Member
Attorney · Austin, TX · Member since 2014 · 1k+ posts · 932 votes
7y

While I have assisted many investors with the Wyoming LLC, it is not the only method to introduce anonymity for an LLC. When establishing an LLC you can also nest it into an Agent Trust for external anonymity, which functions in a similar way as the Land Trust would for the individual property. The involves having an attorney sign as the "nominee trustee." This means your name does not appear on public record, and instead it is a name protected under attorney-client privilege.

This means you can create and operate a (Series) LLC from any state with anonymity on public record. An example of what the structure of a Series LLC with anonymity would look like is this:

............................................................... Series LLC...........................................................................

....................................................... Agent Trust (anonymity) .................................................................

Child Series 1 ...................................... Child Series 2 ......................................... Child Series 2 ........... (etc)

Land Trust 1 ........................................ Land Trust 2 ........................................... Land Trust 2 ............ (etc)

Property 1 ............................................ Property 2 ............................................ Property 2 .............. (etc)

But it is just another option. Both work. I have just found that often the Wyoming LLC is more work than is required simply to introduce anonymity externally.

And as other people have mentioned in this thread, many trusts do not actually offer liability protection. If you are operating something like a Delaware Statutory Trust you are in a good spot, but that is not what it appears the OP was referring to.

The simplest and most effective asset protection strategies have often included a Series LLC as the asset holding company and traditional LLC(s) as operating companies. The asset holding company is implementing best strategies for both external and internal liability and will also separate each property into it's own "child" series for liability purposes. The Traditional LLC conducts the highest liability actions to limit exposure and carry the lionshare of the liability. Of course it all just depends on what types of investments you have and the size of your portfolio.

Podcast Guest on Show #109
1Reply
See this reply in the discussion

16 Replies

Jump to latestLatest
  • Mike S.
    Investor · Broward County, FL · Member since 2018 · 1k+ posts · 938 votes
    7y

    @Michael Aschenbrenner

    I would avoid putting your AZ LLC as trustee, especially for personal properties. I would use a different LLC as trustee. Also to my knowledge the trust won't add any liability protection but only anonymity and probate avoidance.

    I agree with the concept of having single member, member managed AZ LLCs owned by a WY holding LLC.

    0Reply
  • Michael Aschenbrenner
    OP
    Member since 2018 · 4 posts · 0 votes
    7y

    Mike S. I am not sure what you are suggesting / why you are suggesting it. Are you suggesting a different LLC for each property? Also, if others do not know of the other properties because they are in different trusts, are they not considered separate entities in the case of a lawsuit? They can sue that one trust but not the other trusts held in the same LLC? I don't know. That's why I am asking.

    0Reply
  • Nate Marshall
    Real Estate Consultant · Evergreen, CO · Member since 2018 · 1k+ posts · 735 votes
    7y

    Wyoming by far is the best state for setting up an LLC or Corporation. It's also the best state for asset protection and trusts. So many benefits that I cant list them all but if you message me I can give you more info and my contacts at 2 companies that can help set you up there.

    0Reply
  • Mike S.
    Investor · Broward County, FL · Member since 2018 · 1k+ posts · 938 votes
    7y
    Originally posted by @Michael Aschenbrenner:

    Mike S. I am not sure what you are suggesting / why you are suggesting it. Are you suggesting a different LLC for each property? Also, if others do not know of the other properties because they are in different trusts, are they not considered separate entities in the case of a lawsuit? They can sue that one trust but not the other trusts held in the same LLC? I don't know. That's why I am asking.

    Each LLC is its own box. In case of internal liability, you risk loosing all the content of the box.

    If you put all your properties in the same box, an attack into one risks all of them. So yes, depending on the value of each property, it may be better to have one local LLC per property. All of them owned by a WY holding LLC.

    Generally a revocable trust only provides anonymity. It does not provide asset protection. If you have ten trusts into one LLC, the only asset protection entity is the LLC. So if one trust is attacked, you may loose the nine others.

    I am not a lawyer so you would like to talk to one, but here is the setup I eventually adopted for myself after consulting a few attorneys.

    Each rental property is titled into a Land Trust, each land trust has a local separate single member LLC as beneficiary. All the local LLCs are owned by a WY holding LLC. This WY holding LLC also hold my non dangerous assets (brokerage account, bank accounts, etc...).

