Property Transfer Services: How One-Stop Shops Save Investors Money 

Real estate investors are always looking for ways to minimize risk while maximizing profit.

One way that they can do this is to transfer title to their property from their personal name to protect themselves. 

A property transfer service helps real estate investors move their properties into corporate structures (such as a Series LLC or a Land Trust) to protect assets from lawsuits and other creditors. These legal structures separate your assets and preserve your anonymity, making you look like less of a target for would-be litigants.

property transfer serviceWhat Exactly Do Property Transfer Services Do?

While the process for property transfers is not incredibly elaborate, there are various steps and costs associated with transferring the title to real property. A one-stop-shop property transfer service takes care of everything you need to do to transfer your real estate, saving you time and money.

Bundling these services provides you with the convenience of only needing to find, vet, and transact with one business when securing your assets from unnecessary liability. And perhaps more importantly, these packaged services save investors money. You can always order each of the services “a la carte,” but a property transfer bundle saves money and dramatically simplifies the process. 

Transferring Property Into A Series LLC/Land Trust Combo

We recommend using a Series LLC in conjunction with an anonymous Land Trust to secure maximum asset protection. When set up correctly, this combo will hide and protect your assets from potential lawsuit plaintiffs. 

To pull this off, you’ll need several different services to be completed:

Drafting A Deed

First, in order to transfer property, you must have a properly drafted deed. A deed is a legal document used to transfer ownership of real property from one person to another. In this case, the deed must transfer title from your name to a Series LLC. For your Series LLC to give you the most protection possible, you must have a properly drafted deed that is correctly transferred into the Series LLC structure. 

Creating A Series LLC

To have a properly drafted deed transferred into a Series LLC structure, you will need an accurately drafted and legally binding Series Document and Series Operating Agreements. Then, pairing an Anonymous Land Trust with the Series LLC stops lawsuits before they even start.

Forming an Anonymous Land Trust

An Anonymous Land Trust is a type of trust that allows you to hold title to land and other real-estate-associated assets anonymously, essentially hiding your assets. You can make the Land Trust the owner of your Series LLC, adding another layer of asset protection to your plan. To form an Anonymous Land Trust, you’ll need a properly drafted legal instrument.

Title Insurance Considerations

Title insurance is a specialized kind of insurance that protects you if there are legal issues with the title when transferring real estate. Can title insurance be transferred? The answer is yes, but only in certain situations.

When transferring property to a Series LLC structure, the most reliable method to maintain title insurance is to name a Land Trust as the beneficiary of your insurance policies. Adding your Land Trust as a beneficiary essentially guarantees that you'll get to keep your insurance.

Before transferring any property, it's definitely a good idea to review your insurance policy. Usually, when you transfer property, your hazard and title insurance expire. But if you transfer your properties into a Land Trust, you’ll be able to preserve both your hazard and title insurance.

This method is leaps and bounds better for you than getting a new insurance policy because your new insurance policy premiums would be based on the property’s current value. And thanks to appreciation, the current value will almost certainly be higher than it was when you bought it. While that's good news if you plan to sell it, it's bad news if you need to get a new insurance policy. It means you’d actually end up having to pay more—perhaps a lot more—than before. So you want to hold your policy to the last minute before being forced to renew.

Plus, if your policy isn't already near its expiration date, getting a new policy will unnecessarily cost you extra money, which certainly could be used for much more pleasant things than insurance. This is why it's worth the effort to use the Land Trust method to avoid triggering the expiration clause in the insurance contract.

property transfer service: UekusaCan’t I Just Do This Myself?

Every state has its own set of requirements for these documents to be legally valid, and there may even be county-level rules that apply. If a legal document is not drafted correctly, it can render even the most thoroughly planned asset protection plan ineffective. Working with a reputable property transfer service will ensure that everything goes off without a hitch.

Sure, you can find templates for these documents online, but these “free” options are rarely truly “free.” A small investment now could save everything you own later. Unless you happen to be both an experienced CPA and a licensed real estate attorney, it is unlikely that you will know all of the legal, financial, and technical requirements for creating effective and legally binding documents and entities. Don’t take that chance.

Whether you’re brand new to real estate investing or a seasoned investor with the portfolio to match, a competent property transfer service can handle the paperwork and answer your questions.

Property Transfers for Real Estate Investors

For Complete Protection You Must Have A Properly Drafted Deed Transferred Into An Series LLC Structure

Our property transfer service helps real estate investors move their investment properties into new corporate structures.

Whether you have a property you need to get out of your personal name, are acquiring a new property, or wish to transfer a real estate asset to a business partner or friend, the Royal Legal Solutions property transfer service can help you.

What's included with the Property Transfer?

Our property transfer package includes three related services: drafting the Deed, forming the Anonymous Land Trust, drafting the Series Document, and the Series Operating Agreement.

Do I have to use all three services?

Of course, you could order any of these services individually. However, Royal Legal Solutions offers them as a package deal to save your hard-earned money as we construct the most powerful asset protection plan possible.

Why would I need all three services?

Many of our clients also appreciate the convenience of transferring property with us. When you use the three services we offer in the package together, you can rest easy knowing that the asset is secured from unnecessary liability.

Who Should Use Our Property Transfer Service And Why?

This service is designed for those who already own a Series LLC or plan to buy one. For your Series LLC to give you the most protection possible, you must have a properly drafted deed that is properly transferred into the Series LLC structure. For a property to be incorporated into that structure, you will need an accurately drafted and legally binding Series Document and series OPAG.

These structures separate your assets and preserve your anonymity. When used together, you become a serious pain to sue. Not only will it be nearly impossible to prove you own your investments, but you will also appear to be personally much poorer than you actually are. Attorneys don’t like to waste time investigating whether you’re rich enough to make a civil case worth their while. They also don’t have many legal options for defeating a sound asset protection strategy. Essentially, using this plan makes you way more trouble than you are literally worth. A small investment now could save everything you own later.

Why Should You Choose Royal Legal Solutions For Your Property Transfer?

Of course, you have your choice about where you choose to create any of the documents you need for an effective property transfer. We strongly recommend against attempting to draft such items yourself. Despite the fact that you can find templates for such documents online, we find that these “free” options are rarely truly “free.” You may end up paying a great deal for cutting corners on your documents. Consequences for doing this can range from fines to losing your asset protection coverage, and in some cases, never even owning your property in the first place. Unless you happen to be both an extraordinarily experienced CPA and a licensed real estate attorney, it is unlikely that you will know all of the legal, financial, and technical requirements for creating effective and legally binding documents and entities. Don’t take that chance. Royal Legal Solutions is here to help investors like you.

Features Of Our Property Transfer Service

Anonymous Land Trust Combined With The Series LLC

Savvy investors can pair the Anonymous Land Trust with the Series LLC to achieve total anonymity and superior asset protection. To learn many more details about how these structures combine to make you nearly impossible to sue, check out our free educational resource on how the Series LLC and Anonymous Land Trust prevent lawsuits.

Prevent Lawsuits Before They Occur

The short version is that these structures separate your assets and preserve your anonymity. When used together, you become a serious pain in the ass to sue. Not only will it be nearly impossible to prove you own your investments, but you will also appear to be personally much poorer than you actually are. Attorneys don’t like to waste time investigating whether you’re rich enough to make a civil case worth their while. They also don’t have many legal options for defeating a sound asset protection strategy. Essentially, using this plan makes you way more trouble than you are literally worth. A small investment now could save everything you own later.

Royal Legal Solutions regularly uses this strategy to help investors protect what is rightfully theirs. In our experience, the Anonymous Land Trust and Series LLC combination stop lawsuits before they even start.

Our Property Transfer Package Is Cost-Effective

At other firms, you may find yourself having to order each of the services we provide in our property transfer package “a la carte.” The land trust alone averages $500 elsewhere. At Royal Legal Solutions, we will set yours up for a much more competitive rate. The costs you will incur plummet even further when you take into account the savings you receive from the Property Transfer bundle.

Our Property Transfer Package Is Convenient

At Royal Legal Solutions, we make it our mission to share the asset protection strategies long known by the wealthy. After all, well-employed asset protection strategies are just one reason that the “rich get richer.” But you don’t have to be exquisitely rich to protect your assets like those who are. We’re here to serve everyone, and believe all investors deserve access to high-quality asset protection strategies. This is why we’ve made this package both affordable and convenient. Whether you’re brand new to real estate investing or a seasoned investor with the portfolio to match, we can handle the paperwork and answer any questions you may have.

What If I Don’t Already Have A Series LLC?

You can still take advantage of the property transfer services we offer. But, you will have to do things a little bit differently. Many clients prefer to purchase their Series LLC first, then execute the transfer. Another option is to explore our Royal Protection Plan Package, which comes with a Series LLC at a reduced cost.

Why Use Royal Legal Solutions For A Real Estate Investment Asset Protection?

We have experience in setting up the proper asset protection and making it easy for an investor to use. Our system simplifies management structure as much as possible, and we also use common sense to ensure your needs are met. For example, just one tip we give our clients is that you don’t need multiple bank accounts as long as you have accurate accounting records. For taxation, they should stay exactly how they are now while being reported on a Schedule E of your personal return (if you’re an individual/married partners) or a partnership return (if unmarried partners).

Common Problems In Operating Agreements + Remedies

Your Operating Agreement is one of the first documents your attorney will draft when forming your LLC. Learn more about the common problems in Operating Agreements and their remedies below.

