All Forum Posts by: Rob C.

@Jason Bott, thanks for the follow-up, but it doesn’t really address my question. Did you read the article I linked above? If you disagree with it can you please let us know why?

Assuming the article is factual, wouldn’t the following be a better representation of the choices a landlord has for being named on a renter’s insurance policy:

Additional interest - you will receive notification of changes to the policy

Additional insured - you can make a claim against the policy, but payout is likely to be dramatically less (and potentially zero) if it’s a matter of tenant liability.

Would you actually recommend a landlord be named as “Additional Insured” over “Additional Interest” on a renter’s insurance policy? If so, please let me know what I’m missing. 

@Klemens N. I like the point by @Steve Vaughan to go the last yard with a management company. However, I think I’d hire one rather than set up an entity through which you would manage. I don’t think the latter would make much difference given that you’d still be interfacing with the tenant. The more I’m coming to learn about liability the more I’m becoming convinced it is important to have a layer of separation between owner and tenant. And that’s a shame because I actually do enjoy building a rapport with my tenants and I’ve had such hard luck finding decent property managers in the past. I’ve managed most of my rentals in the past, but I think I’m convinced at this point it’s not worth the risk. From what I gather the person interfacing with the tenants tends to be named personally in frivolous lawsuits brought by tenants. And while I think I agree that your assets within your entities would be out of reach if you’re sued personally, wouldn’t a collector be able to garnish your wages if they get a judgment against you personally? or distributions if you choose to take them? Everyone’s risk tolerance is different, but that is a scenario I would rather try to avoid personally at the cost of a professional PM. And it’d be a good idea to make sure that the PM will keep your name from being disclosed, e.g. on leases or any other documentation with tenants.

This also ties a bit into my earlier question - is there any advantage to designating yourself personally as the manager of the LLC as opposed to the FRT? Just seems like a best practice to avoid using your personal name anywhere you don't have to, but please correct me if I'm mistaken.

@James Leigh - why do you say that being an “Additional Insured” is the preferred way to be listed rather than as “Additional Interest”? I assume in that statement you’re still referring to the situation you described about landlords wanting to be added to a renter’s insurance policy. Did you read the article that I linked above? Can you please explain why the authors may be incorrect? or are there any advantages of being an “Additional Insured” that we are not yet aware of in this thread that somehow offset the disadvantages mentioned in that article (e.g. being “prohibited from tendering a claim against the renters policy for the liability to pay for the damage” such as when a tenant causes a fire)?

@Nathan Gesner - got it, that makes sense. Thanks for the clarification. I’m just concerned newcomers reading that “Additional Insured - affords you protection under the policy” might instinctively think that must be the better option then, so I just want to point out to them in cases like a renter’s insurance policy it’s probably not for the reasons described in the article.

@Bill Crow - thanks for the reply. I think I agree with everything you said, although I think I’d go further to say that being “Additional Insured” is of negative value (pending @Jason Bott’s response)

@Nathan Gesner - it seems like you are using the terms “Additional Insured” and “Additional Interest” interchangeably. I’ve found that to be a common assumption/misunderstanding throughout these forums threads, but it appears the ramifications are very different depend on which you choose. Take a look at the article I linked above for more details.

@Jason Bott & @Bill Crow,  

This article makes a compelling case that “Additional Interest” is a much better option than “Additional Insured.” Are you able to point to why the authors may be wrong on the points made? If they’re right, it seems like those disadvantages for an “Additional Insured” outweigh the advantage of being able to make a claim on the renter’s policy if the renter refuses to.

This article makes the case that “Additional Interest” is the way to go

1) Thanks for the clarification @Klemens N. I’m still coming up to speed on trusts, and was not aware that the trustee’s state of residence was the factor controlling the trust’s domicile. Seems counterintuitive because people move. And sure enough, upon some quick googling, I found that moving can potentially open up a can of worms: https://dennisfordhamlaw.com/d... I wonder if this could be another reason someone suggested to me setting up a Trustee LLC (e.g. in Wyoming) to serve as trustee on any trusts I might set up- i.e. the LLC (and corresponding trust) stays put (e.g. in Wyoming) even if I were to move about the country. Guess I have more research to do :)

2) Yea, I guess that makes sense that the manager is indemnified by the LLC. I've heard though that property managers, for example, tend to get sued individually and held liable even if their actions correspond to work for their respective property management LLC. I seem to recall concluding that may have just been for torts though- I've come across so much mixed information on that topic that I don't really know what to believe. I figured though it would be a best practice not to include yourself as a named individual unless necessary. Is there any advantage to naming yourself as manager as opposed to having the FRT be the member and manager?
As for the FTB, they have a different perspective published on their website, but I think I would agree with you that it’s an unenforceable perspective inconsistent with the tax code (in my non-lawyer opinion and pending further input on the parallel thread I linked earlier). Upon further thought, I guess the FTB wouldn’t view your situation any differently anyway if your FRT was the manager since that trust is based in California (I assume) just like you, so I guess it doesn’t make any difference on the franchise tax topic. 

@Daniel Hankins - I love the way you’re thinking. I’m in the initial stages of brainstorming a non-profit with similar intentions, so I can relate on a lot of levels. I’ve noted some of the things I have in mind on my profile if you’re interested in getting a sense. I’m aspiring to set up a proof of concept the latter half of this year, although it more realistically will happen after the year is over. I’m very curious to hear if / how you’ve taken action on any of this since the post was originally written a couple years ago. 

@Klemens N., I just noticed a couple aspects of your structure that are a bit confusing to me, which I’m hoping you might be able to clarify.

What is the reason you chose California Land Trusts to hold your out-of-state properties? I wasn’t even aware you could do this. I assumed that the land trust had to be set up in the same state that the property was located.

Does this imply that your Wyoming Series LLC is manager-managed and its corresponding Operating Agreement defines you (i.e. as individual) to be manager? Wouldn't that open you up to unnecessary liability as opposed to making it member-managed so that the FRT entity serves as both single-member and manager? as well as unnecessarily give the FTB a reason they think they may be able to collect franchise tax from you (regardless of whether they legally can or not)? I'm no attorney (so my questions shouldn't be interpreted rhetorically as legal advice) and I know you aren't either, but I'm interested to hear your personal perspective on these topics.