    The WY holding LLC is managed by a C-corp, that is also 1% member of the WY LLC. This Corp is the public face of my operation. It acts as landlord, manage all the companies, and give me the fringe tax benefits available to a C-corp.

    The 99% holder of my WY LLC is my living trust. This trust only purpose is to avoid probate. I have also a pour over will and advanced directive. I wouldn't put some of my personal property into the WY holding LLC, as it may weaken your protection, a case could be made that the LLC is becoming your alter ego and piercing its veil. For these few personal asset, for anonymity purpose, I created a few personal property trusts to mask the title ownership of some of assets (car, ...).

    I have created a separate NM LLC to act as trustee of my land trusts and property trusts. NM LLCs do not have great asset protection statutes, but they are very cheap and anonymous and as trustee, you don't get really any liability per se anyway.

    1Reply
  • Weston Couch
    Attorney · Austin, TX · Member since 2019 · 128 posts · 98 votes
    7y

    @Michael Aschenbrenner I think you're on the right path in terms of asset protection, but there are a lot of details/minor corrections(Mike S. mentioned some) that need to be addressed to get you to your final destination here. To begin with, you don't need to be constrained to thinking of Arizona entities just because your assets are located there.

    0Reply
  • Michael Aschenbrenner
    OP
    Member since 2018 · 4 posts · 0 votes
    7y

    Thanks Weston. Well the Wyoming LLC would not be an Arizona entity, but from what I understand, the Arizona LLC has to be the one my Trusts are linked to, and the AZ LLC has to then refer to the Wyoming one. But you are saying that each property should have a separate LLC, so, with 2 Properties I should have 2 LLC's and so on, with bank accounts for each, if I have 3, then 3 separate bank accounts ... I guess that makes sense ... Is that what you are saying?

    0Reply
  • Michael Aschenbrenner
    OP
    Member since 2018 · 4 posts · 0 votes
    7y

    Wow Guys, Thanks for the help. Let me see if I have this straight:

    • 1.)Wyoming LLC is manage by a C-corp that is a 1% member of the Wyoming LLC. This is the public face of the entire operation.
      • a.It acts as landlord
      • b.Manages all companies
      • c.Gives tax advantages of a c-corp
    • 2.)Wyoming LLC is Owning/managing LLC of all LLC's
      • a.Holds all LLC's
      • i.Property
      • ii.Business
      • iii.Brokerage accounts
      • iv.Bank accounts
    • 3.)Separate LLC's for each property in AZ
    • 4.)Separate Grantor/Land Trusts for each property (Land Trusts) (Anonymity) MAnaged by one AZ LLC each
    • 5.)Each property is titled into it’s own land trust
    • 6.)Make a living trust the 99% holder of my WY LLC
      • a.This trust only purpose is to avoid probate.
      • b.I have also a pour over will and advanced directive.
    • 7.)Create a few personal property trusts to mask personal property, i.e. cars, trucks … Do not put personal property into the WY holding LLC, or your AZ LLC's as it may weaken your protection, (A case could be made that the LLC is becoming your alter ego and piercing its veil. )

    How does that sound. Anything I am missing, things to change ...

    0Reply
  • Mike S.
    Investor · Broward County, FL · Member since 2018 · 1k+ posts · 938 votes
    7y

    Again this is one way of setting it up. It may be overkill for your specific situation or not enough (maybe you would need adding offshore asset protection too). That is why you should probably consult a lawyer and CPA specialized in asset protection and real estate to discuss with you what would fit you best. You can tweak it by changing some of the entities (like using series LLCs), or using DST in high cost LLC state like CA. You can also put more than one property in one entity if your risk tolerance is higher.

    But educating yourself on all the pro and con of these entities is probably a must before meeting with your legal & tax team.

    Last, but not least, when the structure is created, you need to maintain it. If you don't understand it or don't know how to use it, it would become useless and maybe dangerous (creating more liability, cost and/or tax burden). You should understand before going down that route what are the requirements and cost involved over the life of it.


    You will also create other side effect that you need to assess (cost of lending in an entity vs person, tax reporting, commercial insurance, need to use a lawyer to represent your entity in court, ...)

    Once you know all the factors, only you can decide if it worth it or not. Some would argue that a simple liability insurance would be enough. In my case, based on my specific factors, I concluded that it was not enough. It may be for you.

