All Forum Posts by: Michael Izbotsky

Thanks, @Ashish Acharya. That was my thought as well. Either way, I ended up adding my wife to my SMLLC to further clarify. That way there shouldn't be an issue with a due-on-sale/transfer clause. 

For anyone following: It cost me $5 to file the updated statement of info and I simply drafted an amendment to the existing internal operating agreement to clarify our intent to operate as a married SMLLC. 

Thanks everyone!

@Ashish Acharya My SMLLC was created after we married, so couldn't that argument carry over that the LLC is "owned equally by both spouses"? Therefore, transferring our jointly owned investment property into my SMLLC would not trigger a due-on-sale clause?

@Katie Balatbat I'm sure it's not a huge deal. I just don't want to go through the hassle of updating documents, filing a statement of info, etc. As for the living trust, I'm assuming you mean to have the LLC within the trust to avoid probate? Or am I missing something else?

Hi Brain Trust,

My wife and I are purchasing a property in St. Louis, MO where we are both on the loan and title. I was planning to quit claim the property into my LLC after we close on the property. My wife still needs to have at least 50% ownership in the property since she is on the loan.

I am currently the sole 100% owner of this SMLLC formed in CA. We're in a community property state, where I believe my wife is automatically considered an owner.

Would you be able to clarify if I am allowed to quit claim into this LLC as is, or if I'll need to add my wife to become a married single member LLC (married SMLLC)? If I did it that way, the ownership would read [Wife's First Name] & Michael Izbotsky as 100% owner.

I'm asking because it will save me from headaches and filing paperwork.

Many thanks in advance, and happy Thanksgiving!

Best,

Michael

Thanks for the tag @Rick Albert. @Marc Sinnott, I'm a CFP running my own RIA/firm here in LA. Wrote a few thoughts/recommendations below. I'm happy to have a conversation and point you in the right direction. I also linked to a couple useful websites at the bottom of this reply. 

I highly recommend looking for a fee-only financial planner/advisor, as you mentioned. I don't see hourly offered as much as I do flat fees. Personally, I don't offer hourly advice. I hated paying an old CPA of mine an hourly rate. I ended up doing as much work as I could on my own because I didn't want to be nickeled and dimed every time I had a 5 minute conversation with him. Also, did it really take him 30 minutes to complete a task, or was it truly only 10 minutes? I'll never know...

A flat fee can mean that the advisor charges a flat fee per project or analysis, or that they charge a flat fee as an annual retainer. I used to offer project based work for a flat fee, but it's no longer time efficient for me. I prefer to have long-lasting ongoing relationships with clients. 

Not all financial advisors require their clients to invest their money with them. For example, I charge clients an annual flat-fee paid quarterly or monthly, whichever they prefer. This covers all things financial planning. I offer investment management as a separate service and don't require clients to invest any money with me, although most clients do invest with me. I charge a separate fee for the investment management. For clients with large enough balances, I waive the annual flat-fee for the financial planning, essentially bundling both services. 

With my clients in their 30s and 40s, a lot of our planning/advice revolves around cash flow & business planning, wealth accumulation, and creative financing. For instance, I set up a client with a securities-backed line of credit (SBLOC) against his investment portfolio in order to fund the rehab/renovations of his new property. An SBLOC works mostly the same as a HELOC, but you use your investments as collateral instead of the equity in your home.

It might be difficult to find an advisor to provide you with the level of detail/expertise you're looking for, but not necessarily impossible. You'll likely have to pay a premium depending how much detail or hands on help you want regarding private equity, LPs, alts, etc. I'm happy to have a conversation and point you in the right direction. 

You can find other fee-only CFPs here:

XY Planning Network
NAPFA
FeeOnlyNetwork.com

Looking forward to connecting soon!

-Michael

Hey @Natalia Davis,

I would highly consider t bills. They are essentially risk free, as they are government bonds. You don't owe any state income tax on the interest, whereas with CDs and high yield savings accounts you do owe state income tax on the interest. (Obviously only applicable in states that have income tax). They yield as high as, if not higher than CDs. 

You can purchase t bills via a brokerage account, such as an account at Charles Schwab. You could ladder the duration. For example purchase a few one month t-bills, a few 3-month t-bills, and a few 6-month t-bills. 

A simpler alternative would be a t bill or short term Treasury fund, such as SNSXX if you want the same liquidity as a high-yield savings account. It's currently yielding higher than most savings accounts. You could also purchase this via a brokerage account.

Hope this helps! 

-Michael

Unlike a SBLOC I mentioned above, the money you take out as a loan from a 401k is no longer invested in the stock (or bond) market. So you miss out on market participation. However, the interest you pay on a 401k loan is paid back to yourself, whereas the interest on an SBLOC is paid to the lender. 

The most important thing is to consider what happens to the loan if/when you leave your current job. Most 401k plans require you to repay the loan within a very short amount of time (few months or less). I've only come across a couple 401k plans that allow you to carry the loan and continue making payments after you're no longer employed with that same employer.

If you don't repay the loan, then it's counted as an early distribution. You'll have to pay taxes plus a 10% federal penalty and sometimes a state penalty, depending on the state. For example, California charges a 2.5% early distribution penalty. 

You can find a lot of information from the plan documents, but it might be best to just call the 401k provider and ask them the terms of the loan.

Thanks for the shout-out, @Rick Albert! @Andy Gibson I'm always happy to chat, even if it's to point you in the right direction. As Rick mentioned, I'm a fee-only CFP.

A client of mine actually recently utilized a securities-backed line of credit (SBLOC) for a real estate deal. Same way you have a HELOC on your home, you can take out an SBLOC against your investment portfolio. The caveat is it can only be on your taxable investment accounts, not any retirement accounts. Could be an option to avoid liquidating your investment portfolio.

 Feisty

Is that how you work with your clients? You tell them to find their own answers? 

@Miguelli Fernandez asked an honest question, one that I've wondered myself. Your initial reply was quite arrogant. We're all here to learn from each other and from the "investors with 10+ years of experience."