Revocable Trust for LLC

3 Replies

Hello,

I am in the process of setting up a real estate holding LLC and I wanted to place the holding company (and obviously all of the subsidiary LLCs) into a Revocable Trust to avoid Probate Court in case my untimely death. What is best flow for doing this:

  1. Set up the holding LLC first, then transfer to the Trust
  2. Set up the ownership of the LLC as the Trust at the time of the LLC formation

I'm assuming the latter is less expensive and time consuming but not clear if you can do both at the same time.

Thanks

Disclaimer: I am an attorney, but I am not your attorney. This is not legal advice, just friendly information.

This is a mix of estate planning law and corporate entity law. What we usually do is identify the trust as owner of the LLC upon the LLC formation (assuming the trust already exists). But in these situations it is important that all the proper LLC documents are created showing that the LLC interest is owned by the trust, and how it was purchased; it may not be enough to simply register the LLC with the state especially when subsidiary LLCs are formed. It is also important to file any necessary deeds to make sure the properties are owned by the correct LLC.

Originally posted by @Sean Morrison :

Disclaimer: I am an attorney, but I am not your attorney. This is not legal advice, just friendly information.

This is a mix of estate planning law and corporate entity law. What we usually do is identify the trust as owner of the LLC upon the LLC formation (assuming the trust already exists). But in these situations it is important that all the proper LLC documents are created showing that the LLC interest is owned by the trust, and how it was purchased; it may not be enough to simply register the LLC with the state especially when subsidiary LLCs are formed. It is also important to file any necessary deeds to make sure the properties are owned by the correct LLC.

Hey Sean, I too am curious about the formation above and I've seen others suggest a DST instead of the LLC to hold properties. I've only heard of DST's to invest in (where someone else has set it up to buy large investments). Can you talk about that option. Also if I'm a CA investor with properties out of state where do I have to have the LLC? I hate the hassle of an LLC (and cost in CA). Is it the only option for protection? Thx

@Kelly Pierce , the Delaware Statutory Trust is a completely different beast than what the OP was discussing. The DST is commonly used for real estate syndications where the investors also do 1031 exchanges. The revocable trust OP mentioned is an estate planning tool to avoid probate courts on death. It doesn't offer asset protection, but is extremely useful if you have properties in different states, since otherwise it's a probate case filed in each state. But with all things estate planning, it's extremely local as the laws for each state are unique. So while many attorneys could help with the DST, you would need a local attorney for anything estate planning.

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