Common Oversights in Operating Agreements

The vast majority of the time, the problems in Operating Agreements come down to wording Language that is vague, irrelevant to your situation, or ambiguous in any way can create real-world problems for your LLC. Here are some common issues, along with examples of phrases to watch out for in your Operating Agreement.

Decision-Making Powers

LLC members must have a procedure for decision making. When an LLC has multiple members, some decisions may be made by majority. While you can specify unanimous consent under certain circumstances, clearly defining what constitutes a “majority” clarifies your agreement. Decide with your fellow members whether you want to define majority as a percentage of ownership or by number of members.

Another common problematic clause is one which states that any member may do business with the LLC absent any restriction. This can create issues if a member abuses this freedom. To avoid potential problems, specify that any member of the LLC must get majority approval before performing any transaction directly with the LLC.

Managerial Powers

These issues are particularly important for multi-member LLCs. When an LLC is formed, the Operating Agreement must spell out who the Manager is, how a Manager is selected, and what degree of control they have over the LLC. To learn more, see What Is The Difference Between An Authorized Member And A Manager In An LLC?

Unfortunately, clauses that give too much power to a Manager may be abused at the expense of other members or the company. A good Operating Agreement keeps managerial powers in check in the following ways:

Bottom line: any clause that has the potential for abuse of power will catch the attention of a seasoned real estate attorney. Lawyers who do not regularly form LLCs may be aware of the necessary parts of a legally-binding Operating Agreement, but are more likely to overlook these nuances.

Avoid Operating Agreement Problems: Get Help From a Qualified Attorney

Operating Agreements are simply an example, albeit an important one, of the many documents that should be reviewed by a trained legal professional. Many prospective clients ask us if their local attorney will be sufficient for this. Most of the time, the wisest thing to do is hire legal counsel with specific experience creating LLCs for real estate asset protection purposes. While any attorney is certainly better than no attorney, the asset protection experts at Royal Legal Solutions are investors like you. Because we have our own experience crafting deals and planning for worst-case scenarios, we draw on our experience as both investors and attorneys when counseling clients.

How Title Insurance Works

 

How Title Insurance Works

Anytime you transfer property, you must consider the title insurance implications. Title Insurance will generally being validated upon the transfer of the property. However, title insurance isn't invalidated. If you transfer the property to a wholly owned LLC, that is an LLC that is completely owned by you, the person that also own the property, will also will invalidate it.

If you add your spouse to title for example, that'd be a transfer. But in that circumstance they're not going to invalidate. You also can transfer the property to an inter vivos trust where you are in the settler of that trust. This is the type of strategy that we'll be using with inside of our anonymity land trust and we start transferring properly.

My name is Scott Smith. I'm an asset protection attorney. I'm a real estate investor and I want to help. Click here to set up a consultation today!

Should You Worry About the Due on Sale Clause?

Should You Worry About the Due on Sale Clause?

Despite what you might read on the internet, don't worry about the due-on-sale clause. The fact is is, since before 1960, we haven't seen any bank foreclose based upon a violation of the due-on-sale clause while the note's performing. The fact is is that banks are in the business of making loans and collecting mortgage payments. The due-on-sale clause would allow them to foreclose on your property by transferring the asset. But why would they do that? This could only hurt their interest. Like I've seen it a couple of times, where banks have foreclosed based upon it. But those were always in situations where the mortgage wasn't getting paid, and that was gonna get foreclosed on anyway. So in that sense, don't worry about it. Protect yourself with your proper asset protections strategy. My name is Scott Smith. I'm an asset protection real estate attorney, out of Austin, Texas, and I wanna help you.

What is Fraudulent Transfer?

What is Fraudulent Transfer?

[00:08] If you're thinking of waiting to set up your LLC structure duct, the fact of the matter is that if you're sued, it's already too late. Transfers after the fact of even when a lawsuit is threatened before it's even filed can be considered a fraudulent transfer and a fraudulent transfer of doesn't mean necessarily that you did anything that was shady. All it really means is that you transfer the property outside of the normal course of business, so it means that you have $100,000 property. You would have to have sold it for $100,000 to somebody. You can't sell it to your niece for a dollar thinking that you're going to be able to protect it. The law favors the proactive in the sentence. You need to move all the properties before you ever think that there's going to be a problem with potential lawsuits. Don't think that waiting is going to be an appropriate measure in this circumstance. Contact specialist, call us at royal legal solutions. We can give you a consultation to be able to let you know what you should do for your particular circumstance. My name is Scott Smith. I'm an asset protection attorney in Austin, Texas. I'm a real estate investor and I want to help you.

[01:23] Hey, thanks for watching this video. If you want more high quality content just like this, you can find it here on our youtube channel are going to our website, royal legal solutions.com we have a ton of free content from our blogs or videos, the podcasts that I had been featured on. Whatever question you have, we're going to have it there for you for you.

What is the Due on Sale Clause?

What is the Due on Sale Clause?

Despite what you might read on the internet, don't worry about the due-on-sale clause. The fact is is, since before 1960, we haven't seen any bank foreclose based upon a violation of the due-on-sale clause while the note's performing. The fact is is that banks are in the business of making loans and collecting mortgage payments. The due-on-sale clause would allow them to foreclose on your property by transferring the asset. But why would they do that? This could only hurt their interest. Like I've seen it a couple of times, where banks have foreclosed based upon it. But those were always in situations where the mortgage wasn't getting paid, and that was gonna get foreclosed on anyway. So in that sense, don't worry about it. Protect yourself with your proper asset protections strategy. My name is Scott Smith. I'm an asset protection real estate attorney, out of Austin, Texas, and I wanna help you.

Maintain Title insurance During a Property Transfer

Maintain Title insurance During a Property Transfer

Any time you transfer property you must consider the title insurance implications. Title insurance will generally be invalidated upon the transfer of the property. However, title insurance isn't invalidated if you transfer the property to a wholly owned LLC. That is, an LLC that's completely owned by you, the person that also owned the property. You also won't invalidate it if you add your spouse to title, for example. That'd be a transfer, but in that circumstance they're not going to invalidate it. You also can transfer the property to an intervivos trust where you are the settlor of that trust. This is the type of strategy that we'll be using with, inside of our anonymity land trusts when we start transferring property. My name is Scott Smith. I'm an asset protection attorney, I'm a real estate investor and I wanna help you.

The Benefits of Series LLCs (Protection, Business Growth & More)

Real estate investing is an excellent way to put your money to work. The returns consistently outperform traditional savings and common investment vehicles, with little risk and low management.

There's only one problem. We live in the most litigious society on earth. Did you know one in four U.S. citizens will be sued in their lifetimes? Real estate investors face an even greater risk of lawsuit.

For years, the wealthy and powerful have shielded their wealth within layers of anonymous companies. Now you can do the same. The Series LLC is one of the central legal structures in any asset protection plan. Let's look at the benefits of using one.

A Traditional Limited Liability Company Isn't Enough To Protect Your Assets

Property in your name leaves you open to losing it all: Litigation doesn’t even have to have anything to do with your property in order to wipe you out. If you have property in your name, or even worse, in a general partnership, and are found liable in a car wreck or other random accident, you could lose everything. Insurance is not going to stop a plaintiff from going after anything and everything you own to repay damages for extensive hospital bills or a wrongful death action.

Property in a traditional LLC or corporation isn’t much better. You are in a little better shape if you have all your assets in one traditional LLC or corporation. In that case, lawsuits against you personally can’t normally touch your business assets. But if you have all your assets in one LLC, and there is a slip and fall at one of your properties that results in serious injury or death, a plaintiff can go after all your properties. It doesn’t matter that your other properties are unrelated to the incident.

Insurance Won't Protect Your Investments

Insurance can help with minor incidents, but it’s not going to save you from losing everything in the case of a big, catastrophic lawsuit. If someone falls through your stairs and the court finds you are at fault because of the nature of the structure or maintenance, your insurance will likely not cover you at all. And certainly, neither your property nor your automobile insurance will cover you if you are found negligent in a serious accident.

The one thing that can save you from disaster is setting up an LLC Series and Anonymous Trust. Plaintiffs can never reach all of your assets because they are owned by separate legal entities and never in your name.

How the Series LLC Structure Protects You

1. Compartmentalizes Your Risk

Setting up an LLC Series Structure legally isolates your equity into separate limited liability companies inside a holding company. Even if you lose a lawsuit, the damage is limited to a single property or asset within the individual series.

The Series LLC works for multiple types of investments. It's great for property management but is equally effective at protecting other investments like a stock portfolio.

2. Hides Your Assets

In a Series LLC, your assets are each separated into individual entities. You can add an anonymous trust to each of these entities for further protection.

Limited liability companies and other business entities are exposed to the public. Anybody can look up your company name and see what type of assets it contains. Trusts, on the other hand, do not need to list their holdings publicly. When combined with the Series LLC, it makes all of the individual holdings essentially invisible. The anonymous trusts own the LLC itself and serve as title trusts for the real estate asset.

How a Series LLC Protects You From Lawsuits

There are three pillars of any lawsuit: opportunity, incentive, and the judgement. Winning a judgement requires a good lawyer, a friendly judge or jury, and a little luck. Clearly, that isn't the pillar we want to focus on. Instead, asset protection strategies target opportunity and incentives.

1. Plaintiff Attorneys Can't Sue What Isn't There

An accident on your property plants the seed of opportunity, but it isn't enough to kick off a lawsuit. In order to put things in motion, the lawsuit attorney must be able to sue you.

