All Forum Posts by: Angela W.

 Thanks Hamp! Glad you like the article.

I contemplated on posting this article but decided to do it, since it's valuable information. These are some things a lot of us don't want to think about but should consider because you never know...

Here's the article I wrote recently: 8 WAYS TO TRANSFER YOUR ASSETS WITHOUT PROBATE IN TEXAS

Angela Walter, Texas Attorney - Feel free to message me if you have any legal questions!

Probate is the legal process where a court of law establishes the validity of a decedent’s will. The probate process includes appointment of an administrator, receivership, ad litem, and accounting & inventory of the decedent's belongings, paying off decedent’s debt, and distributing the estate’s assets. Among other reasons, the advantages of probate include:

1. expediting creditors’ claims,

2. court decides outcome for contested matters,

3. reduce expenses that would accrue outside of court,

4. provide an opportunity for beneficiaries, and

5. heirs to be heard.

However, there are several reasons one would want to opt out of probate. The disadvantages to probate are

1. The length of time to close out a probate case,

2. Probate can be expensive especially when contested or a dependent administrator is appointed, and

3. The probate process is public record and accessible to anyone to see the estate’s assets and liabilities.

You may prefer a trust to satisfy specific anonymity needs. However, an alternative to trusts, and to avoid probate are 8 ways to transfer your assets to beneficiaries:

1. Pay on Death (POD) Bank Account - Most banks have a POD form for you to fill out and submit to the bank. Upon your death, the bank requires proof of death, mainly a death certificate and beneficiary’s identification are satisfactory. On the form, you provide the beneficiary’s information. The beneficiary will receive all remaining funds in your account. Beneficiaries under a POD, do not have rights to your account unless stipulated. You are allowed to change beneficiaries at any time. The bank account may be temporarily frozen at the time of your death or by court order, especially if federal levies the estate tax and sufficient funds are paid for IRS taxes. Texas does not have an estate tax. Every bank may have different policies. Ask your bank if notification to the beneficiary is required as part of the procedure for POD. Generally more than 1 designated beneficiary is allowed.

1. Transfer of Death Vehicle Registration - Texas allows vehicles to transfer to your designated beneficiary. The Department Motor Vehicles provides a ‘Beneficiary Designation for Motor Vehicle’ form. This designation will not transfer ownership during your life or affect the interest or right of a secured or unsecured creditor or future creditor. If you file this form with the Department Motor Vehicles, a will won’t supersede the ‘Beneficiary Designation for Motor Vehicle’ form. Once the form is filled out, it must be filed with an application for Texas Title and/or registration, fees paid, and valid ownership evidence to a county tax assessor-collector’s office before the you (owner’s) death. Beneficiaries must survive the owner by 120 hours and title application is submitted no later than 180th day after the owner's death. Beneficiaries can decline interest in the vehicle. After death, if the beneficiary accepts the vehicle, he/she is also accepting any liens on the vehicle. Similar to the owner filing the transfer of death vehicle registration, the beneficiary must also file a title application, pay the fees, provide a death certificate, and provide identification.

1. Transfer on Death Deed (TODD) for Real Estate - TODD allows owners to keep ownership rights during his/her lifetime and allows owners to transfer ownership of real property to the beneficiary after the owner's death without a probate court’s involvement. TODD should explicitly state that title to real property will not transfer to the beneficiary until the original owner's death. TODD should also include the beneficiar(ies) name, legal description of the property, dated, signed, notarized, and recorded in the real property records where the property is located. After death, proof by death certificate and an affidavit of death must also be signed, notarized, and recorded. At any time prior to your death, you may terminate TODD or redesignate the beneficiary or beneficiaries.

1. Tenancy in Common & Joint Tenancy - Two common concurrent ownership in Texas are joint tenancies and tenancies in common. These concurrent ownerships are similar, but have distinctions with significant effects of inheritance.

A tenancy in common occurs when two or more parties jointly hold an interest in property. Concurrent ownership undivided interest and right to possess the property. This is the default Texas rule and is presumed if no explicit written language is stated in the deed. Each owner has the right to sell, devise, lease, or transfer their interest in the property. When an owner dies, his/her share will pass through a will or, if the concurrent owner dies intestate (without a will) the default under Texas Intestate estate code.

