My wife and I own a duplex vacation home that has greatly appreciated. Now living in another state, we don’t get the personal use out of it we once did and would like to “unlock” the equity without taking out a loan. We are going to “sell” 50% to my wife’s sister and brother-in-law whose primary residence is near ours, are cash-rich and desire to share our foothold in this very desireable resort area. I’m considering forming an LLC but I think it would be great if we didn’t have to go through all the hassles of an actual sale…changing the title, redoing all the ownership-related paperwork with the insurance companies, tax collector, rental agents, other vendors, etc. that my wife and I have been the contacts on for many years. The agreement calls for us to remain the key decision-makers (managers) of the property. Could we just leave all the official ownership documentation the way it is and make a very well-worded LLC agreement that protects our new partners from our doing anything hurtful to them (like sell the property; burden it with debt; whatever). They trust us (and we, them) but I wouldn’t want to do anything that puts their investment in jeopardy or makes them uncomfortable. Couldn’t a move like this also save my wife and I from paying cap gains taxs now since title didn’t really change? I.e–deferring that until we actually sell the property some day. Would this be like selling shares in a company? Has anyone done anything like this anywhere?
Without changing the deed, the LLC doesn’t own the property and these new investors have no benefit. Your creditors could seize the property to pay an outstanding judgment.