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I'm looking for advice on setting up a family LLC or even tangential advice I might not be thinking of. My mom and dad both own some property (they're divorced but the property is next to each other) and have some meager investments. Both of their wills establish everything to be left to the children equally. But there has arisen some debate on what to do with the properties once they pass. Most of us would probably sell, but there's been talk of keeping it in the family or renting it out. So we decided that, to be as fair or democratic about it as possible, we should have a family LLC setup to be able to legally decide what to do with everything in the future. Is this something you setup now with the parents as owners? Is this something we setup JUST as kids and have the wills leave everything to the LLC? Not exactly sure what to do here. Parents are divorced so assets are separate. Dad had a stroke 10 years ago and I've acted as his POA ever since. Thanks!
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Sep 14, 2018 22:03
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| # ? Apr 19, 2024 15:11 |
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Have you considered a revocable living trust? I haven't heard of people using a LLC as a vehicle for retirement/estate planning like that.
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Sep 15, 2018 02:52
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You don't get to decide. Your parents do. I'm very confused by this - either you own the property or you don't. They aren't going to will you 1/2 of a property.
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Sep 15, 2018 15:33
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ifuckedjesus posted:You don't get to decide. Your parents do. I'm very confused by this - either you own the property or you don't. They aren't going to will you 1/2 of a property. Sorry if I made it confusing! There's no confusion who to will it to. It will be willed to the children. However since the kids seem to be in a bit of a disagreement of what to do with the property *once inherited* (some want to sell... Some might want to VRBO it etc) someone suggested to form an LLC that has the kids all as members. The property gets willed to the LLC and decisions are made by whatever sort of by-laws you have all agreed to. I think it was recommended as a way to help ease family in fighting after the fact. Sort of a "this is what we all agreed to... Majority rules... We're selling the house." Or "if you want to keep the house you have 6 months to buy out dissenting members" Kinda thing. It also might not be the best way to do things, which is why I'm asking here.
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Sep 15, 2018 15:48
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BonoMan posted:Sorry if I made it confusing! Without an LLC, you and your siblings would become tenants in common (tenant means owner in this usage) of your parent's real (land/house) property. You all own an equal share of the property and have full rights to use the property. Each co-owner does have a right to force a division of the property and own their 1/3 or whatever of your parent's property outright. This is not usually practical (who wants to own/buy/sell 1/3 of a house) and in those cases a sale is forced, with each co-owner getting their share in cash of the proceeds generated. If one person wants to sell and the others don't, they can agree on a price and buy out the one who wants to sell, or one sibling can buy them out alone etc. Buying the other person out is probably the happiest ending if the siblings who don't want to sell can afford it and agree on a price etc. An LLC, by including in its by-laws that decisions be made by majority vote or whatever, could prevent a minority of siblings from forcing a sale or division of the property. If one sibling wants to sell, but the other siblings vote him down, that's probably going to create some bad blood, but it does prevent a forced sale/division. Unless your parent's will created an LLC (and I'm not sure if it really could) each sibling would have to put their share of the property into the LLC, and I can't see why the ones who wanted to sell would agree to do that. Your parent's will could create a trust with all of the children as beneficiaries and trustees, but that's going to get really complicated and involve some serious lawyer dollars. In any case, I can't see why your parents would put their property in an LLC now, with ownership transferring to their children when they die. A revocable living trust is probably a better vehicle if you want to do something like that. You can probably spend a bunch of money with an estate planning lawyer, but what it really comes down to is you and your siblings figuring out among yourselves what to do with the property.
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Sep 16, 2018 19:29
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Kaiser Schnitzel posted:An LLC won't solve the underlying issue of you and your siblings needing to come to some agreement on how to dispose of your parent's property. Thanks for the advice. We'll probably just forgo it. I don't think we'd really fight too much internally about it. There's just some dissenting opinions but maybe we could work it out. However just to clarify: quote:In any case, I can't see why your parents would put their property in an LLC now, with ownership transferring to their children when they die. A revocable living trust is probably a better vehicle if you want to do something like that. You can probably spend a bunch of money with an estate planning lawyer, but what it really comes down to is you and your siblings figuring out among yourselves what to do with the property. Wasn't quite what we were thinking about. We weren't suggesting putting things into an LLC *now*... just that the kids would form an LLC and when my parents passed (not before) the property would be willed to the LLC instead of "five kids equally." Then we'd have some sort of legal body of rules we all agreed to so that when someone decided to about face and become a holdout (which could happen.. families are nuts) if we wanted to sell then we could say "well we've all legally agreed to abide by these rules - even you - so that's that."
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Sep 17, 2018 15:14
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An LLC is just going to be managed in accordance to its operating agreement though. It just adds a layer of complexity you are asking all the siblings to sign on to. As has already been stated, why would the siblings all knowingly enter into an LLC that would cause a stalemate with the assets? Better to just force the sale outright - either within the family, or outside. Those that want ownership of the house can buy it at a fair market price from the others. If they don't have the financial means to, then why should the other siblings be forced to hold an asset they can't liquidate?