An anonymous Series LLC can remove this opportunity in two ways.

Using a Shell Company: Did you know you can break your company into two separate companies? The first is an asset holding company, which isolates assets into individual entities. The second is an operations company, which manages the day-to-day affairs. With some minor adjustments to your contracts, you can require all lawsuits to be brought against the operations company. This acts as a shell company, which means even if you lose the lawsuit there is nothing of value to be lost.

Using Trusts: As mentioned previously, hiding your assets within trusts means your assets are invisible. Even if you could be sued, your opponent's legal team won't be able to find which company to bring the case against. This dramatically reduces the opportunity to bring a lawsuit against you, even if there was some event that could be used as justification for doing so.

2. Attorneys Won’t Gamble or Chase the Money

Not only does a series LLC structure legally protect your assets, because your equity is in multiple legal entities, but it also discourages most lawsuits from ever being filed. Attorneys will not take a case unless they know how they will get paid. If equity is held in multiple LLCs set up with anonymous trusts it will appear on a search that you own very little – if anything at all. Attorneys will look elsewhere for an easier payday.

Plaintiffs need to pay at least $5,000 to even start litigation, and the amount quickly escalates to over $10,000 once discovery starts. It simply does not make sense for a plaintiff to file a lawsuit when they cannot find any assets that can be seized if they win a damage award.

Series LLCs Let You Grow Your Business Forever

With the Series LLC structure, there's an operating company on top, and multiple companies beneath. We use the metaphor of "parent-child" relationships to make the point that this structure lets you have as many "kids," or Series, as you like.

Each Series is its own LLC, and you can create new ones easily as you acquire more investments or other assets. As a bonus, you save money by using a Series LLC rather than the same amount of Traditional LLCs. You pay the costs of establishing the LLC once, and only once.

Series LLCs Protect Your Valuable Assets

The Series LLC's structure isolates your assets, allowing you to have full liability protection for each one. Each asset is secured in its own Series, which functions as its own LLC.

In practice, using a Series LLC makes you very difficult, or at least highly impractical, to sue. Even if someone has a good reason and the resources to sue you, their attorney may not want to. Why? The reasons are pretty simple:

This is just the quick and dirty version. See our previous article on how the Series LLC prevents lawsuits to learn more.

Series LLCs Offer Great Tax Benefits

That's right, even Uncle Sam is kind to the Series LLC. We could write a whole article on tax benefits alone, but here are our top two.

1. Save on Business Taxes

The Series LLC is represented only in its "home state." This means, if your Series LLC is formed in a state with no sales tax, you get to skate on sales tax. For real estate investors, this means rental payments between Series aren't subject to sales tax.

The beautiful part is, you don't even have to reside in the state you form the Series LLC in. If you're itching to save on taxes, consider the Texas Series LLC. This entity will also help you save money via pass-through taxation.

2. Simplify Your Tax Returns

Even though you can have as many Series and assets as you want, you'll still only file one tax return for the whole shebang. The operating company, or parent company, is the only one that you're required to put on the form. Of course, you're still paying taxes on the "children" (Series), but it's all reported as a single entity.

Is There a Catch?

Setting up LLC protection for your real estate business is fast, cost-effective, and scalable. You can be fully protected inside of only a week! There is a one-time set-up of the series structure for the limited liability company. Then you simply purchase a title transfer for each property you want to move within the asset protection vehicle.

There is no more work for your accountant with a series LLC. Though there are separate legal entities, there is a holding company LLC which is owned by an anonymous trust. This means there is still just one tax return, one LLC filing, one EIN, and one operating agreement. After it is set up, you won’t even notice it’s there in your normal course of business.

Setting up the initial structure is inexpensive considering the massive protection you will get and its infinite scalability. You can sleep better knowing your real estate investments and passive income have full asset protection with an LLC series structure and anonymous trusts.

Trustee Vs. Executor: Who Do You Need For Estate Planning?

Unless you are the villain in a spy thriller, there's unlikely to be any intrigue surrounding the reading of your will. Sure, this is a great cinematic device, but a "surprise" announcement regarding your trustee or executor is neither funny nor mysterious in real life.

The events following your death will most likely be painful and dramatic enough as it is. You can ease some of the misery by planning ahead, and letting your chosen executor and trustee(s) know about their jobs ahead of time.

That said, sometimes the executor or trustee really do find out at the last minute. Whether you're in this situation or planning your own estate, this article is for you. You'll learn about the duties of both positions, and how to survive if you're picked to serve as either.

What's the Difference Between a Trustee vs. Executor For Estate Planning?

The executor represents the dearly departed. This person is tasked with administering and distributing the estate. For an executor to do their job properly, he or she must know the identities of any heir and have a solid comprehension of the will. Their main job is to ensure the deceased's wishes are carried out.

Trustees, on the other hand, have a more narrowly defined role: managing a trust. Not all estates necessarily have trusts, but many do. The first order of business for a trustee is to clarify which assets are held within a trust. Check out our asset checklist for estate planning to get started.

It's rare for all of a person's assets to be placed in a trust, so some may be stated only in the will or other documents.

In estate planning, trusts are used to clear up any possible confusion about where certain possessions go. A person may decide to use a trust to offer guidance and maintain more control over their estate. The trust's "job" is to literally own properties, cars, family heirlooms, or any other assets that the creator decides to place within it. The person who creates the trust provides for its funding. The trustee, who may be an individual or even several people, is tasked with determining how money and other assets flow in and out of the trust.

Trust executor duties include liquidating estates. Trustee duties include managing estates.

The former is usually temporary, while a trustee might serve in that capacity for years. There is rarely compensation for either. Many have tried to monetize this position, and few have succeeded. So if someone asks you to serve in either capacity, there are some things you'll want to be aware of. After all, you want to honor your deceased loved one's wishes, don't you?

If this happens to you, don't be afraid. We've got some tips on how to execute and cope with your new responsibilities.

Get Your Estate Planning Paperwork in Order

Before you do anything, you need to review any and all paperwork relating to the estate. These should cover the basics: funeral arrangements, how the deceased wants the estate managed, and preferences about matters like burial. Assuming the deceased planned ahead, there will also be a specific document cataloging valuables like heirloom necklaces or firearms. In legalese, we call this a "memorandum of personal property."

Next you need to determine the assets, which is usually only a hassle if the document above is incomplete or totally absent. If you're in such an unfortunate situation, you may need to get some help. Death leaves quite the paper trail. You're going to need to hunt down everything from the glaringly obvious like bank accounts and real estate, to the not-so-obvious assets like IRAs/401ks, and perhaps a secret vault or two if you get lucky.

Identify the Heirs

Most of the time, heirs are direct relatives. You can usually expect to see them at the funeral. Even if you don't, your paperwork from above should list any heirs. But you should know ahead of time these matters often get sticky. What if one of the heirs has died themselves? Details like this can easily go unnoticed if the most recent will is, say, ten years old. This is when it becomes your job to make a decision--one that can breed contempt under the best of circumstances. Hey, there's a reason people have tried to figure out how to get paid for theses services.,

Speaking of money, there are almost certainly going to be creditors that need to be paid. You need to guarantee that all creditor claims are taken care of from the estate. If you don't pay up, you may suffer liability. "Liability" is legalese for "an all-around bad time."

Yeah, this is a thankless job.

Deal With the Creditors

It doesn't take long for the vultures to circle. You'll have two kinds of creditors to tango with: secured and unsecured. Worry about secured creditors first. These are folks like conventional lenders. You'll want to make sure these types of creditors are notified of the deceased's passing right away. Make payments immediately, as soon as reasonably possible. This is to avoid that all-around-bad-time mentioned above.

Unsecured creditors, on the other hand, are a totally different ballgame. They have to actually come after you in the form of a claim. Unsecured creditors can include everyone from the neighborhood bookie to the (much more likely) credit card companies. Fortunately, credit card companies are fairly realistic about the fact that they're unlikely to be paid off in full. So bust out your haggling skills. There is some wiggle room about the total bill, but don't expect the company to tell you that.
While credit card companies won't break your kneecaps, they can make probate court an even bigger pain in the ass than it already is. Both types of creditors can demand and collect legal fees in a court setting. If the estate ends up in probate court, you will be obligated to alert all creditors of this fact.

Still with me? At this point, nobody will blame you for cursing whoever named you executor.

To recap: Don't mess around with secured creditors. It's a good idea to delay making unsecured creditor payments, because if a claim is never made you won't be on the hook. There's also a clock on how long these types of creditors have to make a claim at all.There’s a good chance this one is going to take care of itself by dissolving into the ether of banking bureaucracy. Now it's time for the fun part: probate court.

Probate Court For Estate Planning

The estate documents should outline exactly how the estate will be administered. Sometimes, the court has to approve certain aspects of this, such as when the family home is transferred to an heir. This is particularly common if the estate is based solely on a will (all the more reason we should all be thorough in our estate planning.)

If the estate you're dealing with is more "Jerry Springer" than "cinematic drama," you may find issues with the identities of the heirs. We're kidding. This is actually more common than most of us would think. Fortunately, it's on the court to figure this out. You've got enough on your plate. Let the judge interpret the law, or anything ambiguous for that matter. Even if you have legal chops of your own, you'll likely need a greenlight from the court to interpret much of anything.

We're approaching home base: stay with me, folks.

