Do you put your rental properties into Anonymous LLC?

[Lingo Lin]

I have my personal home under my name and am considering putting it under an LLC, I did research which took me further into considering putting my own home as well as any rental properties I own in an Anonymous LLC.

This would be for protection from creditors.

Does anyone have experience doing this for your own property and or rental properties?

Please share if you do, thank you.

[Jerry W.]

@Lingo Lin, very creative name. I am an attorney, but am not your attorney, so I am speaking about laws and my training, not becoming your attorney or giving you legal advice. I am licensed in Wyoming, not New York. First putting your primary home in an LLC, as a trustee for you or someone else to avoid liability is a hugely bad idea in nearly every case I can imagine due to a slip and fall, or other liability on the property.

First LLCs and anonymous trusts are more fiction than fact as to reliability. The folks touting their greatness are almost always the ones selling them. Like snake oil if the only one saying it is great is the one selling the snake oil you might get concerned about how great it is. Now I am not saying those attorneys are snake oil salesmen I just pointing out tactics that are common. Now it is almost impossible to keep something anonymous if you use it. Drive a car belonging to an LLC and have an accident and see how long it takes an attorney to find out who is really the actual owner. A few interrogatories or a deposition will slice through the "anonymity" like a hot knife through butter. If you could really truly protect your assets from ever being sued and taken, don't you think every person in the United States would have done it and no one could ever sue anyone ever again? Look at the truly big real estate developers and movers on this site. Not a single one of the true professionals use these anonymous blind trust things, not a single one.

As to your private home, nearly every state has a thing called homestead exemption laws of some type. For example in California, the king of stupid law suits state the exemption is the entire home, I think Florida, and many others have the law too. That means if someone sues you and gets a huge judgement and goes to collect it, your equity in that home is protected from being taken up to the amount of the states exemption law. So in California, and Florida if you have a million dollar house and they have a million dollar judgement against you, they cannot take a dime of it. Wyoming has one of the worst exemption laws, only $10,000. However that amount can never be taken from you. Now if you are married and the house is owned jointly with your spouse it is considered to be tenants by the entirety. That is a special form of ownership that means that both you and your spouse own it entirely. This means if they sue you and win, but your spouse is not liable, they still cannot take a single penny of the value of your house if both of you own it. I don't know if that applies to every state, but I have heard it is common. put the property in an LLC or trust and you lose every protection I just mentioned. Next lets suppose that you move everything into an LLC just to hide it to protect yourself from lawsuits. LLcs have protection that protect the owners from lawsuits. In order to get through that protection the attorney must do something called piercing the veil. Basically it asks the court to ignore the LLC or corporate status because of wrong doing by the defendant. Intentionally making yourself broke in order to avoid liability is a great way to get the protection dropped by a court. Next try doing business, getting a loan, networking, or even a credit card if you don't own anything. Why would some bank take a chance on loaning you money if you have no assets?

Example, you are sued, lose and owe $10,000 or even $1 million no difference. You are put under oath and they ask you questions. First where do you live? You tell them. They ask do you own it? If you say no and they found out later you did, you might go to prison. lets pretend you say no because you think you don't. they next ask how much rent do you pay? Well do you pay rent? Who do you pay it to? You mention the LLC, assuming you do pay them rent. Who owns the LLC they ask. What do you say? Someone has to. you say ABC Trust owns it. They ask who owns ABC trust? you say what? Do you know who created that trust? Someone has to sign the document to create it. Was it you? Maybe your attorney signed it. Do you have a lease from the LLC to you? Who signed it for the LLC? You? Really who did? A friend? They depose your friend. they ask him are you are the owner of the LLC? Think he will risk going to prison for you by lying? Lets say your attorney signed it, that would horribly expensive, but they ask him do you own it? Guess what an attorney can get grieved for doing a business deal with a client. Think he will risk being disbarred? Say you put the property in a friends name. What if he gets sued? His creditors can take it. Maybe your friend takes it and won't give it back? You cannot sue him and force him to give it back, you have "unclean hands" It prevents you from suing because you were committing a fraud and cannot ask the courts help to protect an illegal act. Lets say this guy would never steal from you. What if his wife divorces him, she could get it. They could take it for unpaid child support or if he is in an accident. What if he dies in a wreck, his kids don't know the deal.

I could go on for hours like this.  Your insurance on your home won't protect you if you don't own it.  now you lost your insurance protection. Gah.

Just have insurance, do business the right way.  Don't drive drunk, be responsible, etc.  I have not even touched the accounting nightmare and tax issues you will create.

Hopefully this will make you think a little bit.  look up the exemption amounts in your state.  they cannot take equity that doesn't exist.  Your mortgage is an offset to any item they can garnish.