On the other hand, joint tenancy contains languages of right of survivorship. Right of survivorship means when the concurrent owner dies, the surviving owner(s) automatically inherit the decedent’s share. Property does not pass through probate.

Both concurrent ownership can be used for personal property, but commonly used for real estate. To avoid probate, the deed must explicitly state the right of survivorship language.

Joint Tenancy is not for everyone. Once concurrent ownership is formed, it’s difficult to revert back to you. If you change your mind, you don’t have the right to freely take back the property. Another issue with joint tenancy is that you may need authorization for all concurrent owners to take out a mortgage, sell or transfer the property, etc. In the event that concurrent owner(s) are incapacitated, a court appointed guardian will make the decisions for that person. Other reasons for not using joint tenancy includes gift tax for amounts exceeding $15,000.00 and miss stepped up tax breaks for spouses who become concurrent owners of spouse’s prior separate property. The IRS allows a surviving spouse to get a “stepped up tax basis” only half of a decedent’s property instead of the full property if property becomes joint tenancy.

1. Community Property - In Texas, 100% of community property automatically transfers to the surviving spouse except when the decedent has children outside of the marriage aka step children. Then community property is shared with stepchildren. To learn more about Texas default rule for intestate succession for heirs, click here.

1. Community Property Survivorship Agreement - Under the Texas Estate Code Section 112 spouses may enter into an agreement at any time between themselves to designate the surviving spouse of the deceased spouse that all or part of separate property becomes community property. Texas requires specific language in the agreement to be enforceable. It must include the following:
   1. Be in writing
   2. Signed by both spouses
   3. The phrase: “with right of surviving”, “will become the property of the survivor”,``will vest in and belong to the surviving spouse”, or “shall pass to the surviving spouse.”

Texas Estate Code Section 112.052(d) states that a survivorship agreement may not be inferred from the mere fact that an account is a joint account or that an account is designated as JT TEN, Joint Tenancy, or joint, or with other similar language.

Further, Community Property Survivorship Agreement can be revoked by adding revocation terms to the agreement. If no revocation terms exist in the agreement, the default rule is that a revocation agreement must be in writing, signed by both spouses, or signed by one spouse and delivered to the other spouse. Specific property can be revoked. According to Texas Estate Code 112.054, a community property survivorship agreement may be revoked with respect to specific property subject to the agreement by the disposition of the property by one or both spouses if the disposition is not inconsistent with specific terms of the agreement and applicable law.

1. Life Insurance - Life insurance is a contract between you, the policyholder and the insurance company. You pay the premiums during your lifetime in exchange for a lump sum payment to your named beneficiary. The beneficiary will receive the money after your death and may use that money for any purpose. This type of contract does not involve probate and the proceeds go directly to the beneficiary. There are a couple exceptions for probate involvement such as when the estate is named as the beneficiary. This is done so the estate can pay off debts and taxes. This is suggested under specific circumstances and is not common

Another uncommon scenario is when the financial institution that provides the life insurance may need to show cause for not properly providing the payment to the beneficiary.

There are two primary types of life insurance, term life and permanent life. Term life is a certain duration of your life while a permanent life covers your entire life.

1. Gift - The first $15,000 you give per person as a gift is exempt from federal gift tax. This amount may change per IRS requirements.

When you give a gift to someone, that gift is separate property, meaning it belongs to the person to whom it is given and not shared with another person such as a spouse. There are no requirements to document gift giving (but it is suggested that you keep a written record of it in the event of a dispute in the future), however, once you give that item away generally, you cannot take it back. The exception is some items that require documentation in itself such as transferring stocks & bonds, royalty, land, car, or boat for proof of ownership. These title transfers should be filed in the correct agency or entity in order to be documented. 

Angela Walter, Texas Attorney - Feel free to message me if you have any legal questions!

This may not exactly be a post investors expect to find on this forum but I figured is something to consider when purchasing properties, whether it's your own home or issues that may arise when purchasing residential property

Here's the article I wrote: Transfer on Death Deed (TODD) vs. Lady Bird Deed (LBD); What's the difference?