Income Tax Returns

That's right, you get to deal with both of life's inevitabilities in one experience: death and taxes. You'll have to file the deceased's final tax return. You'll want to be certain that you label the returns with the word "DECEASED.

As your last task, you may have to also file an estate return. This is legally required if the estate earns over $600.00 in gross income.

Final Legal Estate Planning Tips

Don't go it alone if you don't have to. We're sure you're smart, but it's unlikely that you are both an attorney and a CPA. Enlist help from the pros. The estate will assume their costs, particularly if it is a large or complex one. If you spend any of your own money in the course of your duties, the estate should reimburse you.

Be aware that this is a sensitive time for the relatives and other loved ones.The role can be as emotionally draining as it is time-consuming. But don't forget that you have a job to do, and you must do with your head and not with your heart.

If you've been tapped to act as a trustee or executor, or if you need estate planning services yourself (if only to spare your loved ones from some of this rigmarole), get help from experts who know all types of estate planning and administration issues, and who can help in a compassionate manner. Don't let your death become a big traumatic affair played out on the probate court stage.

You Can Use Your Self-Directed IRA To Buy A Retirement Home. Here's How.

In my experience, a retirement that you are in charge of makes for a better retirement than one that is financially uncertain.

If you are starting to think about where you’ll be spending your retirement, you’ve probably been growing your IRA for some time. If real estate investing is what has gotten you to where you are now, you might want to think about buying a retirement home from your self-directed IRA, also known as a SDIRA or solo IRA.

You can use a self-directed IRA to purchase your retirement home  before your loving children dump you on the side of the road and run off with their inheritance. Here's how.

What To Know About Buying Your Retirement Home With Your SDIRA

This is one of the great reasons to go with self-directed IRA. Traditional IRAs can hold investments, but you can’t buy a home with them. With a self-directed IRA you can buy an investment property and distribute later for personal use. This is black-belt level stuff. You can rent the property as an investment, so you are still making money off of it until you are ready to retire and move in.

To do this you need to purchase the property through your IRA, which will own it as an investment until you retire. When that time comes, you will distribute the property via title transfer from your self-directed to your traditional IRA.
This makes your retirement home a retirement benefit.

Beware of Prohibited Transactions

You need to avoid prohibited transactions. You cannot use the property. Your family cannot use the property. You do not own the property. It is the IRA’s property. It rents the property; you don't.

The rental income accrues in your account because, I repeat, your IRA owns the property. You can lease the property, of course—that’s how investments work. They make income. You will have to lease it to someone outside the family until it’s been distributed, but after that, your dream home is all yours.

Be Smart About Distributions and Taxes

When you take control of your retirement home, it is an “in kind” distribution and it means taxes are due for traditional IRA’s. If your future retirement home was appraised at $250,000, you will receive a 1099-R for $250,000 from your custodian upon distribution.

Distribution taxes can be high. You might prefer to take partial distributions over time, to spread out the pain, but it’s going to sting no matter what you do and this can be a trap. You need appraisals every year for fair market valuation. These valuations cost money. Whatever you decide, you and your family cannot use the property until it has been 100% distributed.

As with most things retirement related, if you take a distribution before you are 59½, you’re going to pay a penalty. Ten percent is stiff. Be patient.

Do Your Homework Before Buying

This process of home ownership isn’t going to work for everyone. It takes a lot of work, but most things worth doing are a lot of work, including putting yourself in a position to purchase a retirement home in the first place. It is possible, but if you self-direct your IRA investments, make sure you understand relevant investment laws and tax structures.

You need to be like a Boy Scout when it comes to retirement planning. Be prepared.

Rollover IRAs Explained

An IRA rollover is a transfer of funds from one retirement account into another, such as a traditional IRA or Roth. You can do this either through a direct transfer or via check. If you do a rollover via check, your custodian will write you a check account which you will then deposit into the other account.

Rollovers are defined as tax free transfers of retirement from one type of investment account to another. Rollovers were originally introduced to increase the mobility of qualified plan funds for employees moving from one job to another.
You can find the basic provisions governing roll over transfers here. These provisions cover transfers from one IRA to another, transfers from qualified pension, profit-sharing, stock bonus, and annuity plans to IRAs, and transfers from IRAs to qualified plans.

There are a few rare exceptions to the rollover rules. For example, in certain situations, an IRA can make a rollover distribution to a health savings account (HSA).

In other words, if you receive a distribution from a qualified plan (such as a 401k), you might decide to put some or all of the distribution amount into an IRA. The IRA that receives the qualified plan distribution is called a rollover IRA.

How Often Can I do a Rollover?

The privilege of rolling over from IRA to IRA may be exercised only once in a 12-month period.

Can You Rollover Funds From a Traditional IRA to Another Traditional IRA?

Yes, as long as the money being moved is withdrawn from your old account and deposited in another account within 60 days. Failing to follow this rule can cause your rollover to lose tax-deferred status and cost you big time.

This rule operates on an all or nothing basis. The entire amount received from your old IRA must be transferred to the designated IRA. If you pocket anything, the rollover rule does not apply, and everything received from the old IRA, including any amount transferred to another IRA, is treated as a taxable distribution.

What If I'm Transferring Property That Isn't Money?

If property other than money is received from your old IRA, that property, (not substitute property of equal value or the cash proceeds of the property's sale), must be included in the transfer to the new IRA.

Note: According to our friends at the Tax Court, the rollover contribution must be of cash if the distribution is in cash.
Can I Rollover Funds From a Qualified Plan to a Traditional IRA?

Yes. A qualified plan (or annuity participant) can roll over any distribution other than a distribution that:

 Note: An employee's surviving spouse may also roll over a similar distribution received on account of the employee's death.

Can a Traditional IRA be Rolled Into a Qualified Plan?

Yes. Within 60 days after the distribution, an IRA can be rolled into an eligible retirement plan for the distributee's benefit.

The term “eligible retirement plan” includes:

A rollover contribution must include the entire amount received in the distribution, but it may not exceed the portion of the distribution that, in the absence of the rollover, would be included in the distributee's gross income.

Can I Rollover a Traditional IRA I inherited?

No, usually. A taxpayer whose interest in an IRA is as a beneficiary of the person who created the IRA is usually denied the privilege of rolling over tax free from the IRA to another type IRA or a qualified plan or tax deferred annuity.

Rare exception: a surviving spouse may roll over to another IRA but not a qualified plan.

Why Not?

Because the tax allowances for IRAs (including an IRA’s tax exemption) are intended to encourage saving for the retirement of the contributor and surviving spouse.

Blame Congress. They're the ones who decided it was inappropriate to allow the tax exemption to be prolonged by rollovers after the contributor has died and the account has passed into the hands of a person other than a surviving spouse.

Are There Reporting Requirements For Traditional IRA Holders?

Yes. But don't worry, it's not that bad! (Hopefully you have someone else doing the paperwork for you.) Individuals maintaining IRAs and surviving beneficiaries under IRAs must usually file an annual information return on Form 5329.

Also, an individual maintaining an IRA must make an information filing for each year in which a nondeductible IRA contribution is made or a distribution is received from an IRA.

The filing, which must be included with the individual's return for the year, must disclose the following:

What Will The IRS do if You Fail To File Properly?

A $50 penalty is assessed for not filing, unless you can justify why you didn't. Also, because non-deductible contributions are recoverable tax free upon distribution, the IRS will want $100 if these contributions are overstated in the return and you, the taxpayer, cannot justify the overstatement.

I hope this article answered any questions you may have had. If you have any questions about IRA rollovers feel free to ask me, I'd love to help you.

 

IRA Rollovers, Explained

An IRA rollover is a transfer of funds from one retirement account a traditional IRA or Roth IRA.

IRA Rollovers are defined as tax-free transfers of retirement from one type of investment account to another. Rollovers were originally introduced to increase the mobility of qualified plan funds for employees moving from one job to another.

You can find the basic provisions governing rollover transfers here. These provisions cover transfers from one IRA to another, transfers from qualified pension, profit-sharing, stock bonus, and annuity plans to IRAs, and transfers from IRAs to qualified plans.

There are a few rare exceptions to the rollover rules. For example, in certain situations, an IRA can make a rollover distribution to a health savings account (HSA).

In other words, if you receive a distribution from a qualified plan (such as a 401(k)), you might decide to put some or all of the distribution amount into an IRA. The IRA that receives the qualified plan distribution is called a rollover IRA.

You can do this either through a direct transfer or via check. If you do a rollover via check, your custodian will write you a check, which you will then deposit into the other account.

How Often Can I Do a Rollover?

The privilege of rolling over from IRA to IRA may be exercised only once in a 12-month period.

Can You Rollover Funds From a Traditional IRA to Another Traditional IRA?

Yes, as long as the money being moved is withdrawn from your old account and deposited in another account within 60 days. Failing to follow this rule can cause your rollover to lose tax-deferred status and cost you big time.

This rule operates on an all or nothing basis. The entire amount received from your old IRA must be transferred to the designated IRA. If you pocket anything, the rollover rule does not apply, and everything received from the old IRA, including any amount transferred to another IRA, is treated as a taxable distribution.

What If I'm Transferring Property That Isn't Money?

If property other than money is received from your old IRA, that property, (not substitute property of equal value or the cash proceeds of the property's sale), must be included in the transfer to the new IRA.

Note: According to our friends at the Tax Court, the rollover contribution must be of cash if the distribution is in cash.

Can I Rollover Funds From a Qualified Plan to a Traditional IRA?

