Putting property in an LLC

[Margaret Saddoris]

I have just inherited a few homes that are paid off from a deceased family member. They are all in horrible disrepair. One of the properties was torn down while in a trust. The person in charge of the trust did not pay the taxes for this property for six years. I can't even give this lot away due to the back taxes. I do not have the money to pay the taxes either. I inherited my biggest nightmare. Had I known this, I would never have taken the houses. If I place the empty lot in an LCC will this protect me from any legal issues that might come along? My attorney swears to me that I will be safe, but he is also the person who gave me this nightmare. Also, the city has yet to send out a bill for the tear down of the property. Will the LLC protect me from this also?

[Scott Hubbard]

Originally posted by Margaret Saddoris:

I have just inherited a few homes that are paid off from a deceased family member. They are all in horrible disrepair. One of the properties was torn down while in a trust. The person in charge of the trust did not pay the taxes for this property for six years.

The trustee as a fiduciary responsibility to protect the interests of the trust and its beneficiaries. Here are the issues that I see the trustee should have addressed.

1. Why were the heirs not informed of the back taxes? This should have been disclosed prior to the transfer.

2. Why were the taxes not paid? This is a major problem because it flies in the face of why the trust was created (to protect the interest of its beneficiaries).

3. Why were the buildings not maintained? If the assets were not properly maintained and due to the lack of maintenance the assets were allowed to fall into into disrepair, then the trustee may have acted or not acted in the best interest of the trust.

There are many things a trustee can do if the trust lacks liquidity. For instance, the trustee could have sold off the assets long ago to prevent further losses. Trusts can borrow money against its assets if the trustor allowed it to do so.

Many trustees are professionals (attorney's, CPA's, licensed fiduciaries) and make their living from management fees charged as trustees. It is difficult to show malpractice and even harder to prove fraud, but you may threaten to take the trustee to court and they may not take the chance and settle with you instead.

Originally posted by Margaret Saddoris:

My husband and his brother are both owners of the property. Because the property no longer has a mortgage the attorney just switched the deed over to them. We were not told of the back taxes when my husband and brother signed for the homes. We have tried to give the city, hud, habitat for humanity etc. the property. However, because it is just an empty lot with 8,000 of back taxes due no one wants it. It is in the inner city and in a bad neighborhood. The land is not even worth 8,000. Our attorney has told us that if we put it in an LLC and forget about it then my husband and his brother will be protected. This should be an easy question but we have spoke with a few attorneys at this point and no one knows the answer

I agree with Mitch on this one. This is really bad advise as the debt has been incurred prior to any transfer and putting into any entity will not help you avoid payment should they pursue you.

Not only is this bad advice, I think the advice is actually a scheme to defraud and the fact it was suggested by an attorney suggest they are either very shady or very ignorant and in either case should not be trusted.

Is the attorney you spoke to the trustee?

If the trustee or if the attorney you spoke to is legal counsel for the trustee or trust, then you should also threaten to write a letter to the state bar informing them of the advice you received and the lack of disclosure made of the back taxes. Essentially, you and your husband are responsible for the debts now and you could have refused the transfer had you been given the opportunity.

Attorney's do not want claims made against them. It costs them dearly in malpractice insurance premium increases and costs them in terms of reputation. So, you may need to hire another attorney to explore your options.