Series LLC For Real Estate Investors In Maryland

Maryland is a lovely and lush state full of natural beauty and honest, hard-working people. Our Mariyland investor friends often write in with their questions about their best real estate asset protection options. Perhaps they already know that most REIs can benefits from the Series LLC, or they’re trying to figure out whether Maryland offers a Series LLC.

Is There a Maryland Series LLC Option for Investors?

Unfortunately, Maryland investors cannot yet use a Maryland Series LLC for the simple reason that it doesn’t exist. Just under 20 states currently permit the Series LLC, and Maryland isn’t on the list. But you’ve got no reason to fret: you can still have your Series LLC.

Which Series LLC is Best for Maryland Real Estate Investors?

Fortunately, the Maryland investor isn’t bound to playing by Maryland’s rules. One of the beautiful things about the American real estate industry is that you can choose which state’s “rules” you don’t mind playing by. We’ve gathered up a few of our top choices for Series LLCs for your convenience. Here are some of the states whose rulebooks we like:

Any of these states will deliver a fine Series LLC, and then it’s your responsibility to use it correctly.

How Do I Know if I Need a Series LLC?

It’s pretty simple: if you have real estate assets in your own name, you should consider transferring them immediately into your Series LLC structure. This removes the property from your name, and if you have an anonymous trust, the trust will hold title while the Series LLC defends the property by sticking it in a child series, by itself, protected with liability benefits and literally inside of its own company. All this company does is hold assets--and it should never interface with members of the public. If you have assets you value, you want them in a company rather than your own name. That’s one simple way to decide if you need a Series LLC.                                                                                                                                                      

The quickest way to figure out if you need a Series LLC over a Traditional LLC is easy. Just count up your properties. If you have more than one or plan to have more than one in the future, the Series LLC is the more economical option. File it once, and add child Series indefinitely as you acquire assets. You can easily create new Series at home or work within minutes, print it, fax it to your lawyer, and ask to transfer your new property into it. This way you can grow and defend your assets simultaneously.

Land Trust: What To Know About Your Eligibility, Rules & Regulations

We get frequent questions about rules and regulations of all legal tools used for asset protection. Land trust eligibility is no different. 

Let’s just be clear that you don’t have to pass any eligibility requirements beyond being of legal age to get a land trust. That said, there are some issues to be aware of.

Are Land Trusts Available in Every State?

Regardless of where you live, you (as an investor or business owner) can enjoy the benefits of the land trust. But not all states offer land trusts--in fact, only these six have local options:

But any investor can have a land trust or its equivalent--the only possible exception being those living in Louisiana, who may wish to use other types of trust or asset protection options.

Fun fact for the legal eagles in the crowd: Louisiana is “special” from a legal standpoint because they rely on Napoleonic law, more based in older French legal systems, than the rest of U.S. states which are more closely related to British common law. As a result, Louisiana REIs who wish to keep their business and entities in-state are likely to need attorneys familiar with state-specific tools and laws. The rest of us in the other 49 states (and D.C.--by the way, fantastic City Flag you guys have there!) have things a little easier.

Even states lacking land trusts have similar options by different names, “Title-holding trust” is common, but each state will have its own lingo.

Even if your state doesn’t offer a local option, it likely will default to the laws of Indiana’s land trust, which have set the tone for land trust legislation and regulation nationwide. 

As with entities, you aren’t required to form your land trust in-state. At RLS we always tell our clients: if you don’t like your jurisdiction’s rules, change jurisdictions. It really is that easy. Many of our, say, Alaska investors decide to form Texas Series LLCs because they like Texas’ costs and laws better. You can do the same thing with land trusts. 

What Rules and Regulations Should My Land Trust Follow?

As far as legal vehicles go, the land trust is not particularly heavily regulated. Anyone can have one, and there aren’t many restrictions at all. But not everyone will use the land trust in the same way, and there are some limits and rules-of-thumb to keep in mind.

The most obvious limitation of all land trusts is the fact that they aren’t incredibly useful beyond the realm of real estate law. The land trust, often simply called the title holding trust, can’t hold just any asset--it must be a real estate asset. If you have cash to stash, consider your off-shore banking options. As for other assets, different strategies will work for them.

The best you can do to “play by the rules” is ensure your land trust conforms to all local laws. Next, ensure your use is appropriate and lawful.  If you need help determining your compliance, understanding how trust properties are taxed, or learning how your land trust works in the context of your asset protection plan, check with an attorney, CPA, or even both. Other investors can help you get ideas for using your land trust, but ultimately, counting on pros hip to your personal situation when it comes to matters of legal compliance is the smartest move.

Land Trust Best Practices

When you deed a property to a land trust, you’re removing it from your personal possession. This makes some investors nervous, but it need not, since you still receive your funds as the beneficiary. Here are a few best practices to keep in mind when using land trusts to protect real estate assets:

This last point is one we should stress: land trusts offer anonymity, while entities offer compartmentalization, and the ideal plan has both. Select the best liability-limiting entities for you, whether that’s a Traditional LLC, Series LLC, or both.

Bottom Land: With Few Limitations, Most Investors Can Benefit from Land Trusts

While the land trust has limits, so does every tool. Even non-legal tools are only good for their intended jobs. Try screwing anything in with a hammer if you don’t believe us. As for land trusts, they’re excellent for their designed purposes. To get the most out of the land trust, use it appropriately for your situation and get advice if you’re unsure what role it should play in your asset protection plan.

Land Trust: Basics for Real Estate Investors to Know

Land trusts are often the unsung heroes of the real estate investing world. You can use them to control assets rather than own them yourself.

You’re almost always better off controlling an asset than owning it in your name outright.

And that’s where the land trust really gets to strut its stuff. After all, the land trust is also called a “title holding trust” because that’s it’s main job: hold title to the property in your place. But you still get to stay in control of any property associated with your trust, and of course, any earnings the real estate investment generates. Let’s take a closer look at land trust basics you should know.

What is a Land Trust and How Does it Work? 

The land trust is an asset protection tool that doesn’t get a lot of respect. There is surprisingly little buzz around this real estate tool, though it can save your assets from unnecessary legal risk. 

Land trusts can form a critical part of your asset protection strategy well outside the limelight, and in fact, we prefer creating them anonymously for additional benefits. This type of revocable trust takes the critical first step in asset protection: stripping the title out of your name.

When you establish a land trust, you’re using its trustee-beneficiary structure. Your trustee may then provide for you as a beneficiary of the trust. Lawyers make great trustees because of attorney-client privilege, but you get to choose. This is how you maintain control and enjoy the benefits of property ownership while sidestepping its liabilities. It’s a pretty cool thing, in our opinion.

Why are Land Trusts Helpful for Real Estate Investors?

There are many ways land trusts can help out real estate investors. Let’s just consider some of these common uses of the land trust:

How Land Trusts Best Protect Real Estate Assets

As previously mentioned, a land trust is a great tool but can be limited if used alone. It’s not intended to be your entire asset protection strategy, but rather a piece of it. Recall that properties in LLCs are generally ‘pooled’ legally, unless you use a Series LLC of course. 

We’ve found that asset protection works best in layers. A land trust is a great first layer of anonymity. If your land-trust-owned property is also owned by an LLC or a Series within a Series LLC, that’s another layer. From there, attorneys and CPAs can pile on even more layers such as enhanced anonymity, the addition of a shell corporation, and plenty of other legal and tax tricks.

What Do I Do to Form a Land Trust?

Land trust eligibility isn't the same in all states. The only universal pieces of the land trust formation process are these:

Your lawyer will be able to give personalized advice upon agreeing to help you. Thanks for learning about the benefits of land trusts with us today, and please leave any questions you still have in the comments if they aren’t addressed in our Land Trust FAQ.

Land Trust: The FAQs

If you’ve started learning about the land trust recently, questions are common. We’ve gone ahead and made some primers on what a land trust is and the benefits of the structure, but today, we’re going to answer your most Frequently Asked Questions about the land trust. The inboxes here at Royal Legal HQ are regularly flooded with the same questions--so we plan to start with those. If you have more, just let us know, because we’re always happy to answer your questions--in email or blog format. Let’s dive in.

Land Trust FAQ #1: I Heard Land Trusts Can “Get Around” the Due-on-Sale Clause for Easy LLC Transfers. Is it True?

Yes. Really. We have clients use land trusts for this purpose regularly: to obtain better financing  for an investment property. We’ve outlined the basic method before, but here are the broad strokes:

  1. Let your lawyer know what you’re up to.
  2. Buy in your own name for optimal loan terms.
  3. Transfer your property into a land trust.
  4. If desired, move the property from your anonymous land trust to the LLC of your choosing
  5. Enjoy the sweet relief of never worrying about the DoS again.

