Brokers are often asked by their clients whether or not they should take title to their real estate in another form of ownership – most commonly inquiring about trusts or limited liability companies.
What is the answer?
It really depends. For one, you need to know what the client’s objective is in asking the question:
Are they wanting to avoid probate? A living trust may accomplish that while an LLC may or may not (depending on how it was organized). But the cost of setting up and/or maintaining these may outweigh the cost of probate.
Is the client worried about personal liability? A trust does virtually nothing to avoid that (contrary to commonly dispensed, but erroneous, advice).
Is anonymity a concern? If so, then the land trust might be the best route, but only if the client takes title in the land trust from the outset. And the client needs to know the drawbacks to this form of ownership too.
Another consideration –- intended use of the property. Is it going to be used by the client personally, or is it an investment property? Is it residential in nature or commercial? The resulting answer on how to hold title to the property can vary widely depending on the responses to these questions.
There is no “one size fits all” recommendation or answer. Making the determination of what form of ownership is best for a particular client requires an analysis of quite a few factors: objectives, intended use, source of funds, tax consequences, liability risks, costs and number of “owners” involved, to name just a few. Because the implications of choice can have huge consequences, brokers should tread cautiously in giving advice on this topic and strongly consider referring their clients to qualified legal counsel.
For over twenty-five years, Erwin Law LLC has been guiding residential and commercial real estate closings from start to successful finish, providing sage, comprehensive counsel in all areas of buying, selling, development, business and estate planning. When your clients have questions outside your comfort zone, we’re happy to assist. Call us at 773-525-0153. Or visit: http://erwinlawfirm.com