What is a ladybird deed?

Lady Bird Deeds are also known as revocable life estate deeds or enhanced life estate deeds. Essentially, it is a deed that conveys property but reserves a life estate for the owner (aka grantor). The owner retains control over the property and has rights to lease, mortgage, and sell the property, as well as keep all income produced by the property without permission from the remainderman (aka grantee or the person whom the property is being conveyed to). Additionally, the owner can revoke or amend the deed and when the owner passes away, the title is vested with the grantee (also known as the person the property is conveyed to) subject to any interest conveyed or created by the owner during his/her life.

What is a Transfer of Death Deed?

Under the Texas Estates Code, a TODD allows owners to keep ownership rights during his/her lifetime and allows owners to transfer ownership of real property to the beneficiary after the owner's death and was created as a simple and inexpensive alternative to probate. A TODD is not superseded by a will, meaning it trumps the will. A TODD should explicitly state that title to real property will not transfer to the beneficiary until the original owner's death. A TODD should also include the beneficiar(ies) name, legal description of the property, dated, signed, notarized, and recorded in the real property records where the property is located. After the owner's death, a proof of death certificate and an affidavit of death must also be signed, notarized, and recorded by the beneficiary. At any time prior to the owner's death, the owner may terminate the TODD or redesignate the beneficiary or beneficiaries. A TODD can trigger the due on sale of a Deed of Trust (DOT) clause or related clause after the transfer of property and does not affect the interest of current or future lien holders.

Reasons to use a TODD?

A TODD does not affect the rights and control of the owner such as leasing, taking out a mortgage, or transferring ownership of the property after his/her death. It also allows him/her homestead rights such as property tax exemptions, this is because the property will not transfer ownership until the owner’s death. TODDs are revocable, therefore, the beneficiary can be removed during the owner's life, does not create legal or equitable interest in favor of the beneficiary, meaning the beneficiary cannot rent, sell or take out a mortgage on the property.

TODDs are revocable under the Texas Estates Code Section 114.052. Similar to a LBD , a TODD does not affect Medicaid eligibility or trigger Medicaid transfer penalty.

Reasons to use a Lady Bird Deed?

The purpose of a Lady Bird Deed to allow the owner to have control over the property, retain the property during his/her life, and give him/her the right to reside on the property and homestead rights while avoiding transfer penalties under the Medicaid Program, and to avoid Medicaid Estate Recovery Program (MERP).

In Texas, an applicant applying for Medicaid benefits is required to disclose the disposition of assets within the past 60 months (5 years). The difference in the value of assets versus the amount received is calculated as a “transfer penalty” against the applicant. For instance, if an owner gifted their house worth $500,000.00 to their child, they are e penalized at $500,000.00 for not receiving any payment. This is not necessarily a penalty, rather, it delays the owner’s eligibility based on the amount received for Medicaid benefits.

Under a ladybird deed, the owner does not convey the property to the remainderman just yet and his/her interest has no value since the owner retains full control over the property, therefore the transferred penalty is not triggered.

Additionally, the MERP requires recovered costs paid to Medicaid from the estate of the person who receives support from Medicaid. Each applicant is required to sign a form acknowledging that assets from the estate is subject to MERP claims after he/she dies. The State of Texas must file a claim against the estate of deceased Medicaid recipients who received long-term healthcare benefits 55 or older. Since the Lady Bird Deed would not be a part of the decedent’s estate (estate of a person on his death), therefore not subject to MERPS claim.

How is Ladybird Deed similar from TODD?

As mentioned above, both are legal documents that supersede a will, are revocable, the owner has control and rights over the property, and the beneficiaries interest does not trigger a transfer penalty under Medicaid.

Additionally, both documents are low in initial costs, avoid probate, not subject to gift taxes, the owner maintains homestead rights until death, and is transferred upon death.

How is Lady Bird Deed different from TODD?

Below is a side-by-side comparison of how TODDs and Lady Bird Deeds differ:

Angela Walter, Texas Attorney - Feel free to message me if you have any legal questions!

I'm a Texas real estate and business attorney. What type of lending do you provide Adam?

