All Forum Posts by: Ken McGrew

I don't understand the flippant hostility directed towards myself and my post. This is a professional forum.  

The legal advice I was given is consistent with pretty much anything you find about the subject on the Internet. I got it from a very old and established firm. I suspect the advice is correct. The bank agent at chase said she's lost hundreds of thousands given their policy. I am currently with a local bank and it was not problem. It was not a problem buying properties under the llc either.  But now I need a national bank. 

It's necessary to read the links I provide carefully.  Here's another https://clintcoons.wordpress.com/2011/11/03/how-to...

Here's yet another 

http://info.legalzoom.com/sign-behalf-llc-23236.ht...

The whole reason to have an llc, which is not absolute protection as numerous discussions on here indicates, is to create a separate entity than yourself. If you sign personally there is no llc. 

What I have been asked to sign is a contract regarding the bank account. If you are ever sued the attorneys will attempt to "pierce the viel" which means to show that you were operating as an individual rather than a corporation. Commingling funds and improper signing are low lying fruit. A contract is a contract for these purposes if sued. Banking or not. 

Please, are they any members who are experienced and informed on these matters?  The attorney charges $400 per hour. I just need bank recommendations for national banks that have a different policy. And the attorney might not know of a bank that will allow me to follow his advice. 

I brought all the filings from the state and iRS. 

I'm following attorney advice which you will find repeated everywhere:  http://smallbusiness.chron.com/proper-signature-ll... Signing under the personal name allows for piercing of the viel. 

 Chase set it up with the Federal tax ID bus would not allow me to sign as president. Waukovia was the same. US bank said I'd have to sign under my social security number. 

There must be people on here who have had this issue and found solutions. 

I was cautioned by an attorney to never sign anything in my personal name related to the LLC but rather to sign: "by (signature), president" I have been unable, however, to open a bank account for the business. So far banks are insisting that I sign personally. Not guarantee personally but sign personally for the business account which, as I was told by the attorney, would pierce the veil. Does anyone know of banks that will have different policies or does this rule somehow not apply when it comes to bank account contracts?

There are two conflicting opinions being presented to investors, including on Bigger Pockets, regarding owning property in the name of a trust and making an LLC a beneficiary. As proponents of each perspective are represented on Bigger Pockets, and profiting in many cases from giving their advise, it would certainly be welcome to have them address each other's perspective for the benefit of the membership. I'm hoping this post will spur such a discussion. Moreover, I'm hoping actual case experience can be brought to the discussion.

Owning in the name of a series LLC in a State with good strong LLC statutes seems to be the best option, but is generally not available or not available at favorable loan terms. If anyone knows national banks that don't enforce the due on transfer clause and yet have the better rates available, please speak up.

Against Trust and LLC as Beneficiary

Mr. Miller takes the position that there is little benefit to owning property in a trust much less making an LLC a beneficiary because a) the trustee is liable, b) the trust is liable to satisfy any judgement against the trustee, and c) the LLC being beneficiary does not own the property and thus provides no protection to the asset.

For Trust and LLC as Beneficiary

Mr. Coons argues for the Trust with LLC beneficiary, but does not seem to address the liability of the trustee concern: http://andersonadvisors.com/wp-content/uploads/201...

Mr. Boots likewise argues for owning in a trust and transferring beneficiary to LLC. He states that all liability transfers to beneficiary but cites no source for this position: http://www.biggerpockets.com/renewsblog/2009/03/11...

This presentation does a nice job visually but doesn't address the point at controversy: http://www.assetprotectionplanners.com/articles/re...

This article cites MA caselaw that shows how the trustee can be liable: http://www.richmaylaw.com/?t=40&an=28864 It also suggests that using specific language, in MA, could mitigate contract liability for the trustee (but not presumably other forms of liability). At the same time it cites MA caselaw holding that the asset itself cannot be attached to liens against the individual owner.

This article may be useful, particularly the section on Control, which says the trustee liability is generally limited to the trust itself, meaning not personal assets but trust assets, which may isolate exposure to a given trust http://yourentitysolution.com/wp-content/uploads/2...