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Sep 25, 2018 12:58
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ifuckedjesus posted:An LLC is just going to be managed in accordance to its operating agreement though. It just adds a layer of complexity you are asking all the siblings to sign on to. What? The LLC or Trust wouldn't cause a stalemate. It would do the exact opposite which was the original intent. You set it up with a set of rules that everyone has agreed to so that when the time comes to sell or do something else you can legally point to the rules we've all agreed on. (ie majority rules if someone wants to hold out). It's literally just a legal way to bypass family arguments (because you can say "hey we're all legally bound to these rules... You signed em!") that can arise from this: quote:Those that want ownership of the house can buy it at a fair market price from the others. If they don't have the financial means to, then why should the other siblings be forced to hold an asset they can't liquidate? BonoMan fucked around with this message at 13:14 on Sep 25, 2018 |
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Sep 25, 2018 13:12
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BonoMan posted:What? The LLC or Trust wouldn't cause a stalemate. It would do the exact opposite which was the original intent. You set it up with a set of rules that everyone has agreed to so that when the time comes to sell or do something else you can legally point to the rules we've all agreed on. (ie majority rules if someone wants to hold out). You make the assumption that business arguments (your family LLC) are never challenged and drawn out in court. Makes much more sense for the executor of the estate to just say "Welp, the family house is listed on the market - any sibling(s) that want to buy, here's the contact info for the realtor" and wash your hands of it.
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Sep 25, 2018 13:18
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ifuckedjesus posted:You make the assumption that business arguments (your family LLC) are never challenged and drawn out in court. True but I know my family and the more difficult members, ha.. and I know a prearranged agreement would quell any challenge likely. Also this isn't just specifically to sell the house or I'd do just what you said. It'll likely be in our family for a little bit... Be it family living there or VRBO or sell or who knows... Just wanted a way to make sure we all had something we were beholden to when it came decision time for anything.
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Sep 25, 2018 13:27
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Do whatever you like, but let me just quickly demonstrate a handful of scenarios how an LLC could blow up in your face. 1. Uses a generic LLC Operating Agreement pulled from Google. Has some language about maximizing profit, since most businesses are. Everyone signs on - decision is challenged by dissenting member on the grounds that profit would be maximized by holding on to the asset and renting it out long term. 2. Requires a majority vote. One member doesn't show up to vote. Gridlock. 3. Requires a majority vote. One member doesn't show up to vote. A majority vote is obtained, decision challenged on the grounds that member didn't get a vote. 4. Requires a majority vote. All members show up, a majority vote is obtained and the decision is to sell. One of the dissenting members doesn't show up to the closing to sign off on sale. Sale falls through. 5. Requires a majority vote. All members show up, a majority vote is obtained and the decision is to hold. One of the dissenting members really needs the $$$ and encounters real economic stress as a result. They now refuse to pay on the liabilities side of the asset (property taxes, maintenance, etc). You are forced to sue a family member. These are just a handful of scenarios I can imagine. You would think that maybe even some of this could be solved by buy/sell language in your operating agreement. You would be wrong. If the seller doesn't want to sell, you literally have to drag them to court. If they don't show up, now you have to issue a bench warrant. I've dealt with these scenario's and more time and time again. It's best to just avoid if possible.
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Sep 25, 2018 13:55
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ifuckedjesus posted:Do whatever you like, but let me just quickly demonstrate a handful of scenarios how an LLC could blow up in your face. I get all those points, but it seems that without ANY sort of legal backing then we definitely don't have any recourse but to go to the courts if one or more don't want to sell. At least with some sort of trust or partnership (doesn't have to be an LLC) there is a layer of deterrent because those that don't want to sell likely don't have the means to really challenge it. Could you have language in one of the by laws that states "you have 3 months to register a vote... after that you've forfeited your say in the matter"? Also I just realized there's a real estate attorney just around the corner. Might go see if I can hit him up for some cheap advice.
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Sep 25, 2018 14:58
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Better idea: Hunt down a trusts and estates attorney. This is their bread and butter and if it's enough of an asset to sue each other over later it's enough to get good legal advice on now.
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Sep 26, 2018 19:38
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Spacewolf posted:Better idea: Hunt down a trusts and estates attorney. Yup this is exactly what I'm doing!
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Sep 26, 2018 20:09
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| # ? Apr 19, 2024 15:11 |
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Spacewolf posted:Better idea: Hunt down a trusts and estates attorney. why not have sword duels over it like in the good old times
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Sep 27, 2018 00:23
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I CANNOT EJACULATE WITHOUT SEEING NATIVE AMERICANS BRUTALISED!