It really is that simple. We’ve never known someone who got in “trouble” because the worst thing that can happen with this method is receiving a love note from the bank. If this happens, your property can revert back to your name. You know, where it was in the first place. 

If you still want to protect the asset, it’s likely you made a misstep the first time. When executed with professional help, few investors ever get a letter from their bank because the bank is none the wiser. Breathe. Due-on-sale violations aren’t punishable by hard labor It’s not a crime to get better deals, and each piece of this plan is perfectly legal.

Land Trust FAQ #2: Do I Need Separate Land Trusts For Each Property?

Ideally, yes. While one land trust is better than none, the optimal strategy is to use one per property. That way, you can really enjoy each land trust benefit for each and every property, whether the benefit you want is:

Land Trust FAQ #3: Some Blogger Said Land Trusts Aren’t the Same Thing As Asset Protection? WTF? 

Regular readers now wondering if we’ve been lying about everything all along like scorned spouses, slow your roll. Actually, anyone with this question can slow their roll. First of all, was Some Blogger a credentialed asset protection attorney? If not, exactly what makes them an expert on the topic? You can look up our credentials, read our reviews, etc. Do the same and check your source. 

Considering the Source of Legal Opinions

You’re looking to see if their opinion on asset protection is any more valuable than say, our opinion on the best color for your living room we’ve never seen (Coral. Totally go with coral). 

See the problem there? We don’t know what we’re matching to, what you like, or anything about you. Also, we’re lawyers, not interior decorators. Our lead attorney Scott Smith freely admits lacking interior decorating expertise--perhaps it was this lack of talent that forced him to turn to law, which he’s pretty darn good at. Remember, he used a land trust to offset law school costs. Did Some Blogger?

Scott’s opinion is the same as everyone else’s at RLS’s. Land trusts are a valuable component of an asset protection plan. That’s it.

By the way, even if Some Blogger is or claims to be a lawyer, remember this: no blog should create some kind of surprise attorney-client relationship. So, they aren’t your lawyer even if they are a lawyer. And just for the record, that same concept applies to this blog, even if you think our pearls of wisdom are awesome. That doesn’t make you a client; it makes you a passionate reader. We love both at RLS.

Bottom line: land trusts alone won’t always protect assets, but an asset is better protected in an land trust than in your own name. Land trusts aren’t an entire asset protection plan, but rather part of one.

Land Trust FAQ #4: Same Thing As Asset Protection? WTF? 

This ties back into #3. Land trusts aren’t a complete asset protection plan, but they have their place. What role the land trust will play in your plan is a professional’s place to help you decide. Regardless, this lesser-known tool can help most investors achieve their goals.

Land Trust: The Benefits Of The Structure

As we continue our series on the land trust, it’s time to turn our attention toward the major benefits of this structure. Whether you are old friends with this time-tested real estate tool or have never heard of it in your life, the land trust or title-holding trust can truly be the real estate investor’s best friend. Let’s get right into the three most essential benefits of the land trust, an under appreciated yet powerful legal tool.

Benefit #1: Land Trusts Protect Your Anonymity

If most intelligent people are given the choice between anonymity and oversharing, they tend to like the former. Anonymity makes lawsuits a serious pain, and can actually prevent them if the other party isn’t particularly motivated. Learn more about the inherent benefits of anonymity for asset protection. Or, learn how to get even better protection from the next tip.

Benefit #2: Land Trusts Make Lawsuits Against You Harder

The land trust’s anonymity powers help it prevent lawsuits. Anonymity alone is rarely a good asset protection plan. But by the same logic, it’s impossible to have a highly effective, what we like to call “judgment-proof” package.

Trusts are more difficult to sue than individuals. Trusts paired with entities are even more difficult, and we’re about to explain why in detail. Pay attention if you’re looking for an ironclad asset protection strategy that stops suits before they start at all.

Benefit #3: Land Trusts Kick Ass at Preventing Lawsuits When Paired With Entities.

Of course the asset protection folks save the asset protection benefits for last. But think about it: anonymity is something you need, and the land trust removes property from your own name. It doesn’t have to stay there, though. You can reduce your chances of a lawsuit against you to almost “none” by simply pairing the land trust with an appropriate entity. We’ll give you the play-by-play of both why you need to do this and how.

To build  a high quality asset protection system, pair the humble land trust with a liability-limiting entity. This is a highly intelligent, easy-to-manage, cost-effective way to approach a basic asset protection strategy. Here are the very broad strokes of real estate investors effectively pairing entities and land trusts actually looks like.

Protecting Assets With One-Property-Per-LLC Strategy

First, think of one of your investments. If you don’t have one, imagine your dream spot--maybe in a place you’d like to vacation to. Now, we don’t want anyone coming after that badass property in court. So you might stick it in a Traditional LLC. An ideal strategy is compartmentalized as well as anonymous. 

Compartmentalization is the second key of your plan, and it’s your entity’s main job. One Traditional LLC can protect one asset completely as a holding company, or you may choose to use it as a shell company to assume operations for a Series LLC.

Series LLCs are ideal for the investor or multi-property owner because you can have as many “compartments” (Series, miniature liability-protected companies) as you like. Learn more from our educational Series LLC content on this structure’s benefits, uses, and FAQs. But for now, just understand that the Series LLC achieves perfect compartmentalization, with each of your assets snugly secured inside its own Series.

Compartmentalization compliments anonymity brilliantly, and is indeed what we call one of the pillars of asset protection. If your assets aren’t connected to you, and nobody can figure out who the hell you are, you because a righteous pain to sue.

Bottom Line: Land Trusts Have Many Benefits for Real Estate Investors

The list above is far from exhaustive. There are many more nuances and benefits to land trusts, some of which may apply only in certain situations. For instance, some married couples love them because they allow for a legal ownership method known as tenancy-by-the-entireties. Land trusts can be used like savings accounts backed by appreciating assets, as estate planning tools, for executing transfers around the due-on-sale clause, and many more cool legal tricks.

Just know that using this tool can get you all sorts of perks, and don’t overlook land trusts when constructing your asset protection strategy. You’d just be cheating yourself.

The Real Threats to Your Self-Directed IRA & How to Defend Against Them

One of the many reasons real estate investors love the self-directed IRA (SDIRA)  is the control they have over both their assets and participation with traditional custodians. But many investors are also aware of the SDIRA’s relative security as an asset protection tool. If you weren’t aware of this benefit before, you are now. 

Don’t make the same mistakes other investors make. Watch out for threats to your SDIRA’s security. If you establish an SDIRA, it’s smart to do what you can to protect it; read on to learn how.

How Safe Is Your Self-Directed IRA?

When pros like attorneys discuss self-directed IRAs being “safer” than other investment vehicles, they’re referring to safety in two senses of the word. Your SDIRA isn’t “safe” from any type of attack, but it does protect you legally:

So, this article isn’t intended to suggest IRAs are inherently risky, just to remind you how not undermine its protections. The sticky reality is that for real estate investors, self-directed IRAs can be riskier when they own assets (including REI property) that have liabilities attached.

Your Biggest Threat: Prohibited Transactions Explained

The biggest way you can be a danger to yourself and your self-directed IRA is by performing prohibited transactions. The prohibited transaction rules are a gift from our buddies at the Department of Labor. Basically, there are things you can’t do in a business context with your SDIRA:

  1. Self-dealing is the term for doing business with yourself via your self-directed IRA or other qualified retirement plan (QRP). You can’t do this, frankly, because of too many opportunities for corruption.
  2. Disqualified People.The DOL isn’t dumb. They disqualify certain individuals, namely relatives, spouses, and other types of people you might form “sweetheart deals” with like business partners. So to keep everyone playing fair, plan participants can’t allow their plan to make transactions with anyone the DOL labels a “disqualified person.” Expect to pay hefty penalties if you do.

For your convenience, we’ve compiled an educational resource about avoiding prohibited transactions, complete with examples. Our prohibited transaction resources can help you educate yourself to the point you avoid engaging in such transactions with your self-directed IRA. The only downside to the SDIRA’s freedom from custodians is such freedom means you are responsible for dodging prohibited transactions.

How to Protect Your Self-Directed IRA

You have additional options for protecting your IRAs. For those of us concerned about our real estate assets, the liability-limiting powers of the SDIRA LLC offer an elegant fix.

Consider a Self-Directed IRA LLC for Liability Protection

The ideal legal tool for a long-term SDIRA owning REI is the SDIRA LLC. This variation of the retirement plan is hybridized into an entity, a more secure option for investors.

The SDIRA LLC is an alternative to the IRA Business trust, another option for IRA-owned entities. Real estate investors are attracted to the LLC option because of its strong liability protections. Using an SDIRA LLC gets investors the flexibility to buy real estate with IRA funds and the protection of an LLC, or the best of both worlds.