Here is some basic information for mortgagors:

 Texas Property Code Section 51 covers foreclosure law. When a debtor/mortgagor is in default there are several guidelines that lender/bank must follow. Below is a quick overview of some guidelines for the residential foreclosure process:

The bank/lender aka lienholder is required to provide 21-day notices of foreclosure sales of a residential homestead. This notice must also be filed with the county clerk and posted at the courthouse. The Statute of limitation is four years for lienholders to start the foreclosure process after default. After the statute of limitation expires, the lienholders cannot collect, with a few exceptions.

All lienholders must send a demand letter to debtors with the intent to foreclose on the property, the demand letter must be sent by certified mail. Debtors have 20 days to cure a homestead property, unless the deed of trust states otherwise. If the debtor is able to cure the default then a reinstatement agreement should be executed unless the terms of the debt have been changed, such as a modification agreement or a replacement note.

If the debtor or tenant has paid more than 40% of the amount due or made 48 or more monthly payments, then pursuant to the equity protection provisions of Tex. Prop. Code Sec. 5.066, the seller or landlord must give a 60-day notice of default and opportunity to cure the default. If debt has not been cured, then the trustee may start the foreclosure process.

All superior liens will extinguish subordinate liens. After the sale, any excess proceeds from the foreclosure sale may be distributed to the subordinate lien holders.

Notice must be given to the IRS and U.S. Attorney (if any) 25 days or more prior to the sale. The IRS has 120 days to redeem the property after the sale. The U.S. Attorney has 60 days.

If you are a property owner or lienholder and need assistance with the foreclosure process, be sure to review the deed of trust, note and all other relevant documents. 

Angela Walter, Texas Attorney - Feel free to message me if you have any legal questions!

Foreclosure 101 for Investors

I wrote a few articles on foreclosure. Here is one of them. 

Angela Walter, Texas Attorney - Feel free to message me if you have any legal questions!

Purchasing properties at foreclosure sales can be an opportunity for investors. Some of these properties are offered at a fraction of the market value which is one of the reasons investors are incentivized to buy. Before purchasing a property, there are several steps to consider. Here is a basic overview of the foreclosure process.

TOP 5 DUE DILIGENCE STEPS FOR PRE-FORECLOSURE

There are three types of foreclosures: (1) tax sale, (2) trustee sale, and (3) HOA sale. Tax sales are government lines that usually have superior priority over other liens. Trustee sales are mortgage liens. Usually, these mortgage liens have priority over HOA liens. If the HOA lien is junior to the mortgage lien, it will extinguish at the sale. Mortgage liens are generally junior to government liens, therefore, additional diligence is necessary to ensure that those liens are not on title or that you are accounting for additional costs when purchasing the property. HOA liens are junior to government liens and most mortgage liens. Before purchasing from an HOA sale, you should conduct a title search.

1. TITLE SEARCH = When conducting a title search look for liens, release of liens, any break in chain of title, Lis Pendens and abstract judgments. If you are not familiar with the title search procedure, you should seek a professional with experience. There are many title search companies available that can help you.

2. CONTACT TRUSTEE = Reach out to the trustee of the property. Some trustees may provide an inspection report and let you view the interior of the property. Note that trustees are not obligated to provide such reports or allow you on the property.

3. PHYSICAL CHECK = If you have permission you should physically check the property prior to the sale or have a professional inspector. Account for costs associated with capital expenditures such as the condition of the roof, foundation, and HVAC. Also check to see if the property is in a flood zone and whether there are any environmental contaminants. Be sure to check the neighborhood and surrounding areas. *Be aware that you are not allowed onto the property without permission by an authorized representative or agent.*

4. TENANTS OR OCCUPANTS = Tenants or occupants may be residing on the property even after you purchase the property at a foreclosure sale. The proper procedure to remove tenants or occupants from the property is an eviction proceeding. Otherwise, you can make an arrangement to rent the property to them.

5. FINANCIAL ANALYSIS = Make your own financial analysis for equity. This can be done in several ways. One method is to research the fair market value of the property and surrounding properties to compare that value to the estimated cost of repairs, cost of any liens, and cost of any judicial action needed for eviction.

