All Forum Posts by: Rob C.

@Jane Ng - I encourage you to take a look at this thread to see if you still agree with @Christopher Smith. Christoper, I don’t understand why you continue to spread this unsubstantiated opinion after our previous chats on the topic. If you really know what you’re talking about then please answer the questions I’ve posed in the aforementioned thread with links to corresponding sources of authoritative information that support your position

@Justin Fitzgerald - did you go any further with Zillow? I read from others here on BP in years past that their repair costs were unreasonable, but wonder if that’s changed recently. They gave me a great price on initial offer for one of my properties, and I’m tempted to pursue it 

@Basit Siddiqi - thanks for chiming in, although I’m not sure how to interpret that. Is the scenario I’ve described at the onset of this thread one such way to avoid it in your opinion?

@Jerry W. - thanks for the clarification. First of all, I appreciate people like you who aren’t afraid to challenge conventional wisdom when it seems bogus. And I see how the language in (d)8 could be interpreted in the manner you’re describing. However, Clint Coons’ blog references (d)8 as a reason for why the concept of SMLLC as beneficiary of land trust works and avoids the due on sale:  https://www.biggerpockets.com/... Another attorney, Scott Smith, elaborated on this in another post saying:
The St. Germain lists this type of transfer under it’s exemptions (d), “a lender may not exercise its option pursuant to a due-on-sale clause upon… (8) a transfer into an inter vivos trust in which the borrower is and remains a beneficiary and which does not relate to a transfer of rights of occupancy in the property…” This is stating that this type of transfer is exempted from the Due on Sale Clause. Even though your name is not directly listed as the beneficiary, you can prove ownership of the trust and still fulfill that role. The reason for this is that the Land Trust is considered an estate planning tool, not an asset protection tool. https://www.law.cornell.edu/us...
Honestly, from my vantage point it’s hard to know for sure based on the ambiguity of the text in that law. Are you able to point to any authoritative sources that support your interpretation?

Thanks for the clarification on the other point as well that all anonymity will disappear rather than protection. That makes more sense to me. As for the protection, I think I agree with you that the line blurs when it is based on a judgment call you make. That’s another reason I’m looking to hire a property manager and let them call the shots. Are you suggesting though that the corporate veil will be pierced if the owner is found to be negligent on any level? I’m not convinced of that from my research. Gross negligence though? I would guess more likely in that case, but again it’s hard to know with all the mixed information out there. I’d be interested to learn of any authoritative sources of information you may have on this topic as well.

@DeWayne Lewis - Ian Scattergood was considered the go to guy for this sort of thing within SDCIA when I was attending their meetings many years back. I talked to him a couple times and he really seemed to know his stuff. Looks like he’s still at it: http://www.permitprosd.com/ 

@Sean Morrison, Thanks for continuing to weigh in on this topic. I have a few questions on your last post:

Are you sure that is the case with land trusts (a.k.a. title holding trusts)? If so, how does that reconcile with the description in the final section at bottom of this page for “Title Holding Trust”?

Are you implying that the trustee (i.e. Klemens) owns the LLC somehow indirectly by his involvement in the FRT that owns the holding company that holds said LLC? Even so, wouldn't the creditor be required to pierce the corresponding corporate veils in order for the court to order the LLC interest be turned over?

How does that reconcile with the suggested solution in the final paragraph of this article. In that solution the Wyoming company is said to avoid California jurisdiction even though it indirectly benefits from CA property via an underlying California LLC. How is that different than the Wyoming company in Klemens' structure that indirectly benefits from CA property via the land trust?

@Jerry W., Thanks for adding your insights to the thread. When you say if an attorney is sued as trustee they can get the property in the trust, I assume you're referring to lawsuits related to the property, correct? In that case, how is that any different than if the property were in an LLC (e.g. wouldn't the equity in the property would be at risk anyway to inside liability?). I get the impression that @Klemens N.  does not expect the trusts to provide any asset protection by themselves. I’m assuming they are in place for sake of anonymity and/or to keep any mortgages from being called. On that latter point, may I ask where you got the impression that the lender can call the loan due if a mortgaged property is transferred into trust for reasons other than estate planning?  is this law not the one you’re referring to ? 

You make a good point that this can get really expensive really quick if you have an attorney sign all documents for you. One interesting workaround I've heard for this is to appoint yourself as a "President" of an LLC with such signing authority as described a little at the 10 minute mark of this video. Granted, your name is still out there on documents but not in the capacity of member (e.g. owner). Not sure how effective this would be or not, but am throwing it out there to see if anyone can poke any holes in it before I consider adopting it myself.

Lastly, may I ask what makes you think all layers of protection would strip off in the event of a CO leak (or any other situation the owner is considered negligent, which I assume you’re inferring here?)?

@Klemens N. - I hope you didn’t take my feedback and follow-ups as a general criticism of your structure. For what it’s worth, I like your structure more than any others I’ve come across in my research thus far and I’m likely to base my own off of yours, so thanks again very much for sharing. Also, sorry if I wasn’t clear, but I didn’t mean to imply you should have a member-managed LLC. My question rather was why not appoint the FRT as manager (regardless of the choice to make it a member-managed or manager-managed LLC)? I’m not aware of anything that prohibits the manager from being the same as member in a manager-managed single-member LLC, but please correct me if I’m wrong. 

@Johnny Weekend - take a look at this thread for insights on why the responses you’re getting here regarding the franchise tax rules may not be entirely accurate: https://www.biggerpockets.com/...

@Janet S. - I'm interested to hear more about your situtation. Did the FTB discover your LLC structure themselves and come after you? Or did you voluntarily file Form 568 and pay (e.g. per an accountant's advice)? It'd be interesting to hear what the FTB would say to you if you were to put a trust on top of those LLCs as discussed at the aforementioned link.

Thanks for the reply @Jason Bott, but I don’t see that as being a missing piece. The question is not unique to my personal situation, but rather a more general one - which would you recommend to your clients, and why? 

Limiting the choice to that binary option doesn’t seem to make sense given all of the context presented in this thread. The question itself seems like it’d be misleading to any unknowing client of yours since they wouldn’t stop to think that the latter option may involve a dramatically reduced payout such as the aforementioned article describes - and that’s why I keep asking if and why you disagree with the article? That’s a simple enough question from which to start the conversation. 

I’m not sure how this is relevant. I don’t have the data on it, but I would wager most property owners aren’t even aware that they can be added to their renter’s policy. That doesn’t mean they shouldn’t be. I can’t imagine you’d advise them not to bother. Given my current understanding, it seems that every property owner should want their property manager listed as “Additional Interest” on the renter’s policy so that they can enforce it (that’s what PMs are there to do - enforce the terms of the lease). Or if they are self-managing to be added themselves as “Additional Interest” - what’s the harm in that option?