The DST 1031 Exchange: What Smart Real Estate Investors Know

The Delaware Statutory Trust (DST) is a bona fide legal workhorse.  For the right investors and circumstances, it’s often an excellent tool that preserves passive investment income, prevents lawsuits, and has special tax benefits for Californians. It can pull double duty for asset protection and estate planning, but that’s hardly all. 

The DST can bring even greater rewards to DST 1031 exchange real estate investors.

Real estate investors in California use the Delaware Statutory Trust  to dodge franchise taxes, escaping the state’s harsh regulations and Draconian tax enforcement agency.

But all investors (regardless of where they live) can exploit the DST for its 1031 Exchange compatibility, flexible asset protection and estate planning benefits. The DST 1031 Exchange also gives you a high degree of control over the structure’s protected assets and beneficiaries.

Consider this your quick guide to understanding how DSTs work with 1031s and your crash course into the wild, flexible, world of the Delaware Statutory Trust.

Understanding the Essentials of the DST 1031 Exchange

If you want to brush up on the basics of this structure fast, you should check out our Delaware Statutory Trust FAQs to learn about the basics of the structure. It’s the quickest way to get a comprehensive understanding, but we’ll touch on why asset protection attorneys even use these darn things in the first place.

For the moment, we’re confining this conversation to DSTs in the context of 1031 exchanges (but we’ll get to other benefits, we promise!).

All you need to know that these revocable trusts can designate many beneficiaries, a feature we'll illustrate with a whimsical example shortly. Theoretically, since you’re a beneficiary, you can hide among them for extra anonymity around your asset protection measures. But that’s far from the only perk of the DST for 1031 investors.

Delaware Statutory Trusts Go With 1031 Exchange Like Peas and Carrots

Despite their many uses, most online info about the Delaware Statutory Trust relates to estate planning or 1031 features, often vaguely. These are great structures for managing and defending 1031 investments. Why these basic concepts have become intertwined in the real estate world:

No tool is perfect though. We’ve written about the DST’s drawbacks too. It’s up to you to decide what’s best after gathering the vital information.

Can I Have More Than One Beneficiary for My Delaware Statutory Trust?

The beneficiary is anyone receiving funds from the trust structure. Not only can you have more than one, you can have dozens, even hundreds, if you so desire. So if you’re using your DST to secure the 101 homes you’ve selected for your 101 pet dachshunds, each dachshund could have its own share.

[Note: Your dachshunds would need HUMAN legal reps/guardians to express their interests--sadly they’re property under current law. But if dachshunds gain full legal rights of humans, and they may just be cunning enough to pull such a feat off, each one could own his/her DST shares independently. But you could do this same move with 101 children if you had the time, funds, and inclination to set them all up for life. Parents frequently leverage land trust appreciation to pay for expenses including college tuition for children, and you can too.]

We use this ridiculous example because you can easily imagine pulling in many JV partners, family members, and others who care about your business into your DST network as beneficiaries.

But we’re guessing you aren’t making customized estate plans by the dozen, so yes, you can have up to several hundred human beneficiaries according to the state who designed the trust. You will be one of them. So can any partners, children, or people in life you wish to do business with or support using your DST’s earnings.

Perks of Managing Beneficiaries with a Delaware Statutory Trust

Both you and your beneficiaries can benefit from the DST easily. You stay in control, pick who gets what with precision, and can modify your plans at any time.

#1 Easy to Change Your Beneficiaries

Adding a new beneficiary is easy when you’ve got a DST. Removing one is a separate process, but no harder. Let’s go over some of the best benefits of using a DST to pay out certain people as beneficiaries. 

#2 Divide DST Property Easily with Beneficial Interests

DSTs offer both a high degree of control over and tremendous flexibility for handling beneficiaries., thank the concept of beneficial interest. You can think of it as a way of issuing “shares” from your DST to reflect a person’s interest in a property, or even the whole trust, is.

The concept is known as beneficial interest in the trust. You can even have them issued for minors (though regrettably, not dachshunds as of July 2019). Parents often do to offset college or living expenses of the child beyond age 18, and you can sell/give fractions of a property to others under the same reasoning.

See? Even silly examples are important. The accuracy and control you’ll have over how your beneficial interests are distributed is unique to the DST. It’s a form of co-owing that doesn’t put you at risk and is strictly, clearly defined. Whether Johnny gets 1/16th of a single DST property or the entire trust, you’re the decider.

#3 Asset Protection Benefits of DSTs

The Delaware Statutory Trust’s compartmentalization ability makes it a fantastic choice for investors with many assets, anyone with multiple investments, or those hoping to grow rapidly. This isn’t a beginner’s tool, Californians excluded. This privately filed legally-binding agreement can theoretically protect assets in a way identical to the Delaware Series LLC.  DSTs do this by simply holding title to property for you, getting it out your name.

In fact, many of our Californian clients demand series LLCs until we convince them how much better the DST is. If you’re considering asset protection, this is by far one of the strongest individual structures available. It need not be excessively complicated, but the DST will require effective legal counsel to pull off if you want its protections guaranteed. This is particularly true for REIS or anyone wanting to try out the 1031/DST combo. Not every attorney is equally skilled, but a real estate lawyer with corporate chops or asset protection pro can handle this job easily. Pick yours wisely, because you’ll come to rely on their advice.

Estate Planning with DSTs: Create a Dynasty Trust That is Truly Immortal 

If you love the idea of your business outliving you, you can make it happen with the DST. While other tools and trusts can help estate planning for REIs, the DST comes with everything you need for a business that can outlive you. And not only that, you get to stage-direct exactly how the whole affair goes down.

When you grab that handy attorney, they can explain the full estate planning potentials in your particular situation. But most investors love the DST’s ability to become a legacy business that doesn’t rely on any one person. Your real estate empire could exist in its own right, simply passing through the hands of different “managers” as generations click by. If this idea appeals to you, take a good look at your estate plan, your options, and use our checklist to know if it’s time to update the plan.

If you proceed with buying new entities or assets, these should always be included in your estate plan. Real estate investors can use tools to account for everything, but with good asset protection, you’ll want to plan ahead for business succession or liquidation. You get to call the shots with your DST 1031, no matter how you use it.

Series LLC for Real Estate Investors in Connecticut

There’s now denying that citizens of Connecticut are innovators, with nearly 400 years of history dating all the way back to Colonial times. While most Americans are aware the state is deeply interwoven with early American history, the actual achievements of the Constitution State are not always recognized. After all, Connecticut is both one of our original 13 colonies and home to both the world’s first telephone book and the world’s first nuclear submarine. So we know not to underestimate the sheer brainpower and drive of our Connecticut REIs.

If you’ve wondered how you can get a Series LLC, we’ve got answers. Here’s the real skinny on the Series LLC for Connecticut real estate investors.

Is There a Connecticut Series LLC?

Connecticut has yet to join the club and adopt the Series LLC. They've held out on this issue while 17 other states and Puerto Rico adopted their own. We're not surprised to see the state that Colt Firearms calls home resisting, but you can still have your entity.

Fortunately, neither your hands or finances are bound by your state’s borders.  You can form your Series LLC in any state that permits one.

What’s the Connecticut Investor Who Wants the Series LLC to do?

Recall the state motto of Connecticut: "He who is transplanted still sustains." Well, in the case of real estate investing, the individual who willingly transplants their real estate company to another state. Just because you live or own property in Connecticut does not mean that you are stuck there legally. You're a United States Citizen, so enjoy that freedom and wander into a better jurisdiction for real estate investors business owners.

You, like any investor, can actually select the Series LLC of your choosing based on the benefits that are available in your chosen state of formation. Studying some of the Series LLC options can be helpful in making this decision.

What Are The Connecticut Investor’s Series LLC Choices?

So of our current Series LLC choices, which ones are the best for you?

At the time of this writing, we consider these states to some of those we advise investors to consider for their Series LLC formation include:

Research these states, and compare their benefits and drawbacks. Of course, a legal professional familiar with asset protection will be best suited to help you, but coming in with ideas can save time and money. We hope Connecticut investors now have a better grasp of their true choices for Series LLCs.

Estate Planning: Eligibility, Rules & Regulations

One interesting thing about the asset protection field is how many areas of law overlap. To run an effective practice, asset protection attorneys have to have a thorough understanding of business law, tax law, real estate, and yes, estate planning.

Sometimes, clients are confused as to why our firm, which serves primarily real estate investors and focuses on lawsuit prevention, would would have so much info about estate planning. Well, that’s because our experience has shown us that estate planning is part of your asset protection plan. Our job is to defend assets, which can outlive you. So of course you need to have a plan for what to do with them.

Many of the other structures we use to defend your assets (such as LLCs or other entities, investment vehicles, and certain types of retirement accounts) have many rules, regulations, and restrictions about who is eligible to use them and how. Most legal structures do. So it’s only natural to wonder what rules apply to your estate plan.

