Hi,
Here i go again:
I followed PropertyManager with attention and i ve 2 doubts:
1- If you do all these protective stuff before you get credit, who will lend to your llc or to your land trust or whatever?
2- If you do all these things after, what about the due on sale clause?
And what about if you leave the asset titled to the entity with which you can get credit, mortgage if to the lender, incorporate one company offshore ( it will give you all the privacy in the world), make a junior mortgage favouring YOUR offshore company over your total equity in the property, and finally get insurance?
I already made it and it worked, at least in Europe! Did any of you also make it this way?
About the books: i heard about Wealth Protection by Christopher Jarvis and Asset Protection by Jay Adkisson, any of you have this books ? Will they help us or is there better ones?
Thanks,
FKF,
I think that the best place to learn about these things is at a seminar, where you can ask questions and talk with an expert about your particular situation. Last summer, I attended the Ohio REIA mid year conference in Columbus (very reasonable - about $100). It was a 4-day event featuring the Wild Wonderful Women of Real Estate. This is a group of prominent female investors and experts on various topics. They each spoke for about 4 hours, giving in-depth info and then of course pitched their course. I paid $500 for Pat Tarr’s “Armor and Camouflage” course. Pat Tarr is an asset protection attorney in Cincinnati and is one of the country’s most prominent lawyers in her field. Although I already knew how to set up LLCs and other entities and had done so many times, her course had all the exact forms needed to set up the trust, write the trust agreement, write the deed to trustee, change beneficiaries, etc. I would have cost me more than the price of the course to have my lawyer prepare the trust documents (not to mention that most lawyers aren’t familiar with land trusts).
Verdoclev,
To take advantage of the land trust for privacy, the property needs to go straight into the land trust without ever going into you name. Trusts are basically invisible to banks and the IRS, so they don’t care if you put the property in your name or the name of the trust. In most cases, you will still have to sign a note personally guaranteeing the loan (that will show up on public records under your name). Since you are putting the property in the trust to start with, the due on sale clause isn’t affected.
If you have existing properties that you transfer into an LLC, you do technically trigger the due on sale clause. However, in my experience, the bank isn’t going to foreclose on you, when YOU have the loan and YOU are still paying the loan (through the LLC).
As for setting up an offshore company, I don’t think that’s a good deal. It certainly will work for asset protection, but my understanding is that this sends up red flags at the IRS and if VERY likely to trigger an audit. Who wants that?
Disclosure:
EENY, MEENY, MINY, MO
OF WHAT I SPEAK, I MAY NOT KNOW
I’M NOT A LAWYER, NOR WANT TO BE
SO THIS IS NOT ADVICE FROM ME
One thing I have always wondered, if you buy a property in your own name, then transfer it to an LLC, do you have to pay the transfer tax again? Thanks in advance for any response.
Regards, Tony.
Hi again,
I must thank PropertyManager for this excellent piece of advice, You really know your job. I ve to agree with you that wraping up an offshore with a property already in my name was risky, but it was three years ago while in an absolute urgency ( and it went well: no irs audit).
I d already seen the lay-out you advice when reading the free ebook by Bronchick, nevertheless i maintain some doubts. I ll describe a hypothetical situation:
- I saw a property that seems a good business and decided to go for it. Meanwhile i ask my attorney to begin a Land Trust: Trustor- Myself; Trustee- John Smith ( my confidence man); Beneficiary- MY LLC.
- Now comes financing: I ve 20% for down payment, so i need 80%. John Smith will ask for it to his bank, right ? So, my confidence man needs to have good/ very good credit, his name must be clean from tax liens and he must have a very good income ( because he could have one mortgage of his own- from his home).
- Supposing my investment strategy is Buy & Hold, during the length of this business (while i have this income property), my confidence man must be lucky enough not to be sued or irs must not invent any tax lien to him, or will be my property to respond to his liabilities.
- Last but not least, comes the happy day: I managed to sell this property with a profit of, say, 60%. As, who pays the corresponding tax will be John Smith ( although i pay him the exact amount), it will be much more difficult to disguise the profit than if initially i would take possession of the property with a company of my own.
Not intending to abuse of your goodwill, i d like PropertyManager to comment my description.
However, i ve to ask my attorney about Land Trusts (if is there any type of trust like yours, here in my country) and our companies aren t like your LLCs, neither.
Thanks for your wonderful site,