I want to protect my assets. What is best an SLLC or a revocable living trust. What is better as far as protection against lawsuits
I am a CPA, not an attorney, but my understanding is a living trust is really just an estate planning tool, and not an asset protection tool - I am not aware of any liability protection through just the living trust. An LLC offers vastly superior asset protection. A common structure to get the benefits of both (planning and protection) is having the real estate in a SMLLC, with the single member LLC being owned by the Living Trust.
@Kory Reynolds thanks. I want to seek my options. I keep hearing too many things.
@Antonio Martinez They work together, they are not same or one a replacement for the other. LLC is the one that gives you liability protection, the trust provides a layer of anonymity. Usually, an LLC is paired with a trust.
You are in California, therefore you get special treatment - a SLLC (or regular LLC) might not be the best option for you due to the $800 fee, I think Delaware trusts are the way to go for CA.
But here is a diagram to help you on your quest:
@Costin I. Do you happen to have a link for the diagram. I can’t make it bigger
@Antonio Martinez Click on it.
Generally in CA, a living trust is an estate planning tool that provides little or no creditor protection but is intended to protect you from probate. An LLC is used for business reasons sometimes and usually for creditor protection. In most cases in CA, people have both, with the living trust being the member in the LLC. There are different kinds of trusts out there that may provide you creditor protection but usually the living trust provides very little, if any. Let me know if you attorney or CPA referrals in San Diego.
This article may assist you in your understanding: https://www.mmpph.com/wp-content/uploads/2019/04/May-2019-newsletter.pdf
*this post does not create an attorney-client or CPA-client relationship. The information contained in this post is not to be relied upon and readers are advised to seek professional assistance.
Thank you for your response. Its a little far in san diego. Do you happen to have any colleges around the LA area
For the majority of my clients who either live in CA or hold property in CA, the Delaware Statutory Trust (DST) has been a viable option for asset protection.
As Costin mentioned, the DST is not obligated to pay the $800 franchise tax, and can contain as many assets as you like. The DST is viewed as an estate planning tool, and therefore exempt from the far-reaching corporate tax laws set forth by California's FTB. A properly set-up DST will both protect your assets and bypass the burdensome franchise tax that would be levied against a Series LLC.
The Delaware Act expressly provides that “[n]o creditor of the beneficial owner shall have any right to obtain possession of, or otherwise exercise legal or equitable remedies with respect to, the property of the statutory trust.” 12 Del. C. §3805(b). The title to trust property may be vested in one or more trustees, but shall not be subject to claims against the trustee which are unrelated to the statutory trust.
There are some requirements that go along with the formation of the DST, but if you are planning on doing more investments into the future than the DST will solid investment into an entity that can separate out your assets.
This isn't legal advice, just my opinion as a real estate investor. Here is an article that I published for BP that may be of use to you: https://www.biggerpockets.com/blog/california-real-estate-investors-delaware-statutory-trust/
If you have more questions feel free to leave a reply or DM.