All Forum Posts by: Mike S.

Quote from @David M.:

@Christie Gahan

An attorney has to represent the LLC because it is its own legal entity. However, since its not a "warm blooded" legal entity it can't physically represent itself in court. If the member of the LLC is a licensed attorney in that state, then s/he can represent the LLC so that is the only case where one would consider the LLC "representing itself."

In some states, the representative of an LLC can represent the LLC in small claim courts without an attorney. But it is an exception to the general rule that only an attorney can represent someone else in court.

Quote from @Shafi Noss:

You own an LLC containing property and gift $10k of LLC interest to your daughter through the uniform gifts to minors act. You also have $10k cash. Then you die. Your daughter will not get a step up on the remaining LLC shares. 

On the other hand if you own property but with no LLC and gift $10k cash to your daughter through the act and then die, the daughter will get a step up basis.

Many exceptions and talk to your CPA, etc.

If this is true, using an LLC really screwed you into some taxes. Before I run around for sources, do you think this scenario is impossible?

Anything you give before your death does not have step up basis. So it is often advised not to transfer anything before you die unless your asset are above the inheritance tax limit and need to use some mitigation techniques.

In that case, gifting LLC interest has some tax advantage as close LLC are very unliquid. It could be argued that a fractionnal ownership of one has a value 25% to 30% less that the real value and as such you can gift more interest and stay within your annual gift exemption limit.

Also when you sell interest in an LLC, you can not choose which lot of interest you sell like with stocks. Your tax basis in an LLC is blended.

However, I never heard that if you already own partial membership interest in an LLC, if you receive more interest at time of death, this new interest does not get step up basis. I'll appreciate if you can point me to some more information on that as it goes against everything I read on the subject so far and it seems to me very unlikely. But IRS ruling may at time be completely unlogical and there is maybe somewhere one of this rules I am not aware of.

Quote from @Caroline Gerardo:

Sorry to tell all the cottage industry attorneys and gurus on BP that owning or vesting in a LLC no longer keeps your identity secret. It really never did. If you applied for a mortgage with the LLC it's publicly registered. And everything digital can be accessed or hacked.

• I wrote 50 times to vest in Living Trusts and save the filing costs, keeping money separate, and paying for extra tax returns and attorney fees. Now here is another piece of evidence why not to bother with Asset Protection Schemes. 

Anonymity is only one small facet of asset protection. And the FinCEN Boi does not invalidate anonymity. The IRS already knows who the beneficial owner of the LLC is. A subpoena or a court order was also not protecting that information before the Boi. The Boi will not change the fact that you can keep your anonymity towards the public.

Asset protection is much more than anonymity. It is to protect all your other asset in case of catastrophic lawsuit. If you don't care about protecting your asset that is your own risk assessment decision. But the way you denigrate it, you are insulting all the other people here who need to protect their asset due to a situation different than yours. LLCs are a very good asset protection tool. Are they bullet proof, no, but pretty close if you set them up and maintain them properly. There are better tools for higher risk individuals, but they are more expensive (like offshore trusts).

Quote from @Shafi Noss:

Or if you are trying to pass on property to heirs and you give them LLC shares, they lose the stepped-up basis if you would have just given it to them normally otherwise.

Where do you get that from?
First, LLC don't have shares, they have membership interest.
Second, your heirs get the step up basis at the time of your death, you just need to have proper documentation or appraisal to show the current value of your LLC at that time.
Third, even with shares of corporation you get the step up basis (like your brokerage account).

But anything transferred before your death, LLC or not does not get step up basis.

Quote from @Tracie Balado:

@Mike S. - If my Nevada LLC's sole member is my family Trust, would it be protected from a potential charging order if I used that LLC to hold my Florida rental property?

I am not an attorney and I can't give you any legal advice. But my understanding as a layman is that Nevada has charging order as sole legal remedy, so if you are attacked personally, and if there is no veil piercing or fraudulent action on your part, the asset of your Nevada LLC should be protected from you.

