Asset protection question

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Asset protection question

Monte Blunk
Investor 路 Salt Lake City, UT 路 Member since 2016 路 81 posts 路 16 votes

I have been trying to learn about asset protection and have been talking to Anderson Advisors in NV and another lawyer in ID about setting up a structure for our multifamily complexes here in Utah. Both of them are saying different things about how to set up our structure.

1. Anderson Advisors are trying to sell me a package for around 14K that sets up multiple (6 separate) LLCs in Utah under a Holding LLC in Wyoming that helps give up anonymity. They also are trying to have us set up a C Corp that would serve as the operating company for our vacation rentals so we can use this structure for some of the tax benefits. They also would have us use their tax advisors for an additional cost. The whole structure is quite expensive, and confusing and seems very complicated. Which is why it worries me. If I don't really understand it then how do it know if it really will protect our assets.

2. The other lawyer is recommending that we set up a Limited Liability Limited Partnership to hold our investment properties and business accounts with us as 1% interest (general partner) and our estate trust as 99% interest (limited silent partner). The limited silent partner in this LLLP would be assigned to a Family Estate Trust that would be set up for us. This seems less complicated but again not sure how it really protects our assets in the settings of litigation coming from both inside a property and outside the property.

Would love any advice on what others have done and if they fell either of these structure would be helpful.

Monte Blunk

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    Jack Middleton
    Investor 路 Seymour, IN 路 Member since 2016 路 165 posts 路 32 votes
    6y

    @Amy Kendall

    A trust is that much? Wow. I just put our personal house by recording a warranty deed to trustee in the trusts name (that we made up). That formed a trust. Not sure about your state though.

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    • Rene D.
      NV 路 Member since 2019 路 254 posts 路 57 votes
      6y

      There are a lot of posts on AA so do a search and you should be able to read through.

      I dont know your entire situation but #1 is pricey and complicated - just my .02.

      0Reply
    • Amy KendallBusiness Member
      Real Estate Broker 路 Lehi, UT 路 Member since 2016 路 397 posts 路 318 votes
      6y

      @Monte Blunk My husband and I are just about to finalize our asset protection. We are going to convert our current LLC into a series LLC that we can then transfer the titles of our properties into. I know of several investors that currently use this structure. We have an estate planning lawyer helping us with this, and I was surprised how inexpensive this part was (only around $500 or so). We are also creating a trust for our personal asset protection, which will cost us around $2500. He seemed very knowledgeable and was recommended to us by someone. Your option #2 sounds like the personal asset protection part that we are having prepared, but the series LLC is separate from that. Option #1 seems costly and unnecessary in my opinion. I would look into creating a series LLC and see if you feel like that will give you adequate coverage, and then consider forming a trust if you want additional protection. Good luck!

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    • Monte Blunk
      OP
      Investor 路 Salt Lake City, UT 路 Member since 2016 路 81 posts 路 16 votes
      6y

      @Amy Kendall Thanks Amy!  Do you mind sharing the person who was recommended to you to set up your Asset planning.   Hope all is well! 

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    • Mike S.
      Investor 路 Broward County, FL 路 Member since 2018 路 1k+ posts 路 938 votes
      6y

      @Monte Blunk

      The LP is maybe a little more robust than the LLC as asset protection entity. However it may cost more.

      However the difference between the two solutions offered are that you are using one entity vs multiple. If you are attacked from an inside liability issue, you can loose all the asset in the entity. That is probably why option A was splitting your assets into different entities to limit the risk. So in that part, this option would be more secure.

      The additional step of creating a Corp for management is adding a little bit of asset protection but is mainly created for tax purposes to get a lot of fringe benefit and other retirement planning.

      I have adopted myself a similar structure with a holding WY LLC and a Management Corp. I did not use Anderson advisor to create these entities and it didn't cost that much.

      But as you will be the one using these entities and also maintaining them you have to understand their purpose and requirements. If you don鈥檛 feel confident that you could do it go for the simpler structure. I believe that it would be less secure, but it will be much better that what you have now or risking piercing the veil of a something to complex that you don鈥檛 manage properly.

      1Reply
    • Monte Blunk
      OP
      Investor 路 Salt Lake City, UT 路 Member since 2016 路 81 posts 路 16 votes
      6y

      Thanks! 

      @Mike S.

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    • Jaiden Olsen
      Rental Property Investor 路 Kaysville, UT 路 Member since 2017 路 141 posts 路 120 votes
      6y

      @Monte Blunk, I would only recommend using a series LLC if all of your properties are located in Utah. From my understanding, the series LLC is a Utah product and is great for in State investors, but I'd be wary of holding out of state properties in a series LLC. Check with @Jeffrey S. Breglio, with the Breglio Law office in Salt Lake. He is the best of the best!