    To further educate yourself, I am a big fan of Clint Coons Youtube channel that has hours of sound strategies.

    0Reply
  • Kevin R Ramirez
    Member since 2018 · 1 post · 1 vote
    7y

    @Michael Aschenbrenner Wow, head spinning. I've been watching Clint Coons youtube videos for weeks before I found this thread, my curiosity lead to calling Anderson Business Assoc. and I received a 7k quote to setup a WY land trust, WY LLC and NC LLC. It's only 2.6k for actual setup but they add a bunch of fluff that you don't need like their "Platinum service" etc.

    I only have one property and 7k is steep, so I'm looking at getting as much knowledge as possible before I make a decision. 

    Let's keep this thread going!

    For someone as myself let's walk through the basics for an anonymity compliant structure with inside/outside protection. Also we need to understand operating agreements for LLCs. Also setup local LLCs based on risk tolerance, you don't necessarily need one per property but that would be max protection. 

    1. Step 1: Create a WY Holding LLC. as a manager managed LLC, with a partnership tax structure which produces a 1065 tax return for the company and gives you a K1 which be attached to your return and will have your shares of the earnings generated from LLC. This keeps you at a lower risk from being audited by IRS. Have a trusted person sign up as initial manager, then have them resign and you become the new undisclosed manager of LLC. This provides inside/outside protection, is anonymity compliant and offers charging order protections.
    1. Step 2: Setup local state LLC. Setup as a disregarded entity tax structure (which passes through income to WY holding LLC.), make it a member managed LLC, and have it 100% owned by WY holding LLC. Make WY holding LLC. a member of local LLC. (How this is done without breaking anonymity is probably why the quote from ABA was 2.6k just for LLC, Trust and Fees. Maybe the manager needs to do this before he resigns). This provides inside protection.
    1. Step 3: (If property is financed only? due to note due if bank is aware of transfer) Create a WY land trust (does it need to be WY?). Move property into Trust. This provides anonymity. Move trust into LLC.

    I am still digging through info I will drop links to websites and paperwork as I find....also I know nothing but that's never stopped me.

    1Reply
  • Scott SmithPro Member
    Attorney · Austin, TX · Member since 2014 · 1k+ posts · 932 votes
    7y

    While I have assisted many investors with the Wyoming LLC, it is not the only method to introduce anonymity for an LLC. When establishing an LLC you can also nest it into an Agent Trust for external anonymity, which functions in a similar way as the Land Trust would for the individual property. The involves having an attorney sign as the "nominee trustee." This means your name does not appear on public record, and instead it is a name protected under attorney-client privilege.

    This means you can create and operate a (Series) LLC from any state with anonymity on public record. An example of what the structure of a Series LLC with anonymity would look like is this:

    ............................................................... Series LLC...........................................................................

    ....................................................... Agent Trust (anonymity) .................................................................

    Child Series 1 ...................................... Child Series 2 ......................................... Child Series 2 ........... (etc)

    Land Trust 1 ........................................ Land Trust 2 ........................................... Land Trust 2 ............ (etc)

    Property 1 ............................................ Property 2 ............................................ Property 2 .............. (etc)

    But it is just another option. Both work. I have just found that often the Wyoming LLC is more work than is required simply to introduce anonymity externally.

    And as other people have mentioned in this thread, many trusts do not actually offer liability protection. If you are operating something like a Delaware Statutory Trust you are in a good spot, but that is not what it appears the OP was referring to.

    The simplest and most effective asset protection strategies have often included a Series LLC as the asset holding company and traditional LLC(s) as operating companies. The asset holding company is implementing best strategies for both external and internal liability and will also separate each property into it's own "child" series for liability purposes. The Traditional LLC conducts the highest liability actions to limit exposure and carry the lionshare of the liability. Of course it all just depends on what types of investments you have and the size of your portfolio.

    Podcast Guest on Show #109
    1Reply
  • Caleb Christopher
    Title Representative · Denver, CO · Member since 2020 · 126 posts · 66 votes
    5y

    @kevin @mike @michael, what did you all end up doing?

    0Reply
  • Mike S.
    Investor · Broward County, FL · Member since 2018 · 1k+ posts · 938 votes
    5y
    Originally posted by @Caleb Christopher:

    @kevin @mike @michael, what did you all end up doing?