6. BONUS – OTHER DUE DILIGENCE TO CONSIDER = If there is a wrongful foreclosure action related to this property, it may put you in a legal battle. Wrongful foreclosure claims may prevail when the debtor or owner is an active military member, bankruptcy action is pending, or probate is pending. Check bankruptcy twice, during your due diligence and the day of sale because last minute bankruptcies may be filed.

Angela Walter, Texas Attorney - Feel free to message me if you have any legal questions!

Here is one of the articles I wrote about Foreclosure: The Day of Foreclosure in Texas

Angela Walter, Texas Attorney - Feel free to message me if you have any legal questions!

In Texas, foreclosure sales are at live auctions. Check the real property records for the list of foreclosure properties in the county you want to purchase your property. You may also find the list on your local newspaper, or the trustee’s website. For instance, in Harris County, the Daily Court Review provides a monthly list of properties.

Foreclosure sales are on the first Tuesday of each month between 10 a.m. and 4 p.m at the county court house unless specified otherwise. The constable or trustee will instruct and inform the bidders about the properties.

Depending on which county you are in, you may have to register in advance. In Harris County, bidders can register the morning prior to the auction sale, be sure to check the registration procedure for Harris County. Upon registration a number is assigned to you. The number is on a piece of paper which you will raise when you bid.

Bids usually start with the amount owed including accrued fees and other related costs. Winning bidders must provide identification name, address, taxpayer number, and photo ID and/or LLC.

Payment must be paid within a reasonable time. Generally, you pay once you win. Have the cashier’s check or certified check payable to the trustee or constable or to yourself. You can always endorse it to change the name of the beneficiary. If you are the winning bidder and cannot pay timely, you may be penalized, and the property will be rebidded.

At auctions properties are sold “as is” which means there are no warranties or guarantees. There’s no seller’s disclosures provided. Keep in mind that after winning the bid and purchasing the property, it may take some time to receive the recorded deed from the trustee.

RESCISSION OF FORECLOSURE SALE

Rarely does a property get rescinded, however, rescission of the sale can happen within 15 days post foreclosure. Rescission occurs for several reasons, including technicalities with the foreclosure process, debtor paid prior to foreclosure, probate is pending on at least one of the property owners or borrower of the note, or property owner has a bankruptcy pending with an automatic stay prior to sale. The bidder will get their money back but the bidder can dispute the rescission within 30 days.

REDEMPTION PERIOD

The redemption period is the time an owner can take back the property after foreclosure. Redemption period depends on the type of property and type of lien. For instance, tax liens redemption period is two years for agricultural property and homestead property. The bidder is entitled to the bid amount plus 25% on the first year and 50% on the second year of the redemption period, costs of property insurance, and required repairs and improvements. Please note that repairs and improvements must be for habitable reasons. See Texas codes, ordinances, or the lease. Other properties have 180 days and investors are only entitled to principal and premium of 25%.

Redemption period for HOA assessment liens are 180 days after the HOA sends written notice of the foreclosure sale to the owner and the lienholder. Lienholders have 90 days to redeem after the HOA sends written notice, but the prior owner has first rights. Note that HOA liens are usually subordinate to mortgages and mechanics lien, meaning these liens may still be on title, thus new owner may be liable for those liens.

POST-FORECLOSURE EVICTION

After a successful bid, the bidder receives a deed as new owner of the property. You have title and right of possession of the property and automatically become the landlord if there are tenants or occupants. To request tenants or occupants to leave, a 3-day notice to vacate sent by certified mail is required pursuant to the Texas Property Code. If the tenants or occupants have not vacated the premises, then the next step is to file an action for forcible detainer action in Justice of the Peace Court in the county and precinct where the property is located. After a successful trial and judgment, a writ of possession is requested and the constable posts a notice on the door. Then, the constable removes any occupants or tenants. This can also be done with personal property that belongs to the tenants or occupants that remain on the premises. NOTE: the tenant or occupant can appeal eviction and set a bond, delaying the eviction process.

STOPPING FORECLOSURE SALE

Property owners may attempt to stop foreclosure for several reasons. This includes disputing the amount owed, lienholder did not provide correct and/or timely notice, the foreclosure process was not properly executed.

