Anyone place their home in a trust or LLC?
Anyone place their home in a trust or LLC?
Hi,
I am currently debating placing all or part of my home in an LLC or trust. In short, our property has a home, barn, and pasture with horses. Approximately 75% of the property is easily distinguishable for horses and the barn while the other 25% is our home.
My SO wants to begin providing lessons or small scale activities for kids to come and do a few times a month. My largest concern is what if one gets hurt riding or even on the property (like playing on the swing set), which is what I want to try and cover ourselves and our assets (both property and investments).
We currently have a $2 million umbrella policy. The insurance company has been clear that it would cover a horse being boarded and ridden on our property (which we currently provide), but not the new potential activity above.
I have read about putting the barn and pasture in a LLC and then keeping the home in our name. I have also looked into a revocable living trust, but I am not sure that would provide us any protection. We do like the idea of privacy with the trust though.
Some other information:
• Have loan on entire property for $330,000. Did a refi a year ago at 2.5% over 30 years. Home is in my and SO name.
• Live in Tennessee, equine law is as follows (we have multiple signs up already): Under Tennessee Law, an equine professional is not liable for an injury to or the death of a participant in equine activities resulting from the inherent risks of equine activities.
Questions:
• Thoughts on LLC or Trust? Is there another way to help protect us?
• Any type of tax considerations that I should be thinking about?
• Would the mortgage company even allow this (went with AIM, sold to Fannie)?
• Who should I research to help with a structure like this (attorney, estate planner, etc.)?
I am currently debating placing all or part of my home in an LLC or trust. In short, our property has a home, barn, and pasture with horses. Approximately 75% of the property is easily distinguishable for horses and the barn while the other 25% is our home.
My SO wants to begin providing lessons or small scale activities for kids to come and do a few times a month. My largest concern is what if one gets hurt riding or even on the property (like playing on the swing set), which is what I want to try and cover ourselves and our assets (both property and investments).
We currently have a $2 million umbrella policy. The insurance company has been clear that it would cover a horse being boarded and ridden on our property (which we currently provide), but not the new potential activity above.
I have read about putting the barn and pasture in a LLC and then keeping the home in our name. I have also looked into a revocable living trust, but I am not sure that would provide us any protection. We do like the idea of privacy with the trust though.
Some other information:
• Have loan on entire property for $330,000. Did a refi a year ago at 2.5% over 30 years. Home is in my and SO name.
• Live in Tennessee, equine law is as follows (we have multiple signs up already): Under Tennessee Law, an equine professional is not liable for an injury to or the death of a participant in equine activities resulting from the inherent risks of equine activities.
Questions:
• Thoughts on LLC or Trust? Is there another way to help protect us?
• Any type of tax considerations that I should be thinking about?
• Would the mortgage company even allow this (went with AIM, sold to Fannie)?
• Who should I research to help with a structure like this (attorney, estate planner, etc.)?
Re: Anyone place their home in a trust or LLC?
I have my personal residence in a RLT and I believe that it does not provide any of the asset protection you are looking for, Its purpose is for estate planning. I do own a rental property in an LLC which limits my liability to the assets in the LLC. I also have 2M in umbrella insurance which covers both. So if there is an issue with the rental, my personal property is protected but the rental can be lost if the judgement is greater than the insurance.
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Re: Anyone place their home in a trust or LLC?
Both you and the OP have fallen victim to a common misconception regarding LLCs. You're always personally liable for your own torts and if committed on behalf of a business, the business is liable too. LLCs protect otherwise-not-liable members from LLC liability, not from the members' own liability. So unless you are 100% passive in your rental LLC, your liability is not limited. Same with the OP - a LLC accomplishes nothing because the SO is running the business. If she screws up, she's personally liable regardless of whether the business is a LLC.leonidas wrote: ↑Thu Oct 28, 2021 4:52 pm I have my personal residence in a RLT and I believe that it does not provide any of the asset protection you are looking for, Its purpose is for estate planning. I do own a rental property in an LLC which limits my liability to the assets in the LLC. I also have 2M in umbrella insurance which covers both. So if there is an issue with the rental, my personal property is protected but the rental can be lost if the judgement is greater than the insurance.
Re: Anyone place their home in a trust or LLC?
I think the tool you're looking for is business liability insurance.
60-20-20 us-intl-bond
Re: Anyone place their home in a trust or LLC?
This is so state specific that other than saying to look into malpractice insurance and/or ask an attorney in your state, I can’t give you any better advice.
Re: Anyone place their home in a trust or LLC?
Good questions, I appreciate your concern as well. We have a similar set-up 200 acres with a riding/ trail area, we own several small business entities and LLC's and found the following of interest:
1) Meeting with our family lawyer - he had very specific comments and recommendations separate your home from the 'barn/riding area', ex.(survey out your home) and record the new survey with your County Property Appraiser office.
2) Meeting with our family insurance agent, he had very specific recommendations, eg. General Liability policy in concert with Umbrella policy.
3) State: here in Florida we are blessed to have the Homestead exemption which is viewed favorably by the Courts
My one recommendation would be to have your lawyer and insurance agent speak directly. It was valuable for both entities as well as, provided a better planning strategy in our situation.
Best of luck!
1) Meeting with our family lawyer - he had very specific comments and recommendations separate your home from the 'barn/riding area', ex.(survey out your home) and record the new survey with your County Property Appraiser office.
2) Meeting with our family insurance agent, he had very specific recommendations, eg. General Liability policy in concert with Umbrella policy.
3) State: here in Florida we are blessed to have the Homestead exemption which is viewed favorably by the Courts
My one recommendation would be to have your lawyer and insurance agent speak directly. It was valuable for both entities as well as, provided a better planning strategy in our situation.
Best of luck!
Re: Anyone place their home in a trust or LLC?
I wonder what "equine professional" means?
You might want to consult an attorney about the perforations possible in that law.
"Never underestimate one's capacity to overestimate one's abilities" - The Dunning-Kruger Effect
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Re: Anyone place their home in a trust or LLC?
Sounds like you need business insurance.
Re: Anyone place their home in a trust or LLC?
Thanks everyone- I will start researching business liability insurance and estate planners/attorneys who could assist.
Re: Anyone place their home in a trust or LLC?
We have our Arizona house in a Canadian trust. This is because of US estate taxes. We are Canadian and wouldn’t otherwise be subject to US estate taxes.