I have already found BP to be a wealth of information for my own needs and now my father's portfolio could use some assistance from these forums.
My father owns 3x properties in NY (their primary residence in Long Island, a second summer/vacation home in Long Island and a rental unit in NYC). I'm becoming more familiar with asset protection in terms of real estate and during a conversation with the old man, I asked how he owns his properties. He told me they are all in his name and he owns them free and clear. He was under the impression that having a $3M insurance policy would suffice, but I told him that EVERYTHING he and my mother owns is at risk given any litigation against the two of them. As I'm sure many of you would agree, I recommended that he explore setting up an LLC and get the rental unit and 2nd home into it (the second home because they're always partying with guests out there).
He agrees with this assessment and is eager to get an LLC formed in NY and the deeds transferred over to it. Since I am not familiar with the NY area, I was hoping to find him an attorney to speak to regarding his needs, which I believe are as follows;
- Determine if he should put these properties in 1 or 2 separate LLCs
- Determine which type of LLC would suit his needs best
- Start said LLC/s in NY (and handle the publication requirements)
- Quit claim the deed from his name to his LLC
- Steer him right in determining other needs in terms of opening a business bank account, adjust insurance policies, etc
Does anyone know a suitable candidate to help my father out in this endeavor? Much appreciated as always.
It's been a long time since I've bought and sold property in Manhattan but I do know the fees seem like legal extortion. I'm not sure if Long Island is the same or not but I would definitely find somebody that understands estate planning and asset protection in New York specifically. You may also wanna consider using Trust's that can sometimes get around a lot of the transfer fees associated with real estate going into an LLC This is a very complex subject probably not best explained in the Bp forI'm.
@Carl Fischer Agreed, I guess I should clarify I'm laying out this info so all you experts might be able to steer us towards professionals who can cater to my father's needs. Thank you for the reply sir!
You are right in telling your father to put his properties in a LLC. But have you discussed the additional cost and administrative work that comes along with a LLC? Here are some numbers for you to digest.
1.Form a LLC, I used Legalzoom - $600, I think an attorney in NY will do it for $1,000 - $1,500
a.Make LLC compliant
i.Publication - $500
ii.Need operating agreement – additional cost if you have an attorney draft one
b.Annual filing with NY state of the LLC, min $25 if no profit.
2.Transfer deed to LLC
a.For Nassau county, attorney will do it for $1,500
b.If you do it yourself, recording fee is $1,000
a.Depends if the LLC is single member or multi members; Multi-member LLC offer better protection
i.Multi-member LLC will require the CPA to file K1s for each member, additional cost
Now you have your properties in a LLC are you protected? Yes but a big BUT, only if your LLC is in compliance.
1. No comingling of rental and personal funds; separate bank accounts for every LLC
2. Operating agreement – recorded annual meeting for the LLC
3.I'm sure there's a lot more, but those two items are mentioned the most for a lawyer to pierce the corporate veil of the LLC.
I have struggled for a long time if I should transfer my properties to a LLC but with all nuisances of keeping the LLC compliant, I'm in the same boat as your father. Four properties in my personal name with a 2 mil Umbrella policy. I should bump it up to 3 mil.
You father should go speak to an estate attorney (mine actually told me I don't need a LLC yet). If you want mine, PM me. In the end it might be easier if your father bump up liability and umbrella coverage.
I think you would in incur a NYC transfer tax based on 'purchase price'.
There is no 'purchase price.' The father owns the properties and conveys them to his LLC for no consideration, then it's exempt from transfer tax.