It has been pretty busy around the office, so it has been a while since my last eblast. For some of my clients this is the first one you have received. When I can, I try and provide a little information about issues that I see on a regular basis and I hope that you find it beneficial.
Since the beginning of the year I have set up quite a few new Limited Liability Companies (“LLCs”). In many cases it is good practice to own real estate in an LLC. This may not be the correct vehicle for everyone, so it is important to discuss the plethora of considerations related to your particular property with an attorney. Some people shy away from using an LLC because of the initial start up costs, the potentially higher loan rate or the additional tax returns. In many instances however, an LLC can be extremely beneficial and may save you time and money in the long run.
When buying property with another person, the LLC Operating Agreement outlines what happens to the property when partners want to split, if one partner dies as well as other matters. Without a written agreement there is the potential for litigation or becoming partners with someone’s relatives. An LLC can also provide asset protection from creditors and perhaps insulate a liability to the specific property and LLC.
One overlooked area is the benefit of using the LLC to own real estate in states where you do not reside. Most people know that upon death their estate gets administered or probated. When there are assets in other states, an ancillary proceeding is needed (a second probate). If you own out of state property through an LLC, you can eliminate the need for the ancillary proceeding, since your Executor will be able to transfer the ownership of the Company privately. This small adjustment in your Estate Plan can save your Executor time and extra probate costs.
So prior to your next real estate transaction or maybe in reviewing your current holdings, consult with a professional and decide if the benefits outweigh your cost and consider transferring your property to an LLC.