     My setup is almost as described on my earlier post. I added a few minor changes, but as a whole it is the same principle.

    1Reply
  • Issa Santos
    Member since 2023 · 35 posts · 0 votes
    2y
    Hello Mike, 

    I see that you’re in Florida. Would love to connect! I have a couple of properties I’m looking to protect, 

    I’m in Tampa FL. 

    I’ve reached out to a few asset protection attorneys and they each have a different opinion and it’s difficult to discern what would be best, 

    and from reading your post it sounds like you have some experience in this area. 

    Quote from @Mike S.:
    Originally posted by @Michael Aschenbrenner:

    Mike S. I am not sure what you are suggesting / why you are suggesting it. Are you suggesting a different LLC for each property? Also, if others do not know of the other properties because they are in different trusts, are they not considered separate entities in the case of a lawsuit? They can sue that one trust but not the other trusts held in the same LLC? I don't know. That's why I am asking.

    Each LLC is its own box. In case of internal liability, you risk loosing all the content of the box.

    If you put all your properties in the same box, an attack into one risks all of them. So yes, depending on the value of each property, it may be better to have one local LLC per property. All of them owned by a WY holding LLC.

    Generally a revocable trust only provides anonymity. It does not provide asset protection. If you have ten trusts into one LLC, the only asset protection entity is the LLC. So if one trust is attacked, you may loose the nine others.

    I am not a lawyer so you would like to talk to one, but here is the setup I eventually adopted for myself after consulting a few attorneys.

    Each rental property is titled into a Land Trust, each land trust has a local separate single member LLC as beneficiary. All the local LLCs are owned by a WY holding LLC. This WY holding LLC also hold my non dangerous assets (brokerage account, bank accounts, etc...).

    The WY holding LLC is managed by a C-corp, that is also 1% member of the WY LLC. This Corp is the public face of my operation. It acts as landlord, manage all the companies, and give me the fringe tax benefits available to a C-corp.

    The 99% holder of my WY LLC is my living trust. This trust only purpose is to avoid probate. I have also a pour over will and advanced directive. I wouldn't put some of my personal property into the WY holding LLC, as it may weaken your protection, a case could be made that the LLC is becoming your alter ego and piercing its veil. For these few personal asset, for anonymity purpose, I created a few personal property trusts to mask the title ownership of some of assets (car, ...).

    I have created a separate NM LLC to act as trustee of my land trusts and property trusts. NM LLCs do not have great asset protection statutes, but they are very cheap and anonymous and as trustee, you don't get really any liability per se anyway.


    0Reply
  • Issa Santos
    Member since 2023 · 35 posts · 0 votes
    2y
    Interesting. So would this work in Florida to provide anonymity?Quote from @Scott Smith:

    While I have assisted many investors with the Wyoming LLC, it is not the only method to introduce anonymity for an LLC. When establishing an LLC you can also nest it into an Agent Trust for external anonymity, which functions in a similar way as the Land Trust would for the individual property. The involves having an attorney sign as the "nominee trustee." This means your name does not appear on public record, and instead it is a name protected under attorney-client privilege.

    This means you can create and operate a (Series) LLC from any state with anonymity on public record. An example of what the structure of a Series LLC with anonymity would look like is this:

    ............................................................... Series LLC...........................................................................

    ....................................................... Agent Trust (anonymity) .................................................................

    Child Series 1 ...................................... Child Series 2 ......................................... Child Series 2 ........... (etc)

    Land Trust 1 ........................................ Land Trust 2 ........................................... Land Trust 2 ............ (etc)

    Property 1 ............................................ Property 2 ............................................ Property 2 .............. (etc)

    But it is just another option. Both work. I have just found that often the Wyoming LLC is more work than is required simply to introduce anonymity externally.

    And as other people have mentioned in this thread, many trusts do not actually offer liability protection. If you are operating something like a Delaware Statutory Trust you are in a good spot, but that is not what it appears the OP was referring to.

    The simplest and most effective asset protection strategies have often included a Series LLC as the asset holding company and traditional LLC(s) as operating companies. The asset holding company is implementing best strategies for both external and internal liability and will also separate each property into it's own "child" series for liability purposes. The Traditional LLC conducts the highest liability actions to limit exposure and carry the lionshare of the liability. Of course it all just depends on what types of investments you have and the size of your portfolio.


