LLC V. Land Trust
I am trying to decide between setting up and holding properties in a LLC or a Land Trust. I have two concerns to remedy:
a: personal liability
b: tax implications
I am mainly a rehabber who is doing 2-3 houses a year- and L/O them after rehab. I have had lengthy conversations with other investors, my CPA, and my real estate attorney. They all have differing views on which entity to hold the properties. For example the CPA reccomends to hold them personally or in a trust and just increase your insurance for liabiliity. His view is to remain a passive investor and not be branded as a "dealer" to avoid self employment taxes...
My attorney suggests a LLC and does not see the benefits of a Land Trust.
While other investors have been split: some telling of their problems obtaining re-fi and insurance of properties deeded to the LLC.
Can anyone add to my confusion of which direction to head? Thanks.
WBHMI:
Nice to meet you neighbor!
You stated:
Quote:"My attorney suggests a LLC and does not see the benefits of a Land Trust.
While other investors have been split: some telling of their problems obtaining re-fi and insurance of properties deeded to the LLC. "
First your Attorney should research/ review Lexus-Nexus (at his cost of course) to learn Benefits of Trust Michigan codifications spell it all out yet most legal beagles come from the conservative sort and won't understand your sought after creative application (ala RE Investor transacting)
Or if the initiated Atty still fails to recognize the efficacy of Trusts i suppose you could probably shop for a better qualified Atty already versed in trust---imho
Secondly, when seeking Refis check with WAMU, Lehman Bros. as I know they have programs which lend to TRUSTS as well as to LLCs.
Although I've been doing Trust in MI(Jackson County for over 4 Yrs now) and hold my beneficial interest as an (LLC) by taking over the existing loans; I've yet to run into any problems with insurance co.s adding the inter-vivos (revocable living) trust as a co-insured to the policy.
Again get an agent to research this for you or replace them.
I hope this helps...
Happy Investing!
Derrick Ali :-D
This topic has been discussed extensivly.
Land Trust = Privacy
LLC = Personal Liability Protection
I'd use them both together as they are not mutually exclusive.
Trust never provides any legal immunity like an LLC would.
Not the same thing at all.
A trust is great for avoiding probate and providing anonymous ownership of RE, but don't think its being in title would give its beneficiaries or trustee any legal insulation.
Doesn't and won't do so, and if I had a J against a trust, I could go into court with post-J discovery and the court could force, under power of contempt, the trustee to divulge all details of that Trust.
how does the trust avoid probate?
Just via flow thru of the beneficiary?
"How does Trust avoid probate?"
If Grantor of trust gives all he owns to trust during his lifetime, so he owns nothing at time of his death, no reason for probate.
Then his trust, with new beneficiaries & new trustee, if he was the orig. trustee, being the owner, just continues life undisturbed until all its functions are fulfilled.
Wealthiest families in the world have long used trust to keep their affairs out of limelight and private, and there are some that are hundreds of years old and survive generation after generation.
Create an LLC and put the homes in the Land Trust with the LLC as the Trustee. Double Protection and same tax advantage.