Let’s start with the good news.

Estate Plans: Can Anyone Have One, or Are There Restrictions?

Anyone on earth can (and should) create an estate plan. We will all die eventually, and there are many clear benefits of estate planning we’ve discussed before. Estate planning allows us to prepare for this inevitability, provide for our loved ones, and direct our assets to exactly where we want them to go.

You do not need anything special to get an estate plan. You don’t even need to explain why you want one. Estate plans are universally available to everyone.

Think of estate planning like car insurance, but better. We buy insurance to protect us in case we get in an accident. Insurance and estate planning are both proactive measures you take to offset the pain of an unexpected loss (whether vehicular or of your life).

Well, you may or may not crash your car, but the odds of death are 100 percent. You wouldn’t think about driving without car insurance, knowing you may never even need it. By the same logic, you shouldn’t even think about avoiding estate planning, as the consequence of dying without one will actually be visited upon your family and loved ones. Estate planning lets you die, well, politely, while also getting to control exactly where your assets go and who will run your business.

When is the Right Time to Make an Estate Plan? 

The ideal time to make an estate plan was actually yesterday. But since our mad scientists at Royal Legal Labs have yet to crack the formula for a time machine, today’s just as good. 

All kidding aside, the sooner you can make your estate plan, the better.  Recall that estate planning is available to everyone. Which legal tools will be most appropriate will depend on your personal situation, where you live, and many other details your legal and tax professionals will need to know. 

Recall that estate planning’s connection to asset protection seems obvious to any attorney with asset protection experience. But since you have the flexibility of being able to opt for other kinds of attorneys to create your estate plan, be aware that not all lawyers understand estate planning equally well. For instance, many attorneys have a go-to estate planning strategy that is already legally sound, then tailoring the forms to clients’ individual needs.

We’ve established that emergencies can happen to anyone. Estate planning isn’t about just anticipating your inevitable death either. We use many estate planning tools to ensure your wishes are carried out if you’re ever in any kind of emergency where you’re unable to make decisions. It’s a way to protect your business and assets during life and beyond. But the estate plan can only work if you bother to make it. In our opinion, the consequences of dying without an estate plan are too high.

Aren’t Estate Plans For People Who Are Sick or Dying? 

Certainly not. At least not exclusively, and in fact, estate planning matters in life as well.  Just because we all know we will die someday doesn’t mean we know when. While we may associate estate planning with sickness or old age, assuming you don’t have to worry about estate planning until an emergency happens is foolish. 

The reality is none of us are immune from unexpected illnesses, traumas, freak accidents, or even heavy objects falling from above. Estate planning is the only way

Bottom Line: Estate Plans Should Be Custom to You

Check out our educational resources about the most effective legal tools asset for estate planning for REIs. But keep in mind that the most important thing isn’t what you use, it’s that you use the things suitable to you. Doing your own research is wonderful. We encourage you to use our free educational resources as much as you like, and read even more on top of that.  But given how important this issue is, this research should just be your starting point. Use it to form questions for the legal professionals assisting with your estate plan ... and stay away from LegalZoom and the other "out of the box" legal documents that will cause more headaches than anything else. 

What Is Corporate Compliance and Why It’s Important For Investors

If you go through the effort of forming, building, and growing a company, you want to be sure to do everything you can to protect your business. One thing you simply can’t afford to ignore as a business owner is compliance. Let’s talk a bit more about what corporate compliance means, involves, and looks like.

What is Corporate Compliance?

Broadly speaking, corporate compliance describes how closely your company adheres to the law and any other policies it should be following. You can break it down into two basic categories:

Internal and External Compliance: What You Actually Need to Worry About

And don’t worry, that headline’s not a tease. We’re seriously going to show you how to not give a single solitary F-bomb about compliance. 

Internal compliance matters because it allows you to control your “in-house” liabilities, such as setting up the proper type of company, asset protection, contractor and property manager issues, and much more about your day-to-day.

External compliance, on the other hand, is more focused on the legal pieces of your company needs. This is just one of several reasons why attorneys offer services to assist. Attorneys can help you satisfy the most critical pieces of external compliance, which in our opinion are:

Of course, pros are happy to give you tips too, but generally good ones don’t do it for free. Paid consultations give you a competent real estate support team. This is especially important for ...

Both concepts of compliance are vital and can be offerings of full-service corporate compliance firms or agencies. Let’s dive into why you might think about using one, and your alternatives if you’d rather not pay.

Why Your Company’s Compliance is Crucial

The consequences of noncompliance aren’t pretty. What consequences will depend on the severity and type of noncompliance, but none are pleasant. If your LLC is noncompliant because you got a LegalZoom or similar company’s weak cookie cutter LLC, it may be totally useless as a business entity and thus offering you no real lawsuit protection. With so much on the line, why play around? 

Corporate Compliance: The Real Estate Investor’s How-to Guide

While all of these rules and regulations may seem like a drag, fortunately, you don’t have to wade through all the legalese and paperwork on your own. Professionals can help you be certain of your company’s compliance, with many offering specific corporate compliance services. Let’s talk about what these services look like in real life.

Real Estate Compliance Options

Generally, here are the kinds of services you can purchase from full-service firms. The value of a full-service firm is greater for real estate investors who have more expensive time. “Expensive” by the way can be measured in numbers for most of us. Look at what you average as an hourly rate and decide if putting even one or two hours of time towards compliance is “worth it.” If you can’t get the job done for under $100-300, you absolutely want to think about full-service. Even if your hourly rate is $20, that gives you five hours a year to devote to compliance. The idea that compliance services are for “rich investors only” or those who are well on the way to success is BS, to be blunt. Here’s the quickest, but not only, reason why. 

You can pay a full-service legal firm (not an online LLC-in-a-box shop because lawyers are more effective than LegalZoom or template companies, always) very little money to have them address that list of obligations above. Moreover, investors who purchase a compliance package usually get these things:

When Discussing Your Estate Plan: What To Do With Your Remains

One of the major decisions you will make as a part of your estate plan is how you want your remains handled. Some approach this as a matter of disposal, others as an opportunity for preservation of their legacy. But the options are only getting more interesting if you’re willing to think outside of the box on this issue. For the sensitive readers, if frank discussion of death and the natural processes that accompany it makes you uncomfortable, maybe now would be a great time to check out this excellent estate planning article instead.

Still with us? Let’s get right into the nitty gritty details of some of the more novel approaches to memorializing human remains. If this news story seems a little too intense for you, check out one of our previous estate planning news pieces on celebrity deaths.

Human Composting: Return to the Earth and Create New Life

The idea may seem distasteful on the surface, but stick with it for a moment. Are cremation and burial any more glamorous? With exceptions for religious variation, most folks are fine with burial, an essentially wasteful process (absent other altruistic actions like organ donation, a very cool thing) that involves a return to the earth from whence we all came. But what if your body could continue to provide life as part of a greater ecosystem as a part of that process? Well, it can if you use a human composting service. 

While there are multiple specific methods for human composting, the process involves using natural and biodegradable materials to encourage the remains’ reintegration back into the earth. Some companies use funguses or mushrooms, while others may use a variety of organic materials.

Is Human Composting Legal?

Location will determine if human compositing is a possibility for your own estate planning needs. Those with a specific plan for where they would like their resting place to be would be wise to research well in advance about the legalities of the issue in the relevant jurisdiction. Some, but nowhere near all, states and even smaller units of government have regulations requiring either burial or cremation. Generally, human composting is type of service that is legal where offered. Private providers of such services should be able to advise where they can and cannot operate. This area of law may change in the coming years as more advances in estate planning technology inevitably occur.

Washington was the first brave state to spearhead formal legalization of human composting, thus allowing an industry to flourish.

Why Would I Consider Human Composting or Other Burial Alternatives?

Burial is expensive. Very expensive. Somewhere between $8,000 at the most bare bones to $20,000 on average. Cremation can be cheaper but still runs comparable to the low end of burial. A representative of a major human composting company went on the record to confirm the price of their total service as $5,500.

If you find human composting isn’t as desirable for you, consider some of the other interesting burial alternatives that more Americans are embracing in part to combat end-of-life costs. The LifeGem is yet another memorial novelty, though this type leaves loved ones with a carbon-pressed gem made from the naturally-occuring carbon in your body. The result is a gem that can be mounted on jewelry or other keepsakes. What do you think of these more physically conservative memorialization options? Odds are good that trends that minimize costs and add meaning to the grieving process will have plenty of room in the estate planning market.

Estate Planning Basics: Understanding The How & Why

While estate planning isn’t always the easiest topic to discuss, avoiding it tends to make it into a bigger, more dramatic deal than it needs to be.

If you haven’t looked into estate planning basics yet, now is a wonderful time to consider what kind of choices you want to make, as well as which responsibilities you’ll want to tie up yourself. The reality is, if you don’t plan your estate, someone you love may suffer for it.

