#RichLifeLawyer Podcast 009: Rental Home Protection with an LLC Mistakes
#RichLifeLawyer Podcast 009: Rental Home Protection if Not Owned By Your LLC
In today’s episode I answer a question that was recently posed to me by a real estate agent friend of mine about protecting your rental home with an LLC and a common way that property owners do it that doesn’t work.
To get the full story, click the play button above or read the transcript below.
P.S. Do you have kids? Have you completed guardianship paperwork? Have you done it correctly? Click here to find out what happens if you don’t do anything: Are you okay with a judge choosing the guardians of your children?
P.P.S. Do you own a business? Do you have a plan so the business, and your family, can survive if something happens to you? If not, click here to learn how simple it is to protect your business and your family from tragedy: 5 Ways to Protect Your Business from Catastrophic Failure.
P.P.P.S. Do you have no kids and think you don’t need an estate plan? Single and think a will is only for married couples. You couldn’t be more wrong. Click here to learn more: 5 reasons estate planning is a must have even if you don’t have kids.
Christopher Small is a Kirkland estate planning attorney who helps people get rich and live forever. He is also the owner of CMS Law Firm LLC.
Rental Home Protection with an LLC Mistakes Transcript
Hey everybody this is episode nine of The Rich Life Lawyer Podcast and this is your host, I’m your host Christopher Small. I’m excited to be here today we are talking about, what are we talking about, oh question that came up to me the other day that I wanted to make sure that you all know about it because it could be a huge problem if you have the set up wrongly and it’s what having an LLC for your rental home really means and in the right way to do it. And the best way to explain it is just to give you this story or the scenario that I was given and then tell you why this is not good.
So I was talking to a real estate agent and she was talking about a client of hers that has a rental home and they, the home is owned in their name personally so like John Smith. And they have an LLC for the property like the twelve-o-one. You know rental home LLC and they have bank accounts that have the LLC. They have everything set up for the LLC. The rental agreements in the name of the LLC. But the property is still owned by John Smith personally and she wanted to know if that was good enough. And the answer is no because if you answer it, here’s what, well before I get the why and I want to talk about what an LLC is.
So an LLC is essentially, think of it as the ability to create another person that can be responsible for very specific things and keep you from being responsible for those very specific things. Sort like a box that you can put things in. That’s why rental properties and LLCs are good fits because if something happens at your rental home. If it blows up or somebody does something stupid then the liability can be limited to just what’s owned by that LLC. Which means they can’t come after your bank accounts, your retirement accounts, your home, your cars.
You know everything that you own. And that’s why an LLC is so important. That’s why many people use them for rental homes but if they’re not used correctly then, they don’t work, right. So the answer to the question is no, that’s an area was not good enough. You must put the rental home in the name of the LLC for the LLC to actually protect you from things that happened at the home. Now there’s a couple ways that you can do that I think I wrote a blog post about one of them if you own a property free and clear, you can simply do a quick claim deed transferring the property from yourself to the LLC.
If you have a mortgage on the property though, it gets a little more complicated and you have to, there are some land trusts are involved basically and this is not the absolute talk about land trust. I think I’m gonna talk about them in the next episode. So I’m just going to leave you hanging there but just remember if you have an LLC, and the property itself is not owned by the LLC, which means the name of the LLC is not on the deed, then you are not protected in a way that you think you are. Alright, thanks for listening. I will talk to you next week.