One judicial action is filing a temporary restraining order also known as a TRO, with a reasonable claim such as the foreclosure is wrongful, debtor has cured or can cure with sells contract or proof of payment, pending probate, pending bankruptcy, owner is an active military, or property is in a current dispute, however, title issues cannot be claimed since it does not affect foreclosure. TRO is temporary and usually lasts only 14 days. However, it may be renewed upon a temporary or permanent injunction presented to the court. Sometimes that is enough time to stop a foreclosure and cure the defect.

Foreclosure sales can be a great opportunity to find deals. However, there are several things to consider, and this outline is meant to provide you with some food for thought. For questions about this or more information about foreclosure sales.

Angela Walter, Texas Attorney - Feel free to message me if you have any legal questions!

Here is an article I wrote: Texas LLC Formation

Angela Walter, Texas Attorney - Feel free to message me if you have any legal questions!

A limited liability company (LLC) is a business structure that is permitted by individual state statutes. In Texas, the Business Organizations Code allows for the creation of LLCs. An LLC is formed by filing a certificate of formation with the Texas Secretary of State. Generally, an LLC is owned by its members. The LLC is a separate legal entity from its members, therefore providing liability to its members (except in the case of piercing the corporate veil, etc.). An LLC can serve many purposes, such as for your small business, or if you are a real estate investor, it can hold your rental properties. There are advantages and disadvantages to forming an LLC:

To name a few advantages:

• Offers some asset protection,
• Tax advantages,
• Succession planning opportunities,
• Separation between yourself and your business,
• Anonymity, and
• Credibility as an established business.

However, there are also disadvantages:

• Requires maintenance/upkeep,
• Costs,
• Individuals are responsible for paying self-employment taxes,
• LLC does not fit all business criteria (ex. LLC are not eligible for Section 1202 Gain Exclusions, pass through investment, complex capital raising etc), and
• If the LLC is formed for rental properties, you may run into lending issues, etc.

Within the LLC formation there is also the series LLC. To learn more about series LLCs, check out my other posts. Additionally, there are other types of businesses that you can form in Texas, including partnerships, sole proprietorships, corporations, etc. To learn more about other business entities, be sure to check out our articles and resources tab. After you have done your research and you decide that an LLC is the best choice to suit your needs, the steps are:

1. File a certificate of formation with the Texas Secretary of State,
   1. Be sure to check the name availability of your LLC first. If a name is already in use, you have to come up with another name,
   2. Also, consider whom you want to name as your registered agent (typically you can name yourself. There are also registered agent services you can find online. The advantage of using a registered agent is that you can use their physical address instead of your own. This is especially important if you do not have an office address and plan to use your home address. 
   3. You can also message me for more legal questions.
2. This step is optional, but recommended, file for an employment identification number (EIN) with the Internal Revenue Services (IRS),
3. Create an operating agreement (and other necessary documents such as resolutions if needed), and
4. If you have more than one member, plan your initial meeting with all the members.

Although the steps are fairly straightforward, if it is your first time creating a business entity, you may have additional questions about proper procedure, forms, documents, and other concerns. For a flat rate Walter & Truong PLLC can take care of the whole process for you. Contact us to schedule consultation here to get started.

Angela Walter, Texas Attorney - Feel free to message me if you have any legal questions!

Here's an article I wrote: Series Limited Liability Company (LLC)

Angela Walter, Texas Attorney - If free to message me if you have any legal questions!

What is a series LLC?

Historically, members had to file, manage, record, and report each LLC separately which meant more paperwork, more cataloging, more expense, and more reporting. That process created more unnecessary work and several issues for not only the members of the LLC but also for the states' regulatory agencies. Some states have resolved this issue by enacting the series LLC. When done properly, a series LLC gives members protection from personal liabilities arising from multiple properties or operations without having the extra expenses of multiple LLCs.

Series LLC also known as master LLC provides liability protection across multiple LLC entities. Business owners and investors ("Members") create LLCs to protect their personal assets from legal liability. Members can add additional protection by forming series LLCs to hold each real property or business entity.

