All Forum Posts by: Katie L.

@Vincent Jones

Not sure what you're looking for in regards to the tenant in common deed but you'll probably want an estate planner then or a transactional real estate attorney. You'll also want to be sure the person you're talking to is familiar with taxation if you're looking at doing any sort of buy out or transfer of the property between the tenants.  This becomes particularly important for property tax purposes due to Prop 13 in California, especially if you're dealing with related parties.  Hourly bill rates for attorneys vary of course, but you should expect something in the range of $225-500 per hour for consultation.  Shoot me a PM if you want referrals for San Diego.  I know a couple attorneys up in L.A. that might be able to help, but some specifically only service high net worth individuals, so will need some more information.

*This post does not create an attorney-client or CPA-client relationship.  Readers are advised to seek professional advice.

@Vincent Jones

What kinds of things are you looking for from an attorney?  Transactional advice?  Landlord/tenant law?  Eviction?  Tax advice?  Depending on what you're looking for, it may be a different kind of attorney.

@Horacio Gutierrez

The property is in a trust?  If so, the trustee has powers over the trust.  The trust will have provisions regarding what a trustee can or cannot do with trust assets.  Usually they have provisions as well for minors under certain ages, and the ages are not always 18.  Sometimes trusts restrict assets until 21, 25, 30, etc.  Depending on how it is structured, the child may never be able to receive the house if principal cannot be distributed.  The mortgage would likely also be in the trust's name, managed by the trustee.  Is the child the only beneficiary of the trust?  I think you need to consult an attorney for these questions.

*This post does not create an attorney-client relationship nor a CPA-client relationship.  Readers are advised to seek professional advice for their particular situation.

@Gary Moore

You raised a ton of issues in a short post.  Couple ideas/issues off the top of my head:

If you're going to go with Idea 1, be very careful how you structure the transaction so as to avoid a property tax reassessment.  You'll want to use the parent-child exclusion if you can to keep the property at Mom's assessed value, which if she has owned it for 3 decades is likely very low in comparison to fair market value.  Due to CA's prop 13, the property taxes often do not increase as quickly in California as fair market value, and triggering a reassessment can mean tens of thousands of dollars additionally a year.

Are there powers of appointment in the trust?  Does it allow for non pro rata distributions?  Any issues with the daughter taking over the mortgage/triggering due on sales?  What's the relative net worth of Mom, can she gift the home or cash without triggering gift or estate tax?  By trust, I presume you mean a revocable living trust as opposed to an irrevocable trust?  Mom is coherent, correct, just her body is disabled?

If the trust is a revocable living trust, then if you go with Idea 2, mom could probably use her exclusion under IRC 121 to avoid paying gains on the sale of the home.  But if it's a revocable trust, usually mom would be the beneficiary of the trust and would retain rights to the proceeds.  You're talking about the daughters receiving sales proceeds so not sure if it's in an irrevocable trust.  And if it is an irrevocable trust, do the daughters have rights to just income, or do they have rights to principal as well?  If principal, is it limited to an ascertainable standard or is it discretionary?

Sounds like you're going to need to get an attorney and a CPA involved for this one.  Worth the cost to do it correctly and avoid triggering big tax bills.  Let me know if you need referrals in San Diego.

*This post does not create an attorney-client or a CPA-client relationship.  Readers are advised to seek professional advice.

@Erick Chavarria

California is a sort of beastly state when it comes to taxes and filings. Even if you create a non-CA LLC, if you are managing the business from California, you will be deemed to be "doing business" in California and therefore subject to CA taxes. California charges a minimum tax of $800 a year per LLC, and more if you have gross receipts in excess of $250k. So, if you create an LLC in another state, you will need to register it as a foreign LLC in California. Though, this process will be the same for the other state (if you created a CA LLC you will need to register it as a foreign LLC in the state in which you are doing business/holding property). This means that you will need to pay registration and filing fees in at least 2 states if you don't buy CA property. Be sure to tell your accountant that you now need to file non-resident income tax returns in each state where you own property as well. Most likely the state where the property is located is where lawsuits would be brought if they are something for personal injury like a trip and fall or something of that nature because the "cause of action" arose in that state. California tends to have more laws on the books and requirements and restrictions that it can be a good idea to form a CA LLC for out of state property so that you as a CA resident are covered, and to try to have your contracts fall under the purview of CA courts. These are all conversations you will want to have with your attorney and CPA so that you get advice specific to your own situation.

*This post is informational only and is not to be relied upon. Readers are advised to seek professional advice. This post does not create an attorney-client or CPA-client relationship.

@Ramsin Jacob I second what @Stanley Bronstein has stated. I do not know what your current operating agreement looks like and how well it was drafted. Therefore I will not opine on whether you can just try to use your existing documents for a new formation. Since your current LLC was drafted I can tell you for sure that rules and laws relating to LLCs have changed so in the very least, you would want to research to see if the code sections referred to are still legitimate. We make changes to our documents here at my law firm regularly to keep up with changes in the law that are passed. Since Congress did a major overhaul of the tax code recently, plus California has made some changes, it may be prudent to have a new set of documents done, and possibly do an amendment to keep your existing LLC document current. You also may want to talk with a professional to confirm that an LLC is the right type of entity for you and that other entity types, such as an S-Corp, do not provide better tax results for your situation. If you are concerned about the costs and want a short work around, then that is your call and the risk you want to take is your decision of course. But, if you approach a professional about it, be prepared to pay a few thousand dollars as you did the first time around.

*This post does not create an attorney-client nor a CPA-client relationship.  Readers are advised to seek professional advice.

@Ramsin Jacob

The state only requires the articles and the statement of information. The rest of the documents are for internal purposes. I am not your attorney but I wouldn't recommend cutting corners. You should have an operating agreement and make sure it contains all the provisions required. The whole point of setting up your LLC is to protect you from liability... when someone sues you it will cost you way more to fix it than if you did it right the first time. You want the operating agreement and other documents so that your LLC is a legitimate business and the corporate veil is not pierced. Having those other documents bolster the fact that your LLC is in fact a business rather than just the 2 short forms on file with the state. Again, I'm not your attorney so you should seek out legal counsel, but generally... you get what you pay for...

*this post does not create an attorney client or cpa client relationship. Readers are advised to seek professional advice.

@Kevin Barnard

@Travelle Mason

I know several CPAs in San Diego that work with real estate investors if you’re willing to work remotely with someone. Shoot me a PM if you want the names.

@Chris Tryling Are you trying to find a CPA to create your LLC? If they're drafting the operating agreement, that's something you'll want a lawyer for. In California, that's considered the "practice of law" and CPAs could face criminal charges for drafting such a document. Not sure how it works in other states. Not sure if CPAs can do the basic secretary of state documents for you to form the LLC but there is case law saying any document that deals with legal rights is the practice of law, so just be careful about that.

As for finding a good CPA, there are several good ones out there.  But, likely not for $700.  That's pretty cheap.  There's that saying that you get what you pay for...  You probably will expect more $1,000-2,500 from a CPA would be my guess, but you can ask around.  I have names for you in San Diego if you're willing to work remotely then shoot me a message.  Or you could reach out to @Logan Allec in L.A. or @Brian Schmelzlen in San Diego.  @Michael Plaks is based in Houston and also may be a good resource for you.  Texas I think has no state income tax but I believe does have a franchise tax so you may have less of a tax burden there than in California but you'll definitely want to ask your CPA about that.

*This post does not create an attorney-client or CPA-client relationship.  Readers are advised to seek professional advice.

@Matthew Cain  The price we pay for this nice weather...