Smart people make plans. Smart investors can't afford not to.

Why Estate Planning Is Essential

All too often investors and even ordinary entrepreneurs or W2 workers believe estate planning just isn’t something they need to worry about. They’re too young, the topic is boring, they just don’t have time ... 

Each and every single one of these excuses is wrong. If you fall in this camp, you are making a big mistake.

When you die, who calls the shots about your funeral, your real estate investments, paying your creditors, etc.? Do you even know? If not, this is the first reason you’ll want to get clear on your plan.

There are simply certain decisions you want to make with the help of your trusted attorney while you still can. Your spouse may be a wonderful life partner, but not the ideal person to be making nuanced business decisions about how to handle your investments. Even if they are, they may not exactly be in the mood if you suddenly pass.

The loved ones who shouldn’t have to make your decisions are who you’re looking out for when you learn about estate planning for real investors. Let’s get into why we’re so special, and what concerns to bring up with your professionals.

How Estate Planning for Real Estate Investors is Different

As an investor, you’ve got a few things to worry about that the average person does not. At the very least, they’ll include these basics:

There’s much more to consider, but the point is that none of the tasks are tough on their own. You’re better off sorting through them neatly now rather than letting them pile off and dumping the entire mangled mess on your family. Spare them the agony of probate court and all its trappings by crafting a real estate plan that addresses these issues sooner rather than later.

Estate Planning: The Difference Between a Portfolio and a Legacy

Here’s the quick and dirty for those of you looking for the shortest possible version. If you want to do any of these things, listen up: 

If you actually care about any single one these outcomes, a proper estate plan created by a competent estate planning attorney with real estate familiarity is the only truly smart way to go.

The Very Basics of Estate Planning for Real Estate Investors

When we’re talking strategy for real estate investors, there are two fundamental tools that are essential for planning an adequate estate that also protects assets in life. These are the pour-over will and the living trust.

You’d be wise to brush up on both for starters. The living trust is a much more effective vehicle for conveying your assets directly and tax-efficiently (or even free in certain situations) to your loved ones and other heirs than the traditional “last will and testament.” That’s movie stuff. If you want real protection, you need a living trust that contains all of your assets and a pour-over will to back it up in the event you acquire assets not yet in the trust. You can learn much more about how these tools work from our living trust explainer. 

There’s much more to estate planning than these two tools, but they are universal for most plans for investors with assets valued under $10  million. Those exceeding this limit have had good fortune, but must make additional plans to protect it. However much you end up with, remember that you can’t take it with you. Estate planning is how you control where the rewards of your life’s labor go and provide for the ones you love.

Series LLC for Real Estate Investors in Wyoming

We love hearing from our fellow investor friends in Wyoming for a few reasons. Not only do citizens of the Cowboy State tend to be good, honest salt-of-the-earth folk, but also sharp real estate investors. So it’s no small wonder we get tons of questions about the Series LLC for Wyoming investors. It is a mighty entity. Wyomingites, here’s your quick and dirty guide.

Does Wyoming Have a Series LLC?

Wyoming is actually one of the newest adoptees of the Series LLC. They became the 18th state to legislate the entity into their existing LLC law in 2018. Big Wyoming has long been known for the powerful protections the state offers Traditional LLCs, and they extend to the Series.

That said, you need not assume that living in Wyoming means a Wyoming Series LLC is your only or best option. You can form your Series LLC in any state that permits one.

How Effective is Wyoming’s Series LLC?

We will admit that here at Royal Legal Solutions we have said we believe some states have better Series LLCs. That said, we haven’t always given Wyoming a completely fair shake. People usually ask for our top three picks, and Wyoming being such a new kid on the block has meant this is our first occasion to write in depth about the state’s entity. Generally, when folks ask us which three states we like, these are our go-to responses and reasons:

But Wyoming actually offers a very strong Series LLC. State-level asset protection laws are rather investor-generous, meaning it can be considered a top contender for some investors.

What’s the Best Series LLC for the Wyoming Investor?

We believe your Series LLC should be formed wherever serves you best personally. Wyoming investors cannot be generalized. The drawbacks and benefits of a Wyoming Series LLC vs. the alternatives we discussed above will actually vary heavily from individual to individual. What’s good for the REI goose seeking judicial protections isn’t necessarily great for the REI gander who’s content to rely on Wyoming’s strong asset protection laws.

The two best things you can do are study up on these structures and seek the advice of a qualified asset protection professional. We try to help out with regular educational materials on this badass structure for real estate investors--because we’re big believers that all REIs should at least be aware of what this entity’s capabilities are. So please feel free to get your fill of our educational resources. For example, if you haven’t yet, you should catch our short piece breaking down the biggest benefits the Series LLC gives REIs.

Benefits of Estate Planning: Give Your Heirs Control

Let’s do something folks don’t do much: Let's talk about the fun side of estate planning.

While it’s hardly a rip-roaring cocktail party subject, it’s important nonetheless. An improperly planned estate, or worse, no plan at all, complicates your already painful death for those who care about you. Here are some of our favorite benefits of estate planning, spelled out in a bit more detail.

Estate Planning Gives Your Heirs Control of Your Real Estate Business Forever

As a real estate investor, you know the importance of planning ahead for your business. If supporting your family or other loved ones is one of your investing career goals, as it is for many of us, then the kindest thing you can do for those heirs is get familiar with estate planning for real estate investors. 

Depending on what type of REI business you have, it’s fairly easy to make sure it outlives you. Some structures, like the Series LLC with its potentially unlimited lifespan, make this task easier. 

Estate Planning Empowers You to Create Your Legacy Now 

Even though we love to talk shop about our riches and portfolios, ultimately, most of us don’t want to be remembered for our money alone. Leaving your heirs a business with a clear secession plan can save them the stress of also attempting to define and preserve your legacy.

YOU are the best authority on you and how you’d like to be remembered. The worst thing you can do is not have an estate plan at all.  Heck, even if you don’t have family, friends, or even pets to provide for, you can simply give everything you own to charities close to your heart. If you want to establish a philanthropic legacy as well, many of the legal tools that asset protection experts like the Royal Legal Solutions team already use can help you make such donations. 

Frankly, if you’re successful enough to have this problem, well, nobody’s going to feel sorry for you. You’ve got RLS’s sympathies, though. But that’s because we know who gets your money if you don’t decide first: that honor goes to Uncle Sam and a small army of attorneys and accountants. Everyone’s favorite people!

Giving away all your assets to the IRS isn’t most people’s idea of a storybook ending. Again, even if you can’t think of who your heirs would be, you can still probably think of a few people you don’t mind whose lives may be dramatically improved by your generous forethought and support. 

A free property for a homeless man or sending your friend’s kid to college, really you can find something somewhere. The beauty of building your own legacy is you truly get to call the shots. Estate planning can ensure you’re remembered through your support of both people and causes dear to you for years beyond your passing. 

Benefits of The Living Trust/Pour-Over Will Combo

The go-to model that works for most investors with assets valued under $10 million is a combination of the pour-over will and living trust.  With these tools working together, you need not worry about all of those “Last Will”-only issues. You simply deed all of your assets to the living trust, which is a type of trust formed by an attorney that allows you to seamlessly hand off assets to your selected heirs. There’s no need for the agony of probate court. Click here to learn about the living trust.

As for the pour-over will, it’s a better choice as well than a “Last Will and Testament” alone. But a will alone is not a full estate plan. The pour-over will is superior, but needs the living trust to work properly. The pour-over will simply ensures any assets you have will go to the trust upon your passing. This can help avoid some of the sadder situations involving confusion regarding heirs and other unique estate planning situations. 

The good news is that setting up this type of plan is simple with proper professional help. Our needs during the end of life can be highly individualized. Working with a qualified estate planning attorney can help you determine what you need most.

Estate Planning: The FAQs

Estate planning is confusing enough for the average person. But as real estate investors, we have a host of unique concerns on top of the Average Joe/Jane. It’s true that estate planning may be stressful for anyone, but understanding estate planning for REIs is too important to ignore. Luckily, this article’s a stress-free way to learn about the topic.

Death sucks, but let’s just accept it and take a few minutes to get hip to the basics. We’ve even got an educational piece to help you out: “Estate Planning: The How the Why and The Basics” handy for you. Check it out if you feel lost at any point here. We’ll wait for you to re-join us.

Back or already familiar? Great. Let’s dive into our most common estate planning FAQs.

1. Don’t I Have to Be Really Rich to Need an Estate Plan? 

Definitely not. Everyone should create an estate plan for one simple reason. Dying without an estate plan is always more expensive (financially and emotionally) than creating a suitable, appropriate one.. 

