Trust & LLC's

General Real Estate Investing
1

After reading a lot of posts on LLC’s and trusts, I still have a couple questions.

Since setting up an LLC for each property can get quite costly, it seems many people are setting up a trust for each property with an LLC as the beneficiary and themselves as a member of the LLC.

  1. Does the latter strategy provide the same level of asset protection as using only LLC’s?
  2. Can you have 1 LLC be the beneficiary for multiple trusts?
  3. If I purchase a property in my name and transfer it to a trust (with the LLC as a beneficiary) will I be subject to transfer tax?
  4. Will I have a problem getting a mortgage with this strategy?
  5. When it comes time to transfer my assets to my children, can I add them to the LLC as to avoid taxes?

Thanks for the help.

2

Yes, both strategies are equally worthless when used by the average investor.

Yes and they all get merged together if something happens to one trust.

Yes.

You will have to look harder to find a lender that will work with this strategy.

There is a gift tax when you transfer LLC interests to them.

3

BLL -

Yes, both strategies are equally worthless when used by the average investor.

Why do you say that both strategies are equally worthless? What strategy have you employed or would you recommend that I employ for my properties? Also, for your answer to questino 2, you

Yes and they all get merged together if something happens to one trust.

I assume this occurs at the LLC level? Since each trust is its own entity, I would think the problem is due to the 1 LLC managing multiple trusts?

4

They are both pierced with the same minimal amount of effort.

I would need to understand your entire situation before I could even begin to recommend something. The reason guru strategies don’t work is that they are sold as a one size fits all solution. That is not the case. This type of work is like surgery. It is unique to the individual and the individual’s entire situation must be considered when deciding what action to take.

There are many problems with the set up. The largest IMO is that the same individual(s) has control over the trusts and the LLCs.

5
There is a gift tax when you transfer LLC interests to them.

not necessarily. transferring LLC interest can be an effective means to avoid such taxes if properly structured.

6

Do you mean estate taxes?

7

can avoid gift tax, too, if you structure annual transfers to fall below the minimums.

although gift tax isn’t usually a problem - you just apply it to the lifetime exclusion amount.

8

what are the minimums to transfer to children every year? Also, the gift tax exclusion you are talking about is $2M right now. What happens if I have $5M+ in assets to transfer to my kids? Thanks.

9

Now you are getting into advanced planning with Crummey letters, ILITs and IDGTs. You’ll need an estate planner to navigate the process for you.