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    • Monte Blunk
      OP
      Investor 路 Salt Lake City, UT 路 Member since 2016 路 81 posts 路 16 votes
      6y

      @Jeffrey S. Breglio thanks!  I will check out your website and would love to set up a time to meet with you for a consult.  We have a mutual friend in common, Alan Walker.  

      0Reply
    • Monte Blunk
      OP
      Investor 路 Salt Lake City, UT 路 Member since 2016 路 81 posts 路 16 votes
      6y

      @Jaiden Olsen thanks! 

      0Reply
    • Jack Middleton
      Investor 路 Seymour, IN 路 Member since 2016 路 165 posts 路 32 votes
      6y

      @Amy Kendall

      A trust is that much? Wow. I just put our personal house by recording a warranty deed to trustee in the trusts name (that we made up). That formed a trust. Not sure about your state though.

      1Reply
    • Jack Middleton
      Investor 路 Seymour, IN 路 Member since 2016 路 165 posts 路 32 votes
      6y

      @Jeffrey S. Breglio

      I'm using the trusts and LLC structure. I agree 110% about not having a financial planner giving asset protection advice. 馃憤

      0Reply
    • Jack Middleton
      Investor 路 Seymour, IN 路 Member since 2016 路 165 posts 路 32 votes
      6y

      @Jack Middleton

      I meant an asset planner

      0Reply
    • Crystal Brooks
      Austin, TX 路 Member since 2019 路 8 posts 路 3 votes
      6y

      @Monte Blunk There are a few different strategies out there. One that is popular as well is the Series LLC. It uses trusts and llcs like Jack Middleton mentioned. If you checkout podcast #109 here on BiggerPockets it gives a good high level overview of that structure. There is also a few articles here.

      https://www.biggerpockets.com/renewsblog/the-traditional-llc-vs-the-series-llc-which-is-better-for-real-estate-investors/

      https://www.biggerpockets.com/renewsblog/pass-through-entities-real-estate-investors/

      1Reply
    • Monte Blunk
      OP
      Investor 路 Salt Lake City, UT 路 Member since 2016 路 81 posts 路 16 votes
      6y

      @Crystal Brooks thanks! 

      0Reply
    • Duane Richards
      Cedar Hills, UT 路 Member since 2019 路 64 posts 路 43 votes
      6y

      @Monte Blunk I am in the same boat you are. I met with my accountant, who highly recommends an LLC for my properties (even possibly one LLC per property), my lawyer, who actually suggested a separate LLC for my own property management (if you're thinking of managing them yourself), that way all the lease agreements etc. go into an LLC with no real assets aside from a little money in the bank used for CapEx, maintenance, vacancy, etc., which I thought was an interesting suggestion. He also suggested I stay away from a series LLC for now, as they haven't been "proven out" in courts in Utah, they're only about 5 years old here according to him. Here was an interesting article on Series LLC's and asset protection I found: https://www.corporatedirect.com/c-corps-s-corps/series-llcs-where-angels-fear-to-tread/

      I'm also looking at investing out of state, which means I either need an LLC (or multiples) in each state I plan to invest, or I can form in Utah and register with a foreign qualification in another state (or something like that). I'm still not sure what works best, so I'm also open to any follow-up posts!

      @Crystal Brooks thank you for the podcast suggestion and articles, I'm listening and looking right now!

      @Jeffrey S. Breglio, thanks for your advice as well, I'll be checking out your web site content.

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    • Jeffrey S. Breglio
      Attorney / Investor 路 Salt Lake City, UT 路 Member since 2015 路 228 posts 路 198 votes
      6y

      Duane, those that tell you to "stay away" from something are those who don't understand them and can't provide them so they want to push you in a direction they can service. That it "hasn't been proven" is a weak argument, they said the same thing about LLCs 40 years ago and now look where we're at. We recommend the Series LLCs and have been using them for over 15 years.

      I do often recommend a separate property management LLC, especially for clients with a large number of rentals or using the series LLC as it helps with bookkeeping. This also deflects liability to an entity without assets. A good strategy.

      For out of state properties, my general recommendation is the use of a property (think "Land") trust. That will avoid needing to register your LLC in a bunch of states.

      Happy Investing!

      Jeff

      1Reply
    • Cathy Karowski
      Investor 路 Rockport, TX 路 Member since 2016 路 8 posts 路 2 votes
      6y

      @Jeffery S. Breglio I have formed a Series LLC for my rental properties. What are your thoughts on utilizing Protected Series 1 as the management protected series, responsible for managing the operations of the business? Protected Series 2 and on will hold separate pieces of property or operate different segments of the business. Many have suggested a two-company structure to separate assets from activities by forming a shell management company for dealings with tenants, vendors, and the public. It seems to me that utilizing one of the series for management activities accomplishes the same goal.

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