Hi, Lee Phillips here, United States Supreme Court counsel,
and I deal a lot in the areas of estate planning, asset
protection, taxes, and stuff.
What's happening today is, particularly in the real estate
investment group, is people are being
told to put their property into a limited liability
company, an LLC.
And that's fine.
Nothing wrong with that.
It does give it asset protection,
and it's actually pretty good.
And we don't need to get into how many LLCs you set up now,
that's a topic for another video.
But when you put the property into the trust,
or into the LLC, what happens?
Well, you have now moved that property
from being yours, private investor,
over to LLC, commercial entity.
An LLC's a company.
OK, that's all right.
How do you do it?
Well, you make out a deed from you to LLC,
and then I want you to get stock or membership interest
in the LLC back in exchange.
And we'll talk about that in another video as well.
But what happens to the insurance?
What happens to the property taxes?
That is no longer your investment property.
It's not a private investor's investment property anymore.
That's a commercial property.
It's owned by a company.
And the interesting thing is the states,
the feds, everybody else has figured out, company,
we're going to get them.
So the property taxes are going to almost triple,
in many cases.
You need to check and see what's going
to happen to the property taxes before you move them
in to an LLC.
Now, you might try the argument, look I own it now,
I own it LLC, I'm the only home owner, same ownership.
That works in some cases.
Maybe not the tax guy, but with the insurance guy.
The other issue is that people put the piece of property
into the LLC, and they never bother
to change the property casually insurance on the piece
property.
Burns down.
Insurance company comes in and they say,
well, gee, we insured this property.
We didn't insure commercial property.
This isn't the property we insured.
This is owned by a company, and they don't cover the deal.
If you go ahead notify them that it's in an LLC,
they say fine, company property, three times the premium rate.
Now I have actually done this myself.
I have made the argument, no, look, I owned it,
I've moved it into the LLC, same ownership, it's me,
gives you a better asset protection, everything else.
And the insurance companies have said, OK.
Now I get two statements, two coverages, two contracts,
and everything, one my name as an insured,
and one the company's name as an insured.
But the insurance company now knows
that this piece of property is held in an LLC,
and they have agreed to insure it.
On 80% of my properties, no problem, insurance company
bought that.
On the ones where I owned them with my son, or my daughter,
or somebody else, they said, no, no, no, you
move it from your two as joint tenants
over into LLC, that's a different animal.
We're changing your insurance.
And frankly, with three times the insurance,
I've left them in my name as joint tenant
with my son, specific one I'm thinking of.
So you have to weigh advantages and disadvantages.
The LLC gives you great asset protection, not only protecting
you from what happens in the entity, at the property,
but also protecting the property from you.
That's a whole other issue on one
of these videos called charging order protection.
This is Lee Philips talking about insurance ramifications
when you move the property from your ownership
into an LLC-- or a corporation, for that matter--
into a company's ownership.