Yes. A qualified plan (or annuity participant) can roll over any distribution other than a distribution that:

 Note: An employee's surviving spouse may also roll over a similar distribution received on account of the employee's death.

Can a Traditional IRA be Rolled Into a Qualified Plan?

Yes. Within 60 days after the distribution, an IRA can be rolled into an eligible retirement plan for the distributee's benefit.

The term “eligible retirement plan” includes:

A rollover contribution must include the entire amount received in the distribution, but it may not exceed the portion of the distribution that, in the absence of the rollover, would be included in the distributee's gross income.

Can I Rollover a Traditional IRA I inherited?

No, usually. A taxpayer whose interest in an IRA is as a beneficiary of the person who created the IRA is usually denied the privilege of rolling over tax free from the IRA to another type IRA or a qualified plan or tax deferred annuity.

Rare exception: a surviving spouse may roll over to another IRA but not a qualified plan.

So why isn't this usually allowed? Because the tax allowances for IRAs (including an IRA’s tax exemption) are intended to encourage saving for the retirement of the contributor and surviving spouse.

Blame Congress. They're the ones who decided it was inappropriate to allow the tax exemption to be prolonged by rollovers after the contributor has died and the account has passed into the hands of a person other than a surviving spouse.

Are There Reporting Requirements For Traditional IRA Holders?

Yes. But don't worry, it's not that bad! (Hopefully you have someone else doing the paperwork for you.) Individuals maintaining IRAs and surviving beneficiaries under IRAs must usually file an annual information return on Form 5329.

Also, an individual maintaining an IRA must make an information filing for each year in which a nondeductible IRA contribution is made or a distribution is received from an IRA.

The filing, which must be included with the individual's return for the year, must disclose the following:

What Will The IRS do if You Fail To File Properly?

A $50 penalty is assessed for not filing, unless you can justify why you didn't. Also, because non-deductible contributions are recoverable tax free upon distribution, the IRS will want $100 if these contributions are overstated in the return and you, the taxpayer, cannot justify the overstatement.

I hope this article answered any questions you may have had. If you have any questions about IRA rollovers feel free to ask me, I'd love to help you.

 

A Series Of Landmark Prohibited Transaction Cases, Part IV: Dabney Vs The IRS

This article is the grand finale of a series with the goal of educating you, the almighty Self-Directed IRA LLC investor, on how to successfully invest & avoid triggering prohibited transactions.

Because the prohibited transaction rules are so broad, the scope of their enforcement is as well. You'll probably agree with what I'm saying if you've read the previous articles in this series.

We've seen Self-Directed IRA investors lose their bankruptcy protection, gains, and even their entire IRA account, simply because they failed to properly follow the prohibited transaction rules.

The case we're about to go over below is different from our earlier cases because it doesn't actually involve a prohibited transaction. Of course, the IRS tried to pin this on him anyway. But what it does involve could happen to any of us: a mistake in judgment.

Dabney Vs The IRS: Background

Back in 2008, Mr. Dabney rolled over funds from an IRA at Northwest Mutual into a pre-existing Self-Directed IRA he had with Charles Schwab. After this, he learned of a piece of undeveloped land in Brian Head, Utah that was for sale. Mr. Dabney believed the land was priced below its fair market value.
He then conducted some Internet research and came to the conclusion that IRAs are permitted to hold real property for investment. He then set out to have his Charles Schwab IRA purchase the Brian Head property.

Mr. Dabney also contacted his CPA (Certified Public Accountant). The Schwab customer service line told Mr. Dabney that he would not be able to make the real estate investment with his IRA at Charles Schwab as they did not permit such investments with IRA funds.
(Of course they wouldn't. There's no money in it for them.)

Mr. Dabney Makes a "Creative" Real Estate Purchase

After carefully considering his telephone conversations with the Charles Schwab customer service representative and his CPA, as well as his own internet research, Mr. Dabney arranged what he believed to be an "IRS approved" way to have his Charles Schwab IRA purchase the Brian Head property.

Mr. Dabney proceeded to wire $114,000 directly to the bank account of Chicago Title and purchased the property. He told them to put the property under the name of “Guy M. Dabney Charles Schwab & Co. Inc. Customer. IRA Contributory”.

He planned to then resell the property for a profit and to contribute the proceeds of the sale back into his IRA. Mr. Dabney believed that the property would not need to be managed by a trustee as long as he did not use or "enjoy" the property.

Although he had hoped to sell the property sooner, Mr. Dabney was unable to find a buyer until 2011. It was then that Mr. Dabney discovered that the property was incorrectly titled in his own name.

Upon discovering this error, Mr. Dabney sought and received a scrivener's affidavit from Chicago Title, which means the company admitted the error was their fault.

Mr. Dabney then sold the Brian's Head property and received $127,226 on the sale, after taxes and fees, which was about $13,000 profit. That amount was wired back directly into his Charles Schwab IRA around January 28, 2011.

Mr. Dabney’s CPA prepared his Form 1040, U.S. Individual Income Tax Return, for 2009. Charles Schwab issued Mr. Dabney a Form 1099-R, Distributions From Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc., for 2009, although Mr. Dabney said he didn't receive it.

The Form 1099-R stated that he had received a $114,000 early distribution from his Charles Schwab IRA and that no exceptions to the early distribution penalty applied. Mr. Dabney did not report the withdrawal on his Form 1040.

The Court's Conclusion

The Court confirmed that an IRA is allowed to hold real estate, but that the law does not require an IRA trustee or custodian to give the owner of a Self-Directed IRA the option to invest IRA funds in any asset that is not prohibited by statute, such as real estate.

The Court further held that the withdrawal of the IRA funds from Schwab was not considered a tax-free direct rollover, which means he was subject to a 10% fee. On the bright side, the court did not hold Mr. Dabney liable for the 20% understatement penalty, citing that he had acted in "good faith".

What Real Estate Investors Can Learn From The Case 

The traditional financial institutions and banks, such as Charles Schwab, etc, don’t make money when you invest your IRA funds in alternative investments, like real estate, and as a result, will not allow you to do so.

To that point, the Tax Court was clear in stating that an IRA custodian is not required to provide its IRA clients with the ability to invest in all IRS permitted investment options if they don't want them to.

In the words of the Tax Court "The flaw is not in Mr. Dabney's intent but in his execution." If Mr. Dabey had initiated a rollover or a trustee-to-trustee transfer from his IRA to a different IRA (one that is permitted to hold real property) he would have won this case hands down.

The Dabney case is a great example of why you want to use a special Self-Directed IRA custodian, such as Royal Legal Solutions when making alternative asset investments with an IRA. A small mistake can cost you thousands, which is far more than the cost of hiring a custodian.
The tax code is vast and can be overwhelming for someone who lacks years of experience in dealing with them as well as the IRS. Save yourself the money and the court dates and get a Self-Directed IRA custodian if you're not 100% sure you won't be triggering a prohibited transaction or some other penalty.

I hope you enjoyed this series of articles and learned a thing or two about directing your own investments.

To learn how to take control of your future and your retirement savings with a Self-Directed IRA LLC, take our Tax Discovery Quiz.

Keep more of your money with a Royal Tax Review

Find out about the tax savings strategies that you can implement as a real estate investor or entrepreneur by taking our Tax Discovery quiz. We'll use this information to prepare to have a productive conversation. At the end of the quiz, you'll have an opportunity to schedule your consultation.    TAKE THE TAX DISCOVERY QUIZ

Top Six Duties For Trustees and Executors of Estates

Unlike the movies, you won't just get a call one day telling you that you've been named as the executor or trustee to a billion-dollar estate. Not usually, anyway.

But let's say you do.

So you’ve been named as an executor in a will or as a trustee in a trust? Now you have some serious duties to carry out. Before I explain the trustee duties and the trust executor duties, you need to know the difference between the two.

What Is an Executor?

An executor, also known as a personal representative, has the authority to administer and distribute an estate. If you were appointed as an executor (or personal representative) in a will, you will need to understand the terms of the will and who the heirs are.

In most situations where only a will is used, you will need to go to court to be appointed as the legal executor of an estate and will need court approval to transfer certain assets (such as a home.)

What is a Trustee?

If you were appointed as a trustee in a trust, you will need to understand what assets are owned by the Trust and what assets are owned outside the Trust. In general, a trust is used by individuals to avoid probate and to provide better direction and control of their estate.

If the Trust was established correctly and if it was properly funded (the trust owns the assets of the deceased person), then you will not need to go to court to get approval to administer the estate.

The Difference Between an Executor And a Trustee

The position of executor tends to be temporary, while someone could serve as a Trustee for a few months or a few decades.

Think of an executor as a "liquidator" and a trustee as more of a "manager." An executor's duties are complete once everything has been liquidated, whereas a Trustee's duties are complete when there is nothing left to be managed.

Fun fact: Usually neither an executor nor a trustee is compensated for their position.

Now that we've got that covered, let's go over the six most essential duties of executors and trustees.

Responsibilities as an Executor or Trustee

#1 Understand the Estate Documents.

Before you do anything, you need to read the estate documents. These documents will determine the distribution and management of the estate. These documents may include funeral and burial instructions. (Where and how the person wants to be buried, or where they want to be cremated, etc.)

There may also be a memorandum of personal property that outlines how specific items of personal property are to be distributed to heirs. Common items identified and handled on the memorandum of personal property are jewelry, guns, and other valuables.

#2 Determine the Assets.