Dying alone is expensive. Funerals are costly, any unpaid debts have to be handled, and of course, there’s your grieving family. They’re paying emotionally, spiritually, and with their time. If their time and money matters to you, creating an estate plan will at least give them a roadmap and fewer responsibilities. 

Estate planning is more humane on families and loved ones, as they’re typically the ones having to round up your credit cards, make sure bank accounts get closed, worry about life insurance and the hundreds of other details that accompany death. When you really think about all of these costs together, the amount of money spent on estate planning begins to look like nothing. 

2. Everyone Needs an Estate Plan, So Why Do Investors Have to Do Anything Different? 

Don’t forget that your business is an asset with the ability to literally outlive you, possibly indefinitely depending on its structure. But the reality is simple. Estate planning is how we can direct where anything that matters to us goes when we pass. If you have properties and asset protection structures like liability-limiting entities (LLCs, Series LLCs, Delaware Statutory Trusts, etc.), estate planning just becomes more important.

3. Isn’t a Last Will and Testament Good Enough for Estate Planning?

Again, not at all.  A full estate plan is not the same as a simple “Last Will and Testament.” Lord knows enough misinformation persists in popular culture about these documents. Those cinematic scenes we’ve all scene of some character hand-writing a last will, often upon deathbed or battlefield for dramatic flair are hilariously wrong. First of all, DIY estate planning is a bad idea. Tempting as it is to point out the many problems with these scenes, the most misleading aspect is that it glamorizes the will and makes people think that’s all there is to it.

Here’s the real deal: a will can be part of your estate plan. But you can’t rely on it alone. If you do, you’re likely to have to pass through this unfortunate soul-sucking spot called probate court.

5. What is Probate Court?

Probate Court’s a real drag. Basically, your heirs get to sit around and watch the riveting legal conversations that only the true dorks like us at Royal Legal like. During this process, you’ll be racking up fees for the Court, any attorneys or accountants needed, etc. It’s better to just avoid the whole mess altogether. And presumably to add insult to injury, the pros get paid out long before your heirs do, particularly if you attempt to DIY a will and miss a critical part. Sadly people do this because they see dramatic movie scenes of people penning Wills, etc. That’s a great way to get yourself a one-way ticket to Probate Court.

But you can avoid probate court with a real estate investor-tailored estate plan.

6. What Do Proper Estate Plans for Real Estate Investors Look LIke?

For real estate investors with under $10 Million in assets to defend, there are two fundamental tools that are essential for planning an adequate estate plan that also protects assets in life. These are the pour-over will and living trust. Let’s review both.

The living trust is a much more effective vehicle for conveying your assets directly and tax-efficiently (or even free, occasionally) to your loved ones and other heirs than the traditional “last will and testament.” Remember? That’s movie stuff. If you want real protection, you need a living trust that contains all of your assets and a pour-over will to back it up in the event you acquire assets not yet in the trust. Learn more from our living trust explainer. 

There’s much more to estate planning than these two tools, but they are universal for most plans for the majority of investors. Take the time you need to research. After all, estate planning is how you control where the rewards of your life’s labor go and provide for the ones you love. They’re worth it. 

The Disadvantages of Delaware Statutory Trust (DST) 1031 Exchange Properties

The Delaware Statutory Trust is a mighty vehicle, but just as with any other legal tool, neither the DST, 1031, or power combo of both is without flaw. You may already be familiar with the benefits of 1031 exchanges for real estate asset protection. You may have seen our article about Delaware Statutory Trust advantages for investors. But today, we’re going to talk about Delaware Statutory Trust pros and cons.

Relationship Between the Delaware Statutory Trust and 1031 Exchanges

For the uninitiated, let’s briefly touch on why these concepts overlap. It isn’t for no reason that investors have spent over $50 million since 2004 on these types of property acquisitions. That's the year IRS recognized the Delaware Statutory Trust as an entity that could participate in “like-kind” or 1031 exchanges.

While some investors see DSTs and 1031 Exchanges as a “one or the other” proposition, others find value in pairing the structures, particularly where long-term investing or capital gains deferment are primary goals. That said, this type of deal structure isn’t without limits, which we’ll spell out in greater detail now.

DST 1031 Limit #1: You Have to Hang on To the Property For Years

Generally, to meet the criteria of the 1031 exchange, investors must hang on to the property for a matter of years. For this reason these real estate assets aren’t as easily liquidated, say, in a financial emergency. They’re great for those playing the long-game, but shorter-term investors may want to consider alternative strategies.

The average 1031 property is held for upwards of five years as a capital gains tax deferment strategy. Learn more about how this method works from our prior educational piece, your go-to guide to controlling capital gains costs.

DST 1031 Limit #2: You Don’t Have Maximum Direct Control Over DST Investments

Investors who are accustomed to the total control of say, a self-directed retirement account or even more traditionally controlled/owned property, may be uncomfortable with the DST with 1031 model. Here’s why.

When Uncle Sam okayed DSTs for participation in 1031 Exchange transactions, they placed direct regulatory limits on beneficial owners of the DSTs. That means you, dear investor. The Taxman breaks it down in the Internal Revenue Code, but allow us to paraphrase and spare you that riveting read. Basically, you aren’t allowed to have “direct operational control”--their words, not ours--or even simple decision-making authority over the properties involved. The object of the law is to keep you from getting your own hands too close to the investment. Many investors are not tolerant to such restrictions and feel suffocated by this limitation even though there are ways to maintain control with the help of your attorney.

DST 1031 Limit #3: New Property Doesn’t Mean New Money

All those funds that similar new property will raise come with a huge catch: you can’t pour any capital back into the DST itself. Even new investors into the property or DST are barred from benefiting financially while the 1031 is in effect.

Sucks, right? Fortunately, this is a problem your competent legal and tax pros should be able to help you address. The right Delaware Statutory Trust Attorney can help you navigate these confusing waters. 

Delaware Statutory Trust (DST): The Benefits of the Structure

Our deep dive into the Delaware Statutory Trust (DST) continues now with what we consider some of the best news about the DST structure: the perks.

If you’ve already read up on the basics, FAQs, and relatively painless regulation breakdown, you already know some of the broad benefits. Learn a little more about this powerhouse structure’s perks.

Comprehensive, Anonymous Asset Protection

California has unique state laws and agencies that investors with interest in the state should be aware of. Your asset protection structure must be able to comply with all relevant law and regulatory measures. The Delaware Statutory Trust offers a cost-effective solution for Californians seeking an anonymous structure that defends the assets within it.

Delaware Statutory Trusts (DSTs) Offer High Levels of Anonymity

Anonymity is more or less built into the DST structure. Deeding property to the trust is a critical piece of your asset protection strategy. This is the move that gets your investment property out of your personal name. Simply not having your name on the property preserves your personal anonymity, which is important for preventing lawsuits. Investors who are successful become attractive targets for litigious types, and frankly, the only meaningful defense from this type of threat is an appropriate anonymous business structure.

Your DST is legally a separate entity from you. Yet using one conveys liability protections onto you, just as if you’d used a network of LLCs. Incorporating additional legal structures is simple, whether you want anonymous trusts as well or greater control over your estate. Adding new assets into your trust is simple, and it can indeed be incorporated into your estate plan. After all, the DST gets its special treatment in part because it is an estate planning tool.

Creative, Completely Legal Tax Savings

California’s onerous Franchise Tax is well known to investors around the country, largely by reputation. Frankly, it’s the type of subject that’s only spoken about in complaint mode.

Until now, that is.

The DST is an estate planning tool rather than a traditional corporate entity, and is treated accordingly under the law.

Because of this legal difference, the DST isn’t subject to the $800 annual expense that out-of-state LLCs and other corporate structures are.

You read that correctly. It’s exempt. The DST is viewed by the state, including the Franchise Tax Board (FTB), as an estate planning tool rather than a corporation. Legally speaking, you can use the DST as both an estate planning device and an asset protection structure. In the meantime, that’s $800 that gets to stay in your pockets or business profits.

Compartmentalization and Control Prevent Lawsuits

When you use a Delaware Statutory Trust structure to protect your real estate investments properly, each asset is compartmentalized. It allows you complete control, while your assets stay away from you and one another. In fact, they’re completely separate for liability purposes, which is one way the DST prevents lawsuits.

Even if an asset within one Series is threatened legally--a task good asset protection makes tough to begin with--any assets in the others are safe.

The Delaware Statutory Trust Is Cheaper By Asset Than an LLC Network

California’s notorious FTB mentioned above views the DST as an estate planning tool. Most trusts are used in this process, and your DST can be too. But its savings powers are at their greatest while you’re still very much alive.

Owners of companies, whether LLCs or S-Corps are operating entities. They will pay $800 for each one. So if you have four properties in the Golden State, sticking them in four LLCs will protect your assets. But it’ll cost you $3200 in franchise taxes alone annually to maintain this clunky, unnecessarily pricey operation. The DST, on the other hand, doesn’t incur the Franchise Tax at all.

