How to to move properties into living trust without a lawyer

8 Replies

We have 4 properties. Our primary (my husband's)  and one rental (mine)  in San Diego, CA. One rental in Indiana and one rental in Texas. We just created a living trust and would like to fund the trust with our properties. ( All the rentals are mine) Our living trust is set up to keep our properties separate.

1.Can we do this without a lawyer and how?

2.What are the pros and cons?

3. Should we create an LLC instead of putting them in the trust?

@Jen Pothilat

Did you use an attorney to create your living trust?  If so, will they not transfer the properties for you?

There are several considerations that can go into the analysis of whether you need an LLC or whether a large insurance policy will suffice. Will depend on several factors like the type of property, type of tenants, your risk tolerance, other assets you own, your estate planning, laws where the property is located, etc.

Any lawsuits would be limited to the assets of the LLC and not your personal assets (assuming you run the LLC appropriately and the corporate veil is not pierced). But, an LLC will not limit you from liability in total. You can still lose your investment in the LLC. If you're going the umbrella insurance route, make sure it will cover you for several things including just the routine slip and fall (like mold or earthquake). You'll also want to ensure you have a good property manager to look after the upkeep of the property if you are not there to notice anything deteriorating or which may need attention.

Creating an LLC in California would cost you a minimum tax of $800 every year. You would have ongoing filing requirements with the State and would need to keep business records and documentation.

You also want to look at whether a pass-through entity helps your bottom line and your taxes. There is a new 20% pass through deduction you may qualify for that could help you, but not everyone qualifies. You should still be able to get this even if the properties are not in an LLC, if you qualify.

These are all things you will want to discuss with your attorney and CPA. If you need references for either of them in San Diego, let me know.

*This post does not create an attorney-client or CPA-Client relationship. The information contained in this post is not to be relied upon. Readers should seek professional advice.

Yes I created the living trust but they wanted to charge $650 for 2 properties. 

I was hoping to find a cheaper way.

@Jen Pothilat

If the living trust has a judgement against it -you think the properties in the trust are not at risk? 

Cheaper is fine until you need it to work. You can put the documents together and pay for a review which may be be cheaper but you want an attorney and their E&O insurance company on the hook in case there is a problem. How much is the property worth? What's your risk tolerance. Be careful -Don't be penny wise and pound foolish.

@Carl Fischer So are you saying I should create an LLC for the properties?

Just to be clear, the attorney created the living trust.

Originally posted by @Jen Pothilat :

@Carl Fischer So are you saying I should create an LLC for the properties?

Just to be clear, the attorney created the living trust.

Your LLC question was directed to Carl, but that's what I do with each property in my portfolio. If you choose that route you really need to understand how LLCs work and how to make sure your asset is in-line with the purpose of the LLC. For example; your insurance identifies the LLC as the insured, rental contract is between the tenant and the LLC, if you use a PM make sure the contract is between the PM and the LLC, bank account is the the name of the LLC. You'll also want to Quitclaim the property into the LLC, but you need to be carefully guided so as not to violate the "due on transfer" clause. All of these issues have been discussed in-depth here on BP if you do a search.

@Jen Pothilat

I did not say get an LLC. What assets did the attorney put into the living trust?

@Jen Pothilat

You may be aware of this, but simply listing the property addresses in the trust document does not avoid state probate with the listed assets. You need to “fund the trust” by transferring the title from your name to the trust’s name. The same goes for brokerage accounts, savings accounts, etc.

You can do a title transfer with a title company that is local to each property. There are fees associated with a title transfer, but the attorney would be charging you these same transfer fees plus their hourly rate on the time involved. That appears to be the case with the attorney’s fee that you mentioned.

Also, a revocable (living) trust and an LLC are two very different things when it comes to asset protection. The living trust protects your assets from the state’s probate process and predetermines who will take ownership / control of the assets upon death. You and your trust are considered the same entity in the event of a lawsuit involving any of the named assets in the trust. Creditors can access your assets in this type of trust.

There are more advanced strategies of using combinations of irrevocable living trusts, land trusts and LLCs for true asset protection. Definitely consult with an attorney in this space to learn what makes sense for your situation as the upfront costs to set things up adds up quickly.

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