You will need to determine what assets are included in the estate. Sometimes this can be difficult to determine, as the deceased person may not have provided complete information as to their bank accounts, investment accounts, real estate, retirement accounts, and life insurance policies.

Many children who become executors and trustees have a difficult time locating the assets of their deceased family member despite having an otherwise close relationship.

#3 Identify the Heirs.

Most estate documents such as a will or a trust will list the heirs to the estate and these heirs (AKA, beneficiaries). Usually, the heirs are clearly identified. However, what happens if the will or trust listed one of your siblings as an heir, and what if that sibling in longer living?

Does that portion of the estate go to your sibling’s surviving spouse or children or to the other siblings? Hopefully, the will or trust will state what shall occur in this instance. But in many instances, this item can be overlooked and not considered in the estate plan.

As executor or trustee, you are left to determine who shall take the place of your deceased sibling and this decision is subject to the terms of the document and state laws.

#4 Identify the Creditors.

Almost every estate has creditors who need to be paid. From credit card companies and other consumer debt to mortgage lenders with liens on real estate owned by the deceased.

As executor or trustee of the estate, you have an obligation to guarantee that all creditors' claims are paid from the estate. Failure to do so may result in liability to you as the executor or trustee or to the heirs who receive distributions from the estate.

Whether you are working with a secured or unsecured creditor, you will need to provide evidence of your position as executor or trustee, which in the case of a Will would include a copy of the Will, or in the case of, a Trust would include a copy of the certificate of trust.

In general, secured creditors such as mortgage lenders or car lenders will be paid upon the sale of the property or asset unless the estate otherwise has cash available and intends to hold these assets.

Regardless of whether the asset will be held or sold, you should immediately notify secured creditors of the death of the deceased person. Where possible, you should make sure that payments are made to these creditors to avoid late fees and other penalties.

If properties or assets subject to the secured creditor are paid, then the proceeds from the sale will resolve these debts.
As for unsecured creditors, you should notify them of the passing of your loved one. However, these creditors are not always paid in full. Don't be hesitant to negotiate with unsecured creditors, such as credit card companies. They can be negotiated with fairly easily.

Maybe start with an offer of 1/3 of the amount owed and see if the unsecured creditor will accept that amount as a payoff. While they do have legal recourse against the estate, they do face significant legal fees in probate court to collect on the debt.
If the estate must go through probate in the court, as will typically occur if there is only a will, then as executor you are required to notify creditors of the probate court action and of the assets of the estate.

Unsecured creditors then have a certain amount of time to assert their claim against the estate. Most unsecured creditors won't follow up and make a claim against the estate despite being given notice of the assets of the estate.

Look to negotiate with these creditors and if you are in probate court already, wait until they actually make a claim in the probate court (following notice of the case and deceased person's death you will be required to provide) before paying those creditors.

You have a good chance that the creditor won’t even make a claim.

#5 Conduct the Proper Process.

The estate documents and the assets of the deceased will determine the process to administer the estate. Also, if the deceased person had assets in multiple states if they only left a will, you may need to conduct probate in multiple states.

There are a number of common situations where you will need to go to court to obtain court approval in administering the estate.

In the case of a will, you will typically need to go to probate court to be appointed as executor by the court and to get court approval to transfer any real estate assets to heirs or in a sale from the estate.

Also, if the identity of heirs is in question, you may need to get approval from the court as to the proper heirs to receive proceeds from the estate.

Lastly, you may be required to go to court if the estate documents leave contradictory, improper, or confusing provisions that cause disagreement amongst heirs. In this situation, obtaining approval from the court is advisable in order to avoid claims against yourself and the estate.

#6 Final Tax Returns

As executor or trustee, you must also make sure individual income tax returns and estate tax returns are filed. This can be tricky, considering the circumstances.

For example, you must write the word DECEASED across the top of the tax return. In addition to a final income tax return, you may be required to file an estate tax return using IRS form 1041. This is required if the estate receives $600 or more in gross income.

Conclusion

Being a trustee or executor isn't easy. You may want to get some professional help to make sure everything goes smoothly.

Remember, the estate can pay the expenses of professionals and if you incur out-of-pocket expenses then the estate can typically reimburse those expenses.

One last thing you should be aware of as an Executor or Trustee. I didn't mention this in the list above, but as an Executor or Trustee, you will typically be involved closely with the heirs/beneficiaries. Sometimes this can involve drama, emotional support, and other sticky situations. For your convenience, we've created an additional Survival Guide for Trustees and Executors. You can make it. We believe in you and are here to support you through this process if you need help.

Estate Planning 101: Who Will Carry On Your Legacy?

Estate planning 101 starts with understanding that a trust is more than an opportunity to guarantee that your assets are distributed the way you see fit upon your death. A trust is also a great way to pass your legacy on to the next generation, whether they be your family, friends or someone else deserving of the privilege.

Your trustee will have an immense responsibility thrust upon their shoulders following your death. But finding a trustee is easier said than done. How do you know how someone will act once you're not around anymore? If you appoint the wrong person as trustee, they might just end up making you "roll over" in your grave.

The Purpose of a Trust in Estate Planning

When establishing a trust you will be outlining your assets and who will receive those assets upon your death. You will also outline certain conditions that may be placed on your assets.

For example, you may state that your children will receive an equal share of your estate upon your death. But you can also add that your children shall not receive a distribution if they have a drug or alcohol addiction or if they have a creditor who would seize the funds. The trust may also set up distributions to minor children so that they don’t receive a large inheritance when they turn 18.

How Do I Pick My Trustee?

As stated earlier, appointing a trustee to your trust is an important part of estate planning. In most situations, you will be the trustee during your lifetime and if you have a spouse your spouse will be trustee if they survive you.

However, you will need to select a successor Trustee of your Trust who will manage your estate following your death. (Even if you have a spouse, you may not want them to be the trustee). This successor Trustee may be a family member, friend, company, etc.

Factors To Consider When Picking Your Trustee

What Will My Trustee Do?

  1. Your Trustee will make funeral and burial arrangements along with family members.
  2. Inform your family members and heirs of the estate plans of the deceased. (This is the part you see in movies).
  3. Your Trustee will pay off creditors and hire professional as needed to assist with the estate. (Lawyers, real estate agents, etc.).
  4. Your Trustee will determine what exactly your assets are to make sure they are distributed to the heirs/beneficiaries of your Trust.
  5. Your Trustee will organize your assets for distribution. This may include listing and selling property, transferring ownership of businesses, jewelry, art, bank accounts, etc.

How Large is Your Estate?

If your trust is only worth a couple million dollars or less, listing a family member as the trustee is probably your best option. However, if your estate is worth over $4 million you may want to consider listing a lawyer as the successor trustee of your estate.

And if you've been fortunate enough to accumulate an estate worth over $10 million you may want to consider listing a trust company or bank as the trustee of your estate. "Absolute power corrupts." Need I say more?

Note: If you appoint a trust company to manage your trust it will cost tens of thousands of dollars, so this option is only viable for large estates.

When Should You Appoint a Non-Relative Trustee?

If you have heirs who are likely to disagree and cause problems, you may want to list a non-family member or a friend as the Trustee so that a third party can make decisions. This way you can avoid potential contention and litigation over your estate.

Does Your Trustee Have Good Financial Skills?

If you are selecting a family member, choose one who has shown good financial skills over their life. If you’re selecting a child over another, consider their financial skills, work background, and family dynamics.

Note: Choose someone who is well organized and who can get things done. You want a responsible person to be your trustee.

What Are The Dynamics of Your Family?

Every family is different, some have gold diggers or feuds, others have delinquents. Maybe your children are too young to be trustees, or you don't have a spouse. In any case, just think long and hard on this one!

Will You Compensate Your Trustee For Managing Your Estate?

You may compensate them or give them something extra from the estate for taking on the responsibility but generally family members are appointed to serve without compensation. Those with large estates may want to hire a professional instead. At any rate, you can do your trustee a favor and supply them with our article on the duties of a trustee.

Can Your Heir/Beneficiary Be a Trustee?

Yes, you may have your beneficiary/heir serve as Trustee. Most people who have adult children will list a child as the successor Trustee and this person will typically be a beneficiary/heir.
 Note: While there is some conflict of interest in this arrangement, the Trustee is bound to the terms of the Trust and can’t abuse that discretion for their own personal benefit.

Should You Appoint Co-Trustees?

Some people will consider listing co-beneficiaries as successor Trustees. This can be a way to involve more than one family member in the distribution of the estate so that one person doesn’t feel left out.
While there can be some benefits to involving another person as Trustee it can cause tension and confusion as to who is doing what. Make sure you're specific about their authority and responsibility if you are listing multiple trustees.

Who is Most Commonly Listed as Trustee?

Most persons with adult children will list one of their children as successor Trustee. Most persons with younger children will list a sibling or close friend as their successor Trustee.

 

How To Buy Your Retirement Home Ahead Of Time Using A Self Directed IRA

Chances are you've been steadily growing your IRA for quite some time. Did you know that you can buy a retirement home with a Self Directed IRA (SDIRA)?

Yep, it's true. But there are a few things you need to know first.

If you have any other IRA besides a SDIRA, you can only hold investments. You can't just go buy a home with your IRA and live there. However, with a SDIRA, you can buy an "investment property", which you can later distribute and use personally.

Let's break this strategy down.