A series LLC is a designated "series" or "child" LLCs from the original LLC aka parent LLC. Each child can hold a specific property or properties, investments, assets, borrow money, or have a specific business purpose. In other words, each series can have its separate rights, powers, duties for specific assets or liabilities and can have a separate business purpose. Liabilities, debts, and obligations are only held against each child LLC and not against the parent LLC or other child(ren) LLCs. Each designated LLC has its own governing documents establishing its members, managers, and membership interests. It can also file lawsuits, be sued separately from the parent LLC, enter into contracts, hold title and secure interest in assets.

According to the Texas Business Commerce Code (TBCC) Section 1.201(b)(27), Legislators defined Texas series LLC as a legal "person." Under the Texas Uniform Commerce Code (TUCC) Section 9.102(3) a debtor is a person obligated on an account, chattel paper, or general intangible. This new law allows series LLCs to acquire assets through debt.

Series LLC are commonly used for business ventures, multiple investments or rental properties, or businesses that operate multiple channels of revenues. One of the benefits of a series setup is that Members can avoid filing separate tax returns for each series.

How does someone form a Texas series LLC?

According to Texas Business Organizations Code (TBOC) Section 101.602(a)(1)-(2), specific languages must be included in the certificate of formation, operating agreement, and maintain separate books and records for each series. In order to receive series LLC benefits, the series must be filed with the Texas Secretary of State, have a unique name from its siblings and parent LLC, conduct business, and be in compliance with the Texas Business Commerce Code and Texas Business Organizations Code.

There are three types of series LLC: (i) registered LLC, (ii) protected LLC, and (iii) series LLC that doesn't fall into registered or protected LLC class.

The minimum requirements to get the benefits of a series LLC is under TBOC Section 101.602(a)(1)-(2) which states that the series LLC must be included in the certificate of formation and company agreement, and the company must maintain separate records for the assets of each series. See TBOC section 101.601 through 101.621. Generally, under the certificate of formation, under the supplemental text section of the form, you add the series information.

Protected series requires that the LLC certificate of formation must provide notice of the series structure and the LLC agreement must permit the formation of different series. The series LLC must be properly recorded and maintain accounts for separate assets and liabilities for each series. Essentially, to file for a protected series, you must file an assumed name certificate in compliance with Chapter 71 of TBOC.

Registered series requirements are the same as protected service with additional documentation that a certificate of registered series is filed with the Texas Secretary of State by the parent LLC. When done properly, this is particularly beneficial when a third party vendor or purchaser of the company requires a certificate of status which shows the registered series in use and in good standing with the State. Additionally, registered series can file other documents with the Texas Secretary of State in relation to that series and provide certified copies to third party vendors or purchasers.

To form a name for a registered series, it must state the name of the parent company, followed by R.S or RS, then name of the series. For instance, if the parent is Texas Real Estate Group LLC, the following are acceptable: 1. Texas Real Estate Group LLC – RS Harvest Blue Houston or 2. Harvest Blue Houston, a registered series of Texas Real Estate Group LLC.

Texas is one of the few states that offer series LLC. Not all states will recognize Texas series LLC, however, Texas is unique in that it will allow you to register out of state series LLCs also known as foreign series LLC.

The laws of a series LLC are ever changing and ever growing. It is a relatively new law and solution provided by some states. Although this article provides some basic information on the series LLC, we always recommend that you do additional research through credible sources and keep up with the law. We will always make good faith efforts to continue to update our articles and resources.

Angela Walter, Texas Attorney - If free to message me if you have any legal questions!

Here is an article I wrote: Texas Closing Checklist for Every New Homeowner

Angela Walter, Texas Attorney - If free to message me if you have any legal questions!

Whether you are purchasing your first home or the next real estate deal, closings can be a nerve-racking process. There are a lot of factors that come into play in order to successfully close on a property. We have created a checklist for you to ensure your closing goes as smoothly as possible.

We broke down the closing process into three stages: pre-closing, closing and post-closing.

Pre-Closing

1. The Contract

If you are the buyer and your offer was accepted by the seller, you will enter into a contract. Generally, your real estate agent will prepare the contract. If it is a residential property, agents typically use a standard residential contract (most if not all states have there own committee). In Texas for example, we use the TREC forms. Your agent will also prepare the appropriate addendums. Be sure to thoroughly review the contract to ensure you understand all the terms. If there is something you do not understand, ask your agent for clarification, or, have a real estate attorney review the contract for you.

