[quote=timtoomey]It would be great to establish an LLC for the sake of privacy and to shelter assets. I appreciate the comments and questions raised especially how an LLC can affect insurance and future loans. I am interested in estate planning and would appreciate any sources I should consult. NOLO is where I am planning to start. Thanks![/quote]
Yes, as UCGal mentioned, I went this route. I researched a while before doing it. You can start out and read a few articles on this website which I found helpful.
There are many reasons why you might want to structure this under an LLC. Several reasons were already mentioned. There are many out there and each person has a different reason for doing it. It can be good old fashion privacy, to asset protection, to tax reasons if you have residency in multiple countries. (Some countries have a worldwide asset tax on PERSONAL assets but none for corporate assets.
What might make sense for one person won’t for another. And there is a LOT of misinformation or varying information out there about LLC and home ownership. So odds are you will find different information from State to State.
I posted a lot of information about this process in another post on Piggington if you want to do a search you can probably find it.
In a nutshell, I found the best way to structure it IF you are going to go ahead and buy under an LLC is to set up the company ahead of time so the house can go into the name of the LLC directly upon the initial purchase. This way you don’t have to transfer the name later which to me kind of defeats the purpose of privacy.
And the best State I found to set it up in was a Delaware LLC which offers the most privacy. They never disclose anywhere the officers/owners of the LLC like other states. Plus the fee to maintain it is very affordable. I pay $250/year to Delaware for the LLC and $100 a year to a law firm in Delaware to be my Registered Agent on record and they pay this tax for me each year and I turn around and pay them this $350/year.
The most difficult part was finding an insurance company that had a clue how to legally structure the insurance. I found most had no clue. Especially the major insurance companies. And even with the SAME insurance company and different offices in San Diego I would get conflicting information or quotes that were FAR apart.
The way I had to structure it was getting the main policy under the name of the LLC and then I had to get a separate rental policy under my wife and I’s name. I went ahead and also got an Umbrella coverage policy with the same company under my personal name.
In the end, everything worked perfectly. The only thing I’d mention is that the City of San Diego will automatically assume you are renting it and not living in it when they see an LLC and they will send you a bill for taxes resulting from renting it out. But all you have to do is send in a letter along with utility bills and they also want to see the Articles of Incorporation and then they just get you out of the system to pay rental taxes.
[quote=gzz]
I don’t think you even want to consider this unless there is no mortage, no chance of getting one later or HELOC. It seems to be the thing to do for very rich people who want to hide assets and maximize privacy.[/quote]
There was no easy way to get a mortgage for an LLC. Most people putting properties under an LLC are buying with cash. In all my due diligence I didn’t come across anyone that was able to get a mortgage for their LLC.
And gzz makes a great point that if you plan on HELOC’ing the house in the future this probably isn’t the way to go. I was looking to buy a 2nd property in Carmel Valley and went through the pre-approval process. I easily got pre-approved but the guy kept trying to get me to use the paid off house for a loan. I wasn’t interested but out of curiosity I heard him out on the process involved if you wanted to do that.
It sounded like I would have had to transfer the house from the LLC to my own name and then I could borrow against it. I had no interest in doing that. So gzz is correct that it’s not easy to HELOC out of an LLC property from what it sounds like.
People don’t necessary do this to “hide assets”. It’s just if you have lots of assets, it’s better for you to shelter these assets so they aren’t in your name for a vast number of reasons.
Just go to any airport, marina, etc. You will find that many wealthy people own their Yachts, airplanes, private jets, etc. all under the name of a Delaware LLC for the most part. When you see corporate executives that own their own jets (think Google CEO’s) in almost every case you will see a Delaware LLC was set up as the entity/structure that owns it.