Creditor Protection and More

The DST structure doesn’t just defend your real estate investments from lawsuits. Assets within your DST are also protected from creditors. While this may not be reason alone to open up a DST, it’s certainly a nice fringe benefit if you ever encounter a financial emergency. To learn which of your assets are best protected, speak to a trusted legal expert familiar with your situation.

Delaware Statutory Trust (DST): Understanding The How, Why & The Basics

The Delaware Statutory Trust (DST) is an asset protection tool that really doesn’t get the sexy reputation it deserves. Because these babies really are fine legal vehicles for compartmentalizing assets, securing your anonymity, and keeping your wealth defended from litigious types.

The DST is particularly indispensable for California real estate investors as one of the only secure, scalable asset protection solutions that won’t cost an arm and a leg at the state level. Let’s get right into the very basics of the Delaware Statutory Trust. If you’re a California investor or even own property in California, you can’t afford not to know this information.

Why Should Californians Use A Delaware Statutory Trust?

All business entities must comply with state and local laws, which vary vastly throughout the United States. While it is always preferable to use a legal structure to remove property for your own name, there is no one-size-fits-all solution.

The closest tool we’ve found is an entity that is useful to the vast majority of investors is the Series LLC. Unless, of course, you happen to live in California.

California has famously brutal tax laws. An unprepared investor can stand to lose downright sinful amounts of profits to the state’s FTB. California’s tax law isn’t particularly kind to businesses, particularly those owned by out-of-state investors. The Delaware Statutory Trust is so remarkable for the California investor because it offers an elegant solution to both of these problems: the DST is effective and scalable without and also spares the investor some of these state taxes. DSTs don’t have to pay the $800 annual Franchise Tax owed by, say, LLCs and Series LLCs.

How the Delaware Statutory Trust Works

We touched on the Series LLC briefly above because structurally, it is very similar to the Delaware Statutory Trust. The DST actually predates and inspired the SLLC as we know it today. Both structures make use of a parent-child structure to separate assets into secure Series, even extending liability protections to real estate investments within the structure.

The ability to shelter assets inside of individual Series offers investors a high degree of protection. It’s generally best to have each major asset inside its own company--and yes, Series “count” for asset protection purposes. So if you own, say, five properties, you will have your parent DST as well as five Series beneath it. And if you acquire a sixth, it may also be deeded to the DST structure and fully protected.

Delaware Statutory Trust Basics Investors Should Understand

One major reason we discuss the structure of the DST is so that investors can understand how it protects their assets. With your assets neatly sorted into separate Series, even if you are sued, the damage is contained. Investors who follow the recommendations about using DSTs effectively can survive a lawsuit against one asset. A plaintiff could bring a suit against, say, Series B of your structure. This legal action could not affect other assets in other Series. Your DST protects other Series (and of course, the assets within them) in the event of a successful suit against one.

Of course, the best thing of all is when we can implement the right structures to stay out of court altogether. Investors seeking additional defenses may employ the power of the Anonymous Land Trust. Anonymity strengthens the protections of the DST, making it difficult to even connect you to your property. Anonymous trusts have many other benefits to enjoy as well for you to exploit.

Between the DST’s flexibility, tax perks, and high degree of asset protection, the California investor will have a hard time finding a better, cheaper entity for shielding multiple assets or a growing business from litigation. For more information, check out our additional pieces on the DST’s benefits, regulation issues, and your top Delaware Statutory Trust questions answered.

Delaware Statutory Trust FAQs: What Investors Need To Know

So far in our discussion of the Delaware Statutory Trust (DST), we’ve hit on the basics you need to know about the structure and some deeper nuances about regulatory and tax implications for California investors. But you may still have questions about this lesser-known tool. Here are some of the most common ones we get, and, of course, their answers.

Is a Delaware Statutory Trust Expensive?

Expensive is always a relative term. The simple truth is how expensive your DST is will depend on who forms it, what if any special details your asset protection plan must account for, and whether services like property transfers are included or sold separately.  As a general rule, it is true that this entity has un upfront cost similar to or higher than a Series LLC, but you do receive something for the extra expenses. Which costs and possible uses will affect you most? Speak with an expert familiar with your circumstances to know for sure.

How Does the Delaware Statutory Trust Avoid California’s Franchise Tax?

California’s tax law can become a profit-syphon for real estate investors with assets in the state. While investors in most states can take advantage of LLCs and Series LLCs as primary asset protection tools, Californians are better suited for the DST largely because of the state’s franchise tax. LLCs, Corporations, and other types of companies must pay $800 per entity in annual franchise taxes.

The Delaware Statutory Trust, however, isn’t included among the structures that must pay this burden. Rather, because DSTs are more correctly classified as estate planning tools, and therefore need not meet the same requirements as traditional companies. But the savvy investor can still use this tool in a manner similar to the Series LLC for highly effective asset protection, all while dodging the tax obligations of the Series LLC. Perfectly legally, of course!

How Many Assets Can the Delaware Statutory Trust Secure? How Does the DST Prevent Lawsuits?

Well, this is where things get fun. The answer is simple: however many assets you have.

And each of those assets is compartmentalized for optimal protection. That means if a would-be-litigant tries to come for your trust-owned property, they’ll have an extra difficult time. Because the DST is such an excellent anonymity tool when set up appropriately by an experienced asset protection attorney, even connecting you to the property in question becomes a chore.

In practice, many asset protection tools are effective because they throw up roadblocks to stall out the lawsuit process. In our experience, a properly established DST stops lawsuits before they’re even filed.

This All Sounds Great! But I’m Not in California. Can I Still Have a Delaware Statutory Trust?

You can, sure. But it may or may not be the best structure for you. Again, the only person who should be calling the shots on asset protection structures is the legal expert of your choosing. The DST may be a great choice for you regardless, particularly if you are doing business in California.

But if you’re outside of the state with no interests there, there’s an alternative that works for a broad range of investors. The anonymity, asset protection, and operational benefits offered by the DST can be duplicated with other tools. To be precise, the Series LLC combined with Anonymous Land Trusts is a system that offers top-notch protection to investors in all other U.S. states. If you have multiple properties, investigate the Series LLC first. It uses that same parent-child structure that makes compartmentalization a snap with the DST. Anonymous Land Trusts can easily disguise company and property ownership--they go hand in hand with the Series LLC. These tools together will offer the same powers, and perhaps additional benefits, to real estate investors or business owners in other states.

Future Retirement Health Care Costs Expected To Fluctuate

One of the reasons we save for retirement is because medical costs invariably go up with age. Saving for your own eventual care, even if you’re healthy as a horse now, is wise. But recent projections suggest you may actually want to save a little more. Cost of care is expected to continue fluctuating, and after all, there’s no such thing as too much savings. Here’s what you need to know about how to prepare.

Why Your Retirement Plan Should Include Healthcare Plans

Healthcare is a substantial cost for most of us in our golden years. These costs tend to escalate across all demographics with age. The prudent investor, therefore, should be both informed and proactive.

Consider the wide variety of things you can expect to go wrong as you age. Frankly, we will all need care to some degree. If you’re very fortunate, that period may be confined to the end of your life. But if you’re like most Americans, you’ll likely experience a slower decline in general health. This is simply the price we all pay for living rich, full lives: aging gets us all regardless.

But let’s delve a little deeper into what types of circumstances can influence your personal healthcare costs. The sad reality is simply that those who manage chronic conditions or experience catastrophic events (the sort you’d associate with hefty insurance claims--accidents, sudden events like heart attacks or strokes, etc.) will face challenges on top of those that we all must. Every person reading this has good reason to save more than what seems essential for health care. That said, knowing that costs will be higher (or lower) for you can help you prepare properly and never have to worry about getting the care you need.

What Influences Healthcare Costs?

Health is deeply personal, and often frustratingly beyond our control. Here’s a shortlist of some of the things that determine these costs.

Known by the insurance world as “pre-existing conditions,” this category can cover a broad range of items. The extent and severity of a person’s health complications is the main factor that will determine costs for health insurance and routine care. Perfectly controlled conditions may even be costly to treat for populations like chronic pain patients and diabetics, who are often dependent on medications and require more frequent doctor’s visits (often with pricey specialists). Even if you’re lucky enough to be 100% able-bodied without so much as high blood pressure, congratulations. But that can change at any moment, as mere aging causes its own health issues.

Costs for women and female-identified individuals tend to be higher. One highly comprehensive 2016 study predicted a 30-year-old healthy woman can expect to pay $120,000 more for healthcare upon retirement.

None of us are safe from this one. The simple reality that $100 today won’t be the same as the day you retire is inescapable. Certain vehicles can help protect your dollars from inflation--both your CPA and attorney should be able to give personalized advice on these matters.