Steps To Using a Self-Directed IRA to Buy a Retirement Home

If you are seriously interested in using your SDIRA to purchase a retirement home, then know that it works in two phases.

First, your IRA purchases the property and owns it as an investment until you decide to retire. (You need an SDIRA for this.) Second, upon your retirement (after age 59 ½), you can distribute the property via a title transfer from your SDIRA a regular IRA. This allows you to personally use the home and benefit from it personally. Before you go out and buy your future retirement home, you should consider a couple of factors.

Avoid Prohibited Transactions

Be careful to avoid those dreadful "prohibited transactions". The rules in place currently do not allow you, the IRA owner, or certain family members to have any use or benefit from the property while it is owned by the IRA.

The IRA must hold the property strictly for investment. The property may be leased to unrelated third parties, but it cannot be leased or used by the IRA owner or prohibited family members (kids, siblings, parents, etc). Only after the property has been distributed from the self-directed IRA to the IRA owner may the IRA owner or family members reside at or benefit from the property.

You Must Distribute The Property Fully Before Personal Use

The property must be distributed from the IRA to the IRA owner before the IRA owner or his/her family may use the property. Distribution of the property from the IRA to the IRA owner is called an “in kind” distribution, and results in taxes due for traditional IRAs.

For traditional IRAs, the custodian of the IRA will require a professional appraisal of the property before allowing the property to be distributed to the IRA owner. The fair market value of the property is then used to set the value of the distribution.

For example, if your IRA owned a future retirement home that was appraised at $250,000, upon distribution of this property from your IRA (after age 59 ½) You would receive a 1099-R for $250,000 issued from your IRA custodian to you.

One of the drawbacks of this strategy is that distribution taxes can be high. You might prefer to take partial distributions of the property over time, holding a portion of the property personally and a portion still in the IRA to spread out the tax consequences of distribution.

However, that would be a tiresome process, as you would have to appraisals each year to set the fair market valuation. While this can lessen the tax burden by keeping you in lower tax brackets, you and your family still cannot personally use or benefit from the property until it is entirely distributed from your IRA.

Bottom Line: Play By The Rules With Your Self-Directed IRA

Remember that you should wait until after you turn 59 ½ before taking the property as a distribution, as there is an early withdrawal penalty of 10% for distributions before age 59 ½.

While this strategy is possible, it is not for everyone and certainly is not easy to accomplish. Few things worth doing in life are. SDIRA investments come with rules, and self-directed IRA investors should make sure they understand those rules. Remember, you can't use your retirement home for personal use until after its been distributed and you may or may not end up paying lots of taxes.

Common Self-Directed IRA Prohibited Transactions: A Quick List

If you own an IRA account, you've probably read or heard a lot about prohibited transactions. If you haven't, that's okay.

Let's just say you don't want to get caught being involved in one.

This is vital information for anyone who invests with a Self-Directed IRA, so read on.

Direct Prohibited Transactions

The types of transactions that could fall under the prohibited transaction rules can be grouped in three different categories: Direct, Conflict of Interest, and Self-Dealing.

The direct or indirect furnishing of goods, services, or facilities between an IRA and a “disqualified person” can take on many forms. Here are some more examples.

The direct or indirect lending of money or other extension of credit between an IRA and a “disqualified person”.

The direct or indirect transfer to a “disqualified person” of income or assets of an IRA also constitutes a prohibited transaction. In real life, this might look like any of these examples:

Conflict of Interest Prohibited Transactions

A “Conflict of Interest Prohibited Transaction” often involves one of the following:

Self-Dealing Prohibited Transactions

Self-dealing refers to the direct or indirect act by a “Disqualified Person” who is a fiduciary whereby he/she deals with income or assets of the IRA in his/her own interest or for his/her own account.

Hopefully this article helps you, feel free to bookmark it as it sure to prove useful to you in the future if you plan on investing using a Self-Directed IRA.

If you have any questions about investing with a Self-Directed IRA, please contact Royal Legal Solutions today.

The New Real Estate IRA LLC

You can invest your money using a variety of cost effective methods. But if you already invest or are considering investing heavily in real estate, it's in your best interest to get a Real Estate IRA LLC.

What Is a Real Estate IRA LLC?

A Real Estate IRA LLC, AKA a Self-Directed IRA LLC, is an IRS and tax court approved structure that allows you to use your IRA funds to purchase real estate, or make almost any other type of investment, tax free.

With a Real Estate IRA LLC you will never have to seek the consent of a custodian to make a real estate investment or be subject to costly custodian account fees.

To establish a Real Estate IRA LLC, first you need to have an IRA. Then you establish an LLC which is owned by the IRA, which is in turn owned by you. The passive custodian then transfers your funds to the new IRA LLC bank account.

How Do I Buy Real Estate With My Real Estate IRA LLC?

When you find a real estate investment that you want to make with your IRA funds, simply write a check or wire the funds straight from your Self-Directed IRA LLC bank account to make the investment.

The Self Directed IRA LLC allows you to eliminate the delays associated with an IRA custodian, enabling you to act quickly when the right real estate investment opportunity presents itself.

This setup also gives you a great advantage when it comes to making real estate or tax liens investments, since custodian delays could cause you to lose an investment opportunity.

Real Estate Is an IRS-Approved Investment

 Investments with a Real Estate IRA are allowed under the Employee Retirement Income Security Act of 1974 (ERISA). IRS rules permit you to engage in almost any type of real estate investment, except from any investment involving a disqualified person.

Note: Disqualified persons are usually limited to your close family members, such as your parents and children.

What Types of Real Estate Investments Can I Make With a Real Estate IRA LLC?

With a Self-Directed IRA LLC you will have the ability to invest in almost any type of real estate investment, such as:

  1. Foreclosure property
  2. Condos or coops
  3. Mortgages
  4. Mortgage pools
  5. Deeds
  6. Farm land
  7. Tax liens
  8. Residential or commercial real estate
  9. Domestic real estate
  10. Foreign real estate
  11. Raw land
  12. Vacation homes
  13. Rental units

A Real Estate IRA LLC Offers You Growth Potential

A Self-Directed Real Estate IRA LLC offers you the opportunity to greatly accelerate the growth of your retirement portfolio. With a Real Estate IRA LLC you can take advantage of the high growth real estate investment sector while benefitting from the tax free IRA benefits.
Investing in real estate is a formidable alternative to the stock market. Why? Because real estate properties can provide steady income as well as long term gains through appreciation.  There are no limitations on the types of properties that can be held by a Real Estate IRA LLC.

Establish Your Real Estate IRA LLC While The Market is Investor-Friendly

You're no doubt well aware of how the residential and commercial real estate market has taken a dramatic downturn due to the subprime mortgage meltdown.

While it’s a bad real estate market for current owners and landlords, on the flip side it's a great investment market for real estate investors with capital. Also, the Real Estate IRA LLC is perfect for any person looking to diversify their retirement funds by investing in the high growth real estate market.

You Have Leverage With Your Real Estate IRA LLC

The Real Estate IRA LLC can be used when making a real estate investment using cash, or may be used when using a non-recourse loan to fund an investment. A non-recourse loan is the only type of loan allowed for a Self-Directed IRA.

A nonrecourse loan is a secured loan which is secured by a pledge of collateral, but for which the borrower is not personally liable. Whereas, a recourse loan is a loan for which the borrower is personally liable. Recourse loans are no permitted when using IRA funds.
 

Note: If non-recourse funds are used as leverage, the debt-financed portion of your investment will likely trigger the UDFI tax.

Opening a Real Estate IRA LLC Is Quick and Easy.

Royal Legal Solutions will take care of setting up your entire Real Estate IRA LLC structure. The whole process can be handled by phone, email, or mail, typically taking 2 weeks or less. The amount of time it takes to setup largely depends on the state you choose to form the IRA in and your current custodian.

Setting Up Your Real Estate IRA LLC: A Step By Step Guide

 

Step 1: Establish Your Account

Your Self-Directed IRA account is established with an IRS approved and FDIC backed passive custodian.

Step 2: Transfer Your Funds

Your retirement funds are transferred to the new Self-Directed IRA account tax free.

Step 3: Form Your LLC

A Limited Liability Company (LLC) is formed with you as the owner.

Step 4: Fund Your LLC

You decide what to invest in, and the passive custodian invests the IRA funds into the newly formed IRA LLC.
Note: One or more IRAs can be used to fund the IRA LLC, including Traditional, Roth, and SEP IRAs.

Step 5: Take Control

You direct the IRA funds held in the new LLC bank account for investment as you see fit.

Step 6: Invest

 Your LLC makes a real estate investment using IRA funds and all income and gains generally flow back to the LLC tax-free!

Learn More About Royal Legal Solutions' Real Estate IRA LLC 

If you still have questions about the Real Estate IRA LLC, contact us today. We're happy to help.
 