Questions

As I am not an attorney and am not giving legal advise, and these attorneys don't agree nor specifically address each others' critiques of each other, I still don't understand if there is any benefit to owning in the name of a trust much less making beneficiary an LLC. It may be that owning each property as a trust isolates them from each other, providing some asset protection, but not liability protection. There may be some personal liability protection if the properties are owned as an LLC, but this protection probably does not extent to trustee liability. Liability may be mitigated by insurance, but if sued individually as owner or trustee, is there insurance to cover this, especially if gross negligence is alleged does the fine print exclude coverage, or alternatively is their language excluding coverage for anything related to a contract? That is to say commercial insurance may exclude personal coverage, and personal coverage may exclude anything related to business, and anyone can allege anything.

Hi Scott,

Thanks for the advice, and it does seem to be the overwhelming consensus, for all the reasons stated.  

I am curious if and how people find investor friendly contracts/realtors because I am not finding them. I can't find anyone who will do a non-exclusive agreement, Etc. I can do most things myself but it's much harder than having MLS and showing access. I am looking into getting a license but don't want to delay the next two properties I hope to close this year.

You would think with the public threads like this one that show up every couple of months that numerous realtors would be posting that they are investor friendly. Because they don't you must conclude that they hate working with investors or else are turning away easier jobs that pay more. And yet we know what the salary ranges are for real estate agents. They should be motivated to earn 2K per day for 4 days work. I am assuming that most investors are series buyers for the right property and many home buyers end up not being able to actually work the financing. They need the agent to do all the searching for them on MLS. Am I missing something here?

I'm having great difficulty finding agents/brokers who will sign non-exclusive contracts, even contracts for duration of less than 6 months. I do my own research to find homes.  I want a realtor to do accurate sales and rent comps and to open a few doors, give honest opinions based on experience but never pressure me, or go against my interests, help with the offer letter, and take half of the seller paid broker fee.  I don't want to be obligated if the seller doesn't pay.  From start looking to offer takes about 4 days of work.  Commissions are many thousands of dollars. I don't understand this profession.  

If the broker/realtor don't find you an acceptable property, and you find one on your own, why should they get paid anything?  If your mother goes into a nursing home and sells you her home to avoid the government taking it, why should the broker get paid anything? If the broker stops doing his job after a month, why should you be stuck with him?

How many investors on here go it alone without a realtor?  How many sign 6 month exclusive contracts with recapture clauses? How many have been able to find realtors who will enter non-exclusive contracts?

I am resurrecting this thread to discuss a similar situation I've had.  Tenants moved into a home in November.  I sent them a detailed email with phone numbers of utilities. They are required to put the utilities in their name and to notify me when they have.  I received an email shortly after taking residence that they put them in their name.  Two months go by and  I get a message that the water is going to be turned off if I don't pay in two days.  I contact the tenants by email and tell them they must put it in their name and pay the balance off.  "Oh, we were wondering why we didn't get a bill.  We'll take care of it."  January get contacted again.  They made a partial payment.  There's an outstanding balance about to go to collection.  So I pay it with the intention of deducting it from deposits. I'm assured that it hasn't and won't go to collections. Now it's September and I am in the process of buying another property.  There is a delinquency on my credit report for the around $125.  The utility took the payment, failed to update their system correctly, and it went delinquent in March.  So now I'm waiting for Monday to get a letter that it was paid in full in January and also have the claim removed from credit.  There's only one person at the utility who is authorized to handle these these matters.  It's amazing how much something so small can impact a perfect credit history.

I suppose in the future I will have to call each of the utility companies to make sure things are switched over as they are supposed to be. But what can I do to protect against creditors not documenting receipt of payment?

thanks for reviewing the documented. I am actually finding it quite difficult to get accurate information related to liability protection. I've been told contradictry things frequently. People dismiss the trust aspect entirely. 

What do you suggest as an insurance strategy? I've been told if you have an llc you can't have liability protection on the personal side, which means in allegations of personal liability you are paying the bills.