1. The Inspection

Follow the terms of your contract and calendar your deadline for due diligence. Generally, the contract will outline your time frame for your option period. An option period is a specific timeframe that both parties agree to in which the buyer can terminate the contract for any reason without risking their earnest money. This time frame is crucial because it allows for you to perform your due diligence on the property before fully committing to the contract. You can order a property inspection report which will show you any concerns or issues with the property.

1. Lending

Provide a copy of the contract to your lender so they have the material terms of the agreement. After the inspection is completed, you may discuss negotiation tactics with your real estate agent if there are concerns with the property. Make sure that your lender has copies of all amendments to the agreement if you agree to a different sales price or concessions/reductions are made. Then, contact your lender to ensure an appraisal for the property is ordered and scheduled.

1. Insurance and Title

Shop around for home insurance companies that best suit your needs and select the insurance company that provides the amount of coverage for your home owner’s insurance policy. You may also need to send a copy of this information to your lender. Additionally, you will most likely need title insurance. The title company that was designated in your contract will provide you with a title commitment to start. Be sure to review the commitment, survey and abstract within the timeframe as stated in the contract. If you have questions about title be sure to contact a real estate attorney to review the commitment on your behalf. The attorney may spot issues and recommend an objection letter.

1. Financing

To calculate how much you can afford for a property, the general rule of thumb is 30% of your gross monthly income on home related expenses. Take into consideration the mortgage, taxes, insurance, HOA fees, and cash reserves for home repairs or replacements. Also take into consideration other expenses unrelated to the property to understand your debt to income ratio. Financing should generally be done before purchasing a home, however, sometimes your finances or sale transactions change, then you should reevaluate your budget.

1. Final Walk Through

The day before or day of closing, go to the property. The final walk through gives you the opportunity to inspect the property before the official sale. During this time, inspect any agreed repairs, inspect all appliances, check whether all doors and windows are secured, working properly, or to your satisfaction, belongings of the seller are completely removed, check for signs of mold, check electricity and outlets, and inspect the exterior & backyard.

Closing

1. The Parties

First, know who all the important parties are. At closing, you will likely meet at your title company’s office and a title agent will be present. Prior to your closing make sure to ask your title agent what you need to bring on the day of closing and what needs to be completed prior to closing. For example, most title agents will request that you bring a valid form of identification such as your driver’s license.

1. Funding

You will also be required to bring your down payment at closing. Make sure to confirm

with the title agent if you need to bring certified funds or wire the funds beforehand and how far in advance the funds must be wired. Wire fraud is serious so be sure to double check the wiring information before you send the money. If you are uncertain if the instructions are legitimate, contact your escrow officer.

Consider whether you want your real estate agent or an attorney present with you at closing to review the documents with you. If you are bringing additional parties, be sure to account for additional time for discussions amongst everyone.

1. Important Closing Documents

Prior to your closing, you should set aside time to review all your documents to ensure the information is correct. Double check the names, address, loan amount, other contact information, etc A few important documents include:

1. The closing disclosure,
2. The deed of trust,
3. The note, and
4. The warranty deed.

Post-Closing

1. Access

After closing you should receive all keys, access codes, garage openers, etc. to your new property. If feasible, we recommend that you change all the locks on the property (if this was not previously completed). This ensures that you are the only people with access to the property.

1. Utilities

If you haven’t already set up utilities, then connect your water, gas, electricity, and Wi-Fi. Typically, we suggest that you complete this prior to closing to ensure you have service by the time you close to avoid any periods of no service.

1. Homestead Exemptions

If this is your primary residence, then apply for the homestead property tax exemption and any other exemptions that you qualify for. You can usually find the forms on the county website where the property is located. Confirm that all change of ownership documents with the county appraisal districts are updated to reflect your information.

1. Important Documents

Lastly, make an electronic copy of your closing documents and store the copy you receive from closing in a safe place.

Angela Walter, Texas Attorney - If free to message me if you have any legal questions!