Investor · Pope Valley, CA · Member since 2014 · 108 posts · 15 votes
This is regarding the LLC + land trust combo, where the property is titled to the land trust, and the land trust's beneficiary is the LLC.
1) Which entity should your insurance policy be on: your LLC, or the land trust?
2) Of the people that have actually had the bank invoke the due on sale clause, most have said the bank was alerted due to the name changing/added on the insurance policy. My own lender even told me this when I asked him.
My question is, is the insurance policy still valid if you keep the policy in your personal name even after changing title? You own the LLC, which owns the land trust, so would the insurance still be binding?
If not, then you're damned either way. You either have the insurance in your LLC's name, risking alerting the bank OR you keep the insurance in your name and risk having the policy be useless.
I am not even sure you can find a lender that will lend on a land trust. Might want to confirm that much before you bend your mind on the insurance part.
I am not even sure you can find a lender that will lend on a land trust. Might want to confirm that much before you bend your mind on the insurance part.
I am not even sure you can find a lender that will lend on a land trust. Might want to confirm that much before you bend your mind on the insurance part.
They won't. You have to move title to your land trust after closing on it. That's what a lot of investors do apparently. The problem is when your lender finds out due to the name changing on your insurance.
The name change on insurance wouldn't be your only problem. When financing in an LLC the lenders will not allow you to so much as make any changes to the LLC, let alone deed the property into another entity.
Thanks Jeff. I believe you have the right questions. Surprisingly, there are very few posts with solutions or suggestions ... and I think this is simply because there is no solution to that problem. It comes down to the following:
1. keep the deed on your name and get a great insurance
OR 2. take the risk of the trust + LLC combo knowing that because you are not compliant with you insurance and mortgage contract the LLC protection might be voided.
Personally, I am going to keep it simple and boost my umbrella insurance policy