    0Reply
  • Issa Santos
    Member since 2023 · 35 posts · 0 votes
    2y
    Hi Mike S., 

    I’m in Florida as well working on protecting some of my rentals. Would love to connect. Do you have an attorney that set up your LLCs? Also am looking for tax planning and tax preparer. 

    Quote from @Mike S.:
    Originally posted by @Michael Aschenbrenner:

    Mike S. I am not sure what you are suggesting / why you are suggesting it. Are you suggesting a different LLC for each property? Also, if others do not know of the other properties because they are in different trusts, are they not considered separate entities in the case of a lawsuit? They can sue that one trust but not the other trusts held in the same LLC? I don't know. That's why I am asking.

    Each LLC is its own box. In case of internal liability, you risk loosing all the content of the box.

    If you put all your properties in the same box, an attack into one risks all of them. So yes, depending on the value of each property, it may be better to have one local LLC per property. All of them owned by a WY holding LLC.

    Generally a revocable trust only provides anonymity. It does not provide asset protection. If you have ten trusts into one LLC, the only asset protection entity is the LLC. So if one trust is attacked, you may loose the nine others.

    I am not a lawyer so you would like to talk to one, but here is the setup I eventually adopted for myself after consulting a few attorneys.

    Each rental property is titled into a Land Trust, each land trust has a local separate single member LLC as beneficiary. All the local LLCs are owned by a WY holding LLC. This WY holding LLC also hold my non dangerous assets (brokerage account, bank accounts, etc...).

    The WY holding LLC is managed by a C-corp, that is also 1% member of the WY LLC. This Corp is the public face of my operation. It acts as landlord, manage all the companies, and give me the fringe tax benefits available to a C-corp.

    The 99% holder of my WY LLC is my living trust. This trust only purpose is to avoid probate. I have also a pour over will and advanced directive. I wouldn't put some of my personal property into the WY holding LLC, as it may weaken your protection, a case could be made that the LLC is becoming your alter ego and piercing its veil. For these few personal asset, for anonymity purpose, I created a few personal property trusts to mask the title ownership of some of assets (car, ...).

    I have created a separate NM LLC to act as trustee of my land trusts and property trusts. NM LLCs do not have great asset protection statutes, but they are very cheap and anonymous and as trustee, you don't get really any liability per se anyway.


    0Reply
  • Issa Santos
    Member since 2023 · 35 posts · 0 votes
    2y
    Hello Scott, 

    Are you still in the business? Reached out a few times and haven’t gotten a call back. 

    Thanks!

    Quote from @Scott Smith:

    While I have assisted many investors with the Wyoming LLC, it is not the only method to introduce anonymity for an LLC. When establishing an LLC you can also nest it into an Agent Trust for external anonymity, which functions in a similar way as the Land Trust would for the individual property. The involves having an attorney sign as the "nominee trustee." This means your name does not appear on public record, and instead it is a name protected under attorney-client privilege.

    This means you can create and operate a (Series) LLC from any state with anonymity on public record. An example of what the structure of a Series LLC with anonymity would look like is this:

    ............................................................... Series LLC...........................................................................

    ....................................................... Agent Trust (anonymity) .................................................................

    Child Series 1 ...................................... Child Series 2 ......................................... Child Series 2 ........... (etc)

    Land Trust 1 ........................................ Land Trust 2 ........................................... Land Trust 2 ............ (etc)

    Property 1 ............................................ Property 2 ............................................ Property 2 .............. (etc)

    But it is just another option. Both work. I have just found that often the Wyoming LLC is more work than is required simply to introduce anonymity externally.

    And as other people have mentioned in this thread, many trusts do not actually offer liability protection. If you are operating something like a Delaware Statutory Trust you are in a good spot, but that is not what it appears the OP was referring to.

    The simplest and most effective asset protection strategies have often included a Series LLC as the asset holding company and traditional LLC(s) as operating companies. The asset holding company is implementing best strategies for both external and internal liability and will also separate each property into it's own "child" series for liability purposes. The Traditional LLC conducts the highest liability actions to limit exposure and carry the lionshare of the liability. Of course it all just depends on what types of investments you have and the size of your portfolio.


    0Reply
Join the conversationCreate a free account to reply, vote on answers and follow this thread.
Log InJoin for Free