Buy Tax Liens With Your Self-Directed IRA LLC Or Solo 401k

Did you know tax liens can be purchased with retirement account funds? Yes, it's true!
By Self-Directing your IRA LLC or Solo 401k Plan investments into tax liens, your profits are tax-deferred back into your retirement account. More importantly, purchases can be made on the spot as fast as you can write a check.
But hold on a minute! What are "tax liens"?
A tax lien is Uncle Sam's (most likely the city or county's) claim on your property. They are usually placed when a taxpayer, such as a business or individual, fails to pay taxes owed.
You probably don't know much about tax liens right now. However, by the end of this article you will know how they can multiply your earnings in a tax-deferred IRA LLC or 401k, making them one of the soundest investments in your retirement account.
The purchase of tax lien certificates is a surprisingly safe investment. The transaction is fast for those using a Self-Directed IRA LLC or Solo 401k. The use of a Self-Directed IRA LLC is actually one of the most tax efficient ways to finance your tax lien purchase.
But this doesn't mean the Solo 401k isn't great for buying tax liens. On the contrary, the Solo 401k Plan offers a loan feature allowing for the purchase of tax liens.
Under the Solo 401k Plan, you can borrow up to either $50,000 or 50% of your account value at the prime interest rate + 1%.
What You Should Know About Tax Liens
Real estate has long been considered one of the greatest investment opportunities for both the large and small investors.
Ask yourself, how do real estate investors make money in a post recession climate? By purchasing properties for a fraction of their value!
The question is how? The answer is: Tax Lien Sales.
Where Do Lien Sales Originate?
When a property owner falls behind on their taxes, failing to pay for one or more years, the local taxing authority has the legal right to place a lien/repossess the property and sell it at auction to get the lost tax revenue.
How long local authorities wait to seize individual properties, and how much they allow to be owed on it before one of these events is up to the lien laws in their particular area.
Properties are often shockingly acquired for a few thousand dollars, regardless of how much they're actually worth! Similarly, paying off the lien on other properties may cost more than the house or land is worth.
The key to investing in tax liens is to take your time to research each property carefully before sale/auction day.
When & Where Do Tax Lien Sales Take Place?
Tax lien sales usually take place at public auctions. How often depends on the area in where it is located, and how many properties the government may seize annually for back taxes.
For example, larger urban areas may hold monthly auctions, while smaller rural ones might only have one auction a year.
2 Types of Tax Liens
There are two types of tax lien sales through auction: the tax lien certificate and the tax lien deed. So what exactly are these liens?
Tax Lien Certificate 
The Tax Lien Certificate offers a delinquent homeowner who has fallen behind on their taxes one last chance to retain ownership of their property.
The certificate gives them a chance to use third-party investment money to pay off the taxes and a bit more time to collect the money needed to pay their debt without the risk of losing their home.
When you bid on a tax lien certificate, you are agreeing to loan the homeowner the money needed to pay all taxes due. The homeowner in turn agrees to pay you, the tax lien certificate holder, back with interest by a specified date.
If the homeowner fails to pay the debt on time, the deed to the property is transferred to you for the amount paid on the taxes.
Either way you make a profit. Whether your profit is on the interest you earn on the loan or by obtaining the property for a fraction of its value through the tax lien sale and then reselling it.
Tax Lien Deed
Tax Lien Deed sales are handled a bit differently, since you are actually buying/bidding for the property at the time of auction, with no responsibility to give the homeowner more time to pay his/her tax debt.
Once the selling price is approved, the deed is automatically transferred to you. Which gives you free reign as to what to do with the property next. You could renovate it, sell it as is or build a new home.
Properties in this type of tax lien sale tend to cost more, which may lower your profit margins compared to the acquisition of tax lien certificate properties. But the advantage to this lien is that you don't have to worry about homeowners.
Either way, investing in tax liens can be a profitable and easy way to enter the real estate market.
3 Ways You Can Make Money With Tax Liens.

  1. Supercharge Your IRA.

You can buy tax lien certificates with your Self-Directed IRA LLC or Solo 401k. For example, let's say you buy a tax lien certificate which earns 16% of your initial investment annually.
When you buy tax lien investments you receive the amount invested plus interest within 12 months. If you continue to reinvest in tax liens year after year at 16%, you can double your money in about 4 years.
Note: Only a Self-Directed IRA LLC can preserve this 16% return, as traditional IRAs can't invest in tax liens.

  1. Grow Your Retirement Money Tax Free.

By buying tax liens with a Self-Directed IRA LLC or Solo 401k, you can avoid all taxes until the money invested is withdrawn from your IRA or 401k, which is usually around age 59 1/2. (Unless you like giving the IRS free money.)
The money can be invested once, twice or a thousand times and continue to grow tax-free, so long as it is not withdrawn for personal use.

  1. Flexibility.

With a Self-Directed IRA LLC, you can serve as the trustee. This means that all assets of the 401k trust are under your sole authority. This gives you the freedom to fund any investment anytime.
As trustee, you can buy tax liens with the stroke of the pen, without a custodian trying to charge you fees or slow you down.
Tax liens are backed and leveraged by the property being "liened" and are guaranteed by the taxing authority.
In most states, they are a first lien on real estate, and when foreclosed, they wipe out all junior liens (such as mortgages). Which means you can snag a valuable piece of real estate for next to nothing!
Tax Liens Are A Great Investment Opportunity.
Real estate has been the cornerstone of wealth since the beginning of civilization. Even cave men had caves!
Although many people have left the real estate market because of the housing bust, many real estate investors are still enjoying huge profits by investing in tax liens.
To learn more about buying tax liens with a Self-Directed IRA LLC, call Royal Legal Solutions today at (512) 757–3994  to schedule your free consultation!

Can Title Insurance Be Transferred? How To Preserve Title Insurance When Transferring Property

Are you in the process of transferring property? Or maybe you're planning to transfer a property, or even multiple properties in the near future. If the answer is no, let’s just hypothetically say you’re looking to transfer your properties into a legal structure as part of your new asset protection plan. Can title insurance be transferred?

Ultimately, this is something most real estate investors will have to deal with at some point in their investing careers. Get this information now so you can stay on top of your business and be prepared when the time comes.

Let's talk about how to preserve your title insurance when transferring, step-by-step.

How Title Insurance Works

Any time you transfer property, you must consider the title insurance implications. Title insurance will generally being invalidated upon the transfer of the property. However, title insurance isn't invalidated if you transfer the property to a wholly owned LLC (an LLC that is completely owned by you, the person that also owns the property).

It also won't invalidate it if you add your spouse to title.

You may also transfer the property to an inter vivos trust where you are the settlor of that trust. This is the type of strategy that we'll be using with our anonymity land trust and we start transferring property.

Property Transfers and Title Insurance

As a real estate investor, you’re painfully aware of the cost of insurance for a property. The last thing you want to do is pay more money than is absolutely necessary for insurance.

Usually when you transfer a property, your hazard and title insurance expire. This typically happens because insurance companies are pretty good at looking out for their own best interests, and have the legal personnel to make sure these stipulations are made in your insurance contract. I know nobody enjoys reading contracts, but go ahead and check if you don't believe me. The vast majority of the time, property transfer means expiration for those types of insurance.

Preserve Title Insurance With a Land Trust

But never fear, smart investor friends: there is a way around this!  You can use the oh-so-useful money-saving and anonymity-preserving land trust, a tool I've written about before here on Bigger Pockets, to preserve your title insurance as well. Here's how it works:  if you transfer your properties into a land trust you’ll be able to preserve both your hazard and title insurance. This in addition any other insurances you might have for the property.

Land trusts are a common component of many asset protection plans because of their ability to give you total anonymity. And as a small bonus, you won’t have to worry about violating the due on sale clause when you transfer your property to a trust. Follow the link in the previous paragraph for much, much more information on these other uses of the land trust.

You might be thinking it sounds too good to be true. The skeptical among you may already be wondering what kind of legal backbends you'll have to do, and if there's a catch here.

Is It Shady To Use a Land Trust? What's the Catch?

Not at all. This is perfectly legal and honest tool, and something that investors can always take advantage of. If you're holding your breath waiting for a surprise gut-punch in the fine print, exhale. You aren't going to find it.

That said, you do need to have your ducks in a row regarding both the property and the trust. First, you must be the settlor of the property you’re transferring to preserve your insurance. You must also be the beneficiary of the trust you’re transferring the property in question into.

Before transferring any property, it's definitely a good idea to review any insurance policy you have. While you're doing this, pay special attention to your title insurance policy. It shouldn’t be too hard to find the part of your insurance contract dealing with this issue. If you're having issues with this, consult with an attorney. A business-savvy professional who deals with contracts regularly, such as an insurance agent, CPA, or other legal professional can also help in a pinch.

Usually, the land trust you want to transfer property to must meet your insurance policy’s criteria for transfer eligibility.  If you’ve looked over the policy and you're still uncertain whether this is the case for you, it's time to check with your agent.

Land Trusts Preserve Title Insurance and Protect Your Assets

The good news is there’s a guaranteed way to make this transfer will work for you.

The most reliable method is fairly straightforward. All you need to do is add the land trust you plan to use as the beneficiary of your insurance policies. Adding your land trust as a beneficiary essentially guarantees that you'll get to keep your insurance.

This method is leaps and bounds better for you than getting a new insurance policy. Why, you ask? Because, as I’m sure you know, a new insurance policy would have to use the current value of the property. And thanks to a little thing called appreciation, which is usually a good thing for investors, the current value is almost certainly higher than it was when you bought it. And while that's good news if you plan to sell it, it's bad news if you're having to get a new insurance policy. It means you’d actually end up having to pay more, perhaps a lot more,  than before. So you want to hold your policy to the last minute before being forced to renew.

First you’d have to pay to re-issue the policy, and since your property has probably appreciated in value, your policy will be more expensive. Second, if you're policy isn't already near its expiration date, you're unnecessarily costing yourself extra money. Extra money which could be used for much more pleasant things than insurance. This is why it's worth the effort to use the land trust method to avoid triggering the expiration clause in that crafty insurance contract.