While none of us can make perfect predictions, it’s generally wise to estimate costs and figure in a 10-20% “buffer” for the unexpected. Just like when you’re building a pro forma for an investment. Your future care is absolutely a type of investment. Let’s look at some smart ways to plan ahead.

The Solo 401(k): The Healthcare Payment Tool You Didn’t Expect

Building up a retirement savings account sufficiently is no small feat. So it’s completely fair to use every single tool at your disposal. The thing is, most of the tools you can use aren’t going to be advertised as healthcare solutions. The Solo 401(k) is a precise example of this type of tool: underrated, under-used, and underappreciated. Well, by most. You and I are about to know better.

The Solo 401(k) isn’t really that different from your typical 401(k) account. The essential feature that makes a Solo 401(k) a viable healthcare savings vehicle is Checkbook Control. Checkbook Control is finance slang for the ability to make nontraditional investments. While most accounts are going to be confined exclusively to the offerings of the institution in question, this isn’t so with self-directed accounts.

Note: Don’t let terms confuse you too badly here. The self-directed 401(k) is the same thing as the Solo-K. You may see variations in spelling or even fancy verbiage thrown around, but it’s the same type of Qualified Retirement Plan. There are however other self-directed accounts, but they tend to be IRAs. You can learn more about the self-directed IRA LLC and the IRA-Owned Self-Directed Business Trust right here on the Royal Legal Solutions site. These vehicles may also prove to be effective choices for you, as they share many key benefits. Learning about all of your retirement options, time permitting, is always a smart idea.

The solo-K can help you beef up your retirement savings easily because it confers these benefits (among many others):

  1. Flexibility. Solo-K’s may be used alongside other traditional retirement plans.
  2. Remarkably high contribution limits.
  3. Endless opportunities for diversification of retirement dollars.
  4. Tax-deferred and Roth options.
  5. May be used as a part of your real estate business.
  6. May play a role in your asset and creditor protection plan.

Smart Retirement Planning: Your Solution to Future Uncertainty

Amidst both the expected fluctuations and life’s unexpected curveballs, the smart play is to do what you can to get the most out of your retirement savings. Of course, this begins with planning ahead. If you need some general retirement saving advice, check out this resource of tips that can help at any age. But let’s take the time to glance at some methods for saving.

Delaware Statutory Trust Law: What To Know About Your Eligibility, Rules & Regulations

To continue our comprehensive series on Delaware Statutory Trust Law and best practices, let’s dive a little deeper into the nitty gritty details of how this structure works to protect real estate investors.  

Should Real Estate Investors Use a Delaware Statutory Trust?

Anyone can have a Delaware statutory trust. An investor won’t ever be told they are “ineligible" for a DST, although the Delaware statutory trust advantages apply more to some than others. When we talk about who can benefit the most from DSTs, there are a few categories of people to keep in mind.

What Does “Doing Business in California” Mean?

California has unique state laws and agencies that investors with interest in the state should be aware of. Most of these regulations that can affect asset protection structures stem from the dreaded Franchise Tax Board (FTB). This also happens to be the agency that defines what it means to be “doing business in California.”

Since tax agencies just can’t help but write in boring, unnecessarily obtuse verbiage, we’re going to help you out with some translation. You’re free to read the full excruciating text if you’re into intellectual masochism. For the rest of us, here is both the state law and the FTB’s criteria, with plain English explanations alongside:

We’re not done yet. That’s just the basic definition of “doing business.” Even if you said no to all of the above, if you’re a member of an LLC or partnership that’s doing business in the state, you still have to play by its rules. This is particularly true if:

For these reasons, an out-of-state LLC can be “doing business” in California and subject to the $800 Franchise Tax. The DST presents an elegant way to not have to even think about this stuff.

Delaware Statutory Trust Laws Regarding Asset Protection

When you use a Delaware Statutory Trust structure to protect your real estate investments, each asset will be held in its own legal space. You retain control of your investment properties and the entire structure as its beneficiary. You technically aren’t the “owner” of the properties; the DST assumes that rule. For this reason, we often say the rich don’t own assets. They control them. The DST is one of the legal tools the wealthy have had historic access to for exactly this purpose.

Delaware Statutory Trust

There are similarities between the DST and asset protection entities that are helpful for understanding how the structure works to protect you. DSTs may sue or be sued, just like companies. But you also get to enjoy liability protections, just like the owner of an LLC or Series LLC would. Structurally, the DST is an intellectual grandparent of the Series LLC. Both tools make use of a parent-child structure illustrated in the image above.

Bottom Line: DSTs Are a California Investor’s Best Friend

As you can see, the term “California investor” applies to many more people than you’d imagine. Avoiding California's Franchise Tax may be something you need to do even if you're not from California. Get to know the DST regardless of whether you end up needing it as your ultimate asset protection solution. If nothing else, the information you learned here may help another investor you care about.

Series LLC for Real Estate Investors in Virginia

Where you live certainly can influence your Series LLC options, and which states you should consider forming your company in. If you plan to use a Series LLC holding company, you may have in-state options--but whether these are worthwhile, let alone your best, is a decision that must be made with the help of an attorney.

Yet time and again we get questions about what asset protection looks like in a given state. The truth in Virginia is the same as everywhere else. In reality, the Series LLC for Virginia investors offers many benefits and can take many forms.

Is the Series LLC Offered in Virginia?

The Series LLC isn’t ubiquitous by any stretch. Not all U.S. states have legislation defining this entity, therefore many investors will necessarily form beyond their state’s borders. This is a common, valid, and safe strategy.

For Virginia investors, the first question is typically whether there is a Virginia Series LLC. In short: no. But you need not be confined simply because your state’s business legislature has yet to get with the program.

Which Series LLC Structures Are Great for Virginia Real Estate Investors?

Let’s just begin with the assumption that the Series LLC will be helpful to you, either now or in the future. It is for essentially any investor who has multiple assets or plans to scale up over time. You still have some choices to make.

You can choose which state’s “rules” you’d like to play by. We have some pretty well-known opinions on the best states for forming LLCs, but will elaborate a bit here wtih the Virginia real estate investor in mind.

Weigh your options, and above all, get the opinions of the experts you trust most.

Virginia Investors: Get the Series LLC that is Right for You

Your Series LLC should above all be tailored to you and formed with the assistance of a  qualified real estate asset protection attorney. If asset protection is even a partial motive in setting up your company, it’s best to work with an expert. In the meantime, you can always educate yourself. We like educated clients, and find investors who are more informed about the structure advocate better for themselves as well. Feel free to use our free resources to bone up on the benefits of the Series LLC.

5 Times in Life to Update an Estate Plan

When asked by someone without an estate plan when they should plan their estate, we tend to give a variation of the answer, “Right away.” But updating your estate plan is a little more complex. There are major life events that are critical times to update your estate plan and make any necessary adjustments.

1: You Got Married

Congratulations! But before you tie the knot, you’ll likely want to ensure your intended spouse will be a part of your estate plan. Spouses are often beneficiaries of wills and life insurance and may be listed on titles to shared investments or homes. For this reason, it is particularly important to update your plan if this isn’t your first wedding. You don’t want things going to your ex that is more appropriate for your current spouse. Even for first marriages, your spouse may not be fully protected or presumed to be an heir if the plan omits them.

2: You Had a Child

Kids, accompanied by marriage or not, really do change everything. One massive reason children can affect estate planning is because this documentation lets you dictate guardianship: who gets your children if you and the co-parent both pass away? It’s a situation nobody wants to be in, but one to plan for. Otherwise, the judgment call could be left up to the state. States also have different laws about whether “natural children” are heirs. Keeping your plan current is critical if you want to retain control.

Your children turning 18 also matters. As adults, they can directly inherit assets, and your plan should evolve accordingly.

3: You Got Divorced or Were Widowed

Removing an ex from estate planning documents is one of many legal considerations during a divorce. All changes in marital status, including a spouse’s death, should at least be cause for reviewing if not amending your estate plan. The detail to focus on is where a former spouse may be a beneficiary, and skilled estate planning attorneys can also inform you of other concerns for your unique situation.

4: You Bought or Sold a Home or Other Major Asset

This includes investment properties and is one major reason why estate planning for real estate investors is approached differently. Those with investment properties may consider the living trust and pour-over will, which an attorney can craft to ensure the seamless transition of assets without the need for probate court. A new home of any kind can drive up your estate’s value, but fortunately, asset protection strategies including titling property to a land trust may help prevent this and other potential legal issues surrounding titling.

5: You Got a New Business

Whether you started or purchased the business, understand it’s also an asset. You’ll need to decide who owns the business, and a succession plan is wise for particularly successful and profitable businesses. If you want to make decisions around your legacy without incurring unnecessary probate court fees, updating your estate plan is vital.