However, if your property is in Florida, you will not be able to act in court as your Nevada LLC has no situs in Florida. If you use a Florida property manager, the later may act in your place, but it may be challenged as the Nevada LLC is the owner.
Also all the asset in your Nevada LLC are at risk if something happens in your Florida rental. You may want to use a Florida Land Trust that will protect your Nevada LLC from the property. A Florida LLC, owned by your Nevada LLC may also be used, or both.

There have been plenty of similar discussions on this forum and you should spend some time reading most of them.

You will find two camps:
1/ LLCs are not needed, you just need liability insurance
2/ LLCs are a must as insurance does not cover you for everything and all your assets are at risk

1/ and 2/ are valid answers depending on your specific situation. No one can tell you what you need, it should be based on your own specifics and your risk taking tolerance.

For me, I strongly support 2/. However, setting up LLC is not as straightforward as going online and creating one. There are a lot of things you need to learn first. I would strongly suggest you spend the time watching the many videos on Clint Coons Youtube Channel that is a treasure trove of information.

You will learn there what kind of LLC you may use in your situation (single member/multi member; member managed/manager managed). You will also have to decide on its taxation status (C or S corp, Partnership or disregarded). And most important you will need a strong operating agreement for your needs (don't use the free template available online or provided by LLC mills). You will also learn in which state or states you need to create your LLC. The most common setup today is to have a WY LLC as holding (either as disregarded or partnership with a C-Corp as manager), and multiple single member disregarded LLC in each state where your properties reside. But there are some variations with specific states where other tools need to be used in the mix like Wyoming Statutory Trusts and land trusts.

After you educate yourself on the structure, you will have to learn how to use it and properly set up its books and bank accounts. Again depending on the structure you chose, it may be different.

If you want to grow your portfolio, don't set up a structure for what you have today, but design it for where you want to be in ten years. If your setup was created properly initially, it will be easy to expand. On the other hand, limiting your views now will become a costly adventure to expand it properly in the future.

Some call maximum overfunded life insurance: the rich man ROTH... No maximum income limit, no maximum after tax contribution limit, and tax free retirement income. On top of it you get a life insurance if you die early.

Great product. Complex to understand, with some front loaded fee that scares a lot of people, but despite the initial drag you get a decent IRR on the long run (3-5% for whole life, 4-8% in IUL). And what a lot of people don't realize, is that during the retirement phase, you can get much more income from a life insurance (7~8% a year) than from a retirement account (3~4%). As you only take loan with the life insurance company, the full cash value continues to grow, while in a retirement account you are depleting it slowly. Also during retirement, your asset allocation in a retirement account will be much more conservative while the life insurance was conservative to start with and will continue at the same pace until your death.

Quote from @Evan Hirsch:

Quote from @Mike S.:

Originally posted by @Fred Krauss:

When moving a property into a land trust from you name and the beneficiary of trust is an LLC. How do you do the transfer so the URS does not look at it as a sale. The LLC is a partnership wife and I. Now the LLC files a K1 return.

To avoid make it looking like a sale, you should first transfer title to the Land Trust where you are still the initial beneficiary of the Land Trust. As there is no change of beneficiary, that should not create a problem nor a due on sale clause. Some counties will consider that as a change of ownership while some other, when showed that you are still the beneficiary won't.

In a second time, you will then assign quietly the beneficial ownership to the LLC. This assignment being a private non recorded document will be 'hidden'. I would however suggest to have it notarized to be able to prove the date of the assignment if challenged later on.

Don't forget to notify your insurances to reflect the change of title ownership of the properties.

 I believe land trusts are exempt from 'calling the note' when you quit claim into them unlike LLCs.

First, you want to avoid doing a quit claim deed but use a warranty or special warranty deed instead.
Second, the Garn St Germain Act will protect you against the due on sale clause, only if you are still the beneficiary of the trust. That is why you really want that first step of being the initial beneficiary. The next step is to assign the beneficial interest to your LLC, as this step is not recorded, you can keep it hidden from the mortgage company, or quickly reassign it to yourself with a simple document if needed. But be aware that often mortgagers are being notified of the change by the insurance companies as you will need to change your name insured and additional insured on your policies...

If your trust has no income, there is no tax either.

Quote from @Dylan DeBellis:

Solo 401k Trustees

 Isn't the purpose of a solo 401k to be your own trustee?