Revocable Trust and LLC as beneficiary in Texas

9 Replies

I have been researching revocable trusts and came upon this interesting presentation that advocates use of a living trust in conjunction with an llc as the beneficiary:

Has anyone used such an approach and if so can they make suggestions of best practices and/or recommend an attorney who understands both estate protection and real estate investing in the Houston area?

In my situation I am unable to follow usual strategies for the following reasons. I have a couple of rentals and am expanding. I am able to get very favorable financing in my personal name but can't transfer to an LLC by lender rules. I can however transfer to a revocable trust. I will be managing the properties personally and will be doing some work myself that does not require license. Otherwise I will use bonded and insured contractors. I am most interssted in protecting personal assets and if possible isolating any judgement against one property from the others as well. I will ofcourse want to have appropriate insurance and umbrella. So many questions come to mind such as whether each property should be in its own trust and whether the beneficiary of each property should be its own series in an LLC.



There has been a great deal of discussion of the motive of some attorneys to steer people towards LLC when this might not be the best option. The purpose of the forums, I think, is to share and discuss experience so we are not at the mercy of the first attorney or CPA we contact.

It's usually better to have a trust own the LLC, and have the LLC operate. Not have the trust operate and have the LLC as a beneficiary. (Trusts typically have no liability protection). And, trustees are usually liable. An LLC can't be the trustee unless it has trust powers (most LLCs don't).

Sorry @James Miller , but I had to look up your profile.  Your advice was too advanced and too good to be a run of the mill investor.  Very accurate and a pretty deep pool of knowledge you have about real estate, especially in Texas.

This seems like the exact question I have been struggling with, but perhaps I'm a bit more ignorant about the whole process (still learning though!).

Thank you @James Miller for this response.  Can you clarify one or two things please?

You say, "have a trust own the LLC and the LLC operate"... in this case, who owns the real estate property? The Trust, LLC or the individual investor?

I set up an LLC for a rental property I purchased last year, and I'm learning that I cannot simply transfer ownership while my loan is outstanding (Due on sale clause risks, insurance policy complications, etc...). Therefore, the property is currently held in my personal name. The LLC that I set up is member managed by my wife and I only. I am using the LLC to "operate" (I think).

I have set up a credit card and banking account for that LLC and I deposit all the rental income into that account and cover expenses from money in that same account. My lease states that the LLC is managing the property for the current owner, however I am still the owner listed on the deed in the county records.

I would like to set up a better structure for asset protection.  Using the example you gave above, how would I go about this?

Set up a trust for the property? Who is the Trustee? Who is the Beneficiary? Does this add protection of my properties from personal lawsuits? Does this offer protection of personal assets from claims against the LLC?

Sorry for the long post! Thank you in advance for any time/help you are able to give!

You are the trustee of the trust, the trust is the 100% owner and manager of an LLC, the LLC owns the land. Trust for anonymity, the LLC for asset protection.

One way would be for a a new trust and LLC to be formed to purchase / refinance the personal name loan from you so that the new LLC would be the record owner / borrower. This takes care of the insurance issues but comes wtih it higher interest rates and shorter amortization schedules with balloon payments. On the other hand, the loan qualification process becomes shorter and faster and with less Dodd Frank annoyances. The new LLC then contracts with your existing LLC to manage the property. In the public records your new LLC now looks like it's totally separate from you personally.