FLIP's as asset protection?

Good idea or are there some better options to a Family Limited Partnership? From what I understand it will protect you(for the most part) from creditors and a good way to protect an estate and its proceeds. Thanks. :-\

FLIPs are good for limited purposes. You must remember that it is always the Parents who are the “managers”. In addition, your real estate is still partitionable and subject to liens and encumbrances.

While I agree with your statement in theory, 2 things;

  1. Doesn’t the “partitionable and subject to liens and encumbrances” apply in every situation?
  2. In the practical world, do you really think that someone is going to sue a FLIP knowing that they(from what I’ve read) will be issued a K-1 annually and end up paying taxes on “phantom” income they will never see year after year? ???

Hi MoW,

For others, I think it’s important that we clarify a FLIP. We are not talking about flipping a property. A FLIP is a Family Limited Investment Partnership. I would like to answer your question without being accused of advertising or board hustling, but you can avoid the tax hassle by placing the property into a land trust, which would shield your property from liens and encumbrances.

Da Wiz

Hey mtnwizard,

Where to begin----

  1. Would a FLIP accomplish the same thing as an LLC as far as taking over a Land Trust?
  2. If not, do you establish the LLC before doing a Land Trust?
  3. I’m a little confused about how a Land Trust will conceal ownership in a property—for example I have 4 properties I own that were purchased in my name. If I then place these in a Land Trust wouldn’t anybody still be able to figure out who the owner is? I know for me here in Fl. I can look up any property online and see all the previous owners names, date purchased and price paid. I run across many examples where I can see they put it in a trust, quit claimed or other, still knowing they were still the owners only in different names or companies.
  4. There is a company about 1 hour away from me that specializes in Land Trusts called Land Trust Service Corporation, but from what I understand, you should use a company out of state(with a PO Box) to make it more difficult for any creditors or Lawyers.
  5. Does it make any difference if the LLC is set up as a single person vs my wife and I as an LLC. How would this effect our tax liabilty if we sell these properties after being in a Land Trust and LLC.
  6. Finally could you please explain in a little more detail how after the property is placed in a Land Trust, I would then be able to have the LLC take over for the added protection? What is involved in that step of taking over, fees etc…
    Thanks for all your help and knowledge,

PS—1 last thing—do you recommend putting your primary residence in a Land Trust as well or does the homestead in Fl. being so good I shouldn’t worry. If I should put it in a Land Trust should I then also have the LLC take it over as well.


Sorry for the delay in getting back to you. Lots of questions. You don’t “take over” a land trust. You can establish the LLC before the land trust, but you must first establish the trust and deed the title to your trustee. Then keep 10% in your own name and deed 90% to your LLC.

Title to your property will show in the public records in the name of your trustee, preferably a non-profit corporation. A creditor of a beneficiary in a co-beneficiary land trust may not attach the land or claim an interest.

In Florida, placement of a property into certain trusts could nullify one’s homestead benefits. However, recent legislation there specifically provides homestead exemption for beneficiaries of land trusts.

The LLC provides the protection of a corporation, but is more like a partnership arrangement in many ways. LLC "members” (versus ‘share-holders’ or ‘partners’) participate in the day-to-day management of the company without incurring personal liability. All taxing agencies (state and federal) tend to “look through” the LLC to its member’s as the responsible parties in terms of accounting for, and payment of, income tax. Profits and losses relative to passive activities within the company flow to the members who remain free of individual self-employment tax.

Regarding ownership in the land trust, one’s beneficiary interest (being intangible personal property versus real property) provides a high degree of protection (though not absolute insurance) against a judgment creditor’s partitioning of one party’s interest from that of another: thereby forcing the sale of part of the property or liquidating it and dividing the proceeds. To best protect against such potentiality, it is prudent and highly advisable for land trust participants to hold their respective beneficiary interests in a Limited Liability entity such as, say, a Limited Partnership or a Limited Liability Company (LLC). In so doing, each beneficiary can then be free of concern about the accidental or untoward misdeeds of the other (i.e., dealings that could otherwise easily involve the property’s title by either party’s creditor’s claims, tax liens, bankruptcy, legal actions in marital disputes, probate, etc.). Since the interest of the beneficiaries under a land trust is personal property, and since the trust agreement expressly precludes the vesting of any legal or equitable right in a beneficiary, partition is not available.

Henry W. Kenoe, Keno on Land Trust, IICLE, p 3-012 Sec. 3-9 (1989)
CA. Civ. Code §872.210
CA Probate Code §50
CA. Probate Code §133(i)(c)
CA. Civil Code §955.1
Wile, “Judicial Assistance in the Administration of California Trusts,” 1`4 Stan. L.Rev. 231, 245-250 (1962)
CA. Estate Administration, §§33.11 to 33.35 (Cont. Ed. of the Bar, 1959)
Aronson v. Olsen, 348 Ill. 26, 29, 180 N.E. 565, 566 (1932); Breen v. Breen, 411 Ill. 206, 210-12, (1952).
Probate Code §§11600 et. seq. & 2463;

Yes, I always place my own home in a landtrust.

Da Wiz

Remember I am not an attorney or